Purpose-driven companies going for the “triple bottom line” not only care about profits but also about the people and the environment they affect with their business. These companies face a greater challenge than conventional businesses because the product needs to sustain an organization as well as the mission behind it.
When talking in numbers and business calculations as we know them, nine times out of 10, the interests of profit conflict with the interests of people and planet.
This is why social and sustainable companies (SSCs) face stiff headwinds when competing in markets where conventional businesses and low-priced products are the biggest competition. Under these circumstances, how can SSCs successfully outpace the field?
Until a paradigm shift occurs, in which environmental degradation and social exploitation are decoupled from economic growth, SSCs need to develop a competitive advantage beyond their value propositions based on sustainability. Because “being green” is not enough, and relying on the “environmental narrative” is believed to be a dead end.
Instead of focusing too much on the value proposition that caters to the customer, SSCs should seek to develop a mentality that serves the competitiveness of their organization.
One option is to level up compound impact skills. There are two key factors for a successful compound impact strategy: the project (or actions) you invest in and the duration of the project.
Rigorously focusing on important actions, however small, leads to a second and third level of effects in the long run. In the best case, these effects will lead you to reach your goal faster.
The message here is that compound impact is an inherent motivation of SSCs already.
This is a key skill for all impact-driven companies. But to many, it is not yet clear how that skill can improve or at least sustain their bottom line. Compound impact is rooted in the Pareto principle — the 80/20 rule stating that, for many events, roughly 80 percent of the effects come from 20 percent of the causes — and is a strategy through which you will be able to focus on the 20 percent.
One example is the social enterprise WakaWaka, a Certified B Corporation, that produces solar powered devices and tackles energy poverty. By providing solar power, WakaWaka aims to reduce the issues of energy poverty — health risks, environmental contamination and low education levels — in a clean, sustainable and safe way.
But the compound impact effect of solar-powered light and energy unfolds especially in the long run. By providing light so children can study after sundown and reducing the health risks from use of kerosene lamps, the country’s overall well-being improves along with its economy.
The compound impact results from picking the right project — tackling the cause first — and having the patience to wait for the (impactful) results to show. SSCs are inherently patient and persevering and know that important changes take time.
Let’s transfer that mindset into your business ethics. Below are three basic questions to ask yourself and your team before you initiate a project — such as starting your company, launching a product or service, entering a new market or expanding internationally.
Answering this question is a useful mental exercise because it forces you to deploy a new perspective and focus on the commercial side of your business.
Differentiating between causes and effects is not always easy. What helps is to recall Pareto and analyze your experiences. Create a sheet where you compare the actions with the effects they entailed immediately and after six months or a year.
Doing this will help you to create a sense of compound impact and exercise what might feel natural to you on the impact side but not on the business side. This exercise can be conducted on every scale in every unit, be it the whole organization or in just one department or team.
After diving into your experiences, take them into account for your planning and again create a sheet with actions opposing their projected effects. In this step you will analyze your actions and make sure that these will develop at least one more level impact in the future. It will also raise awareness for actually tackling causes that are goal-oriented.
In the case of WakaWaka, it has a strong brand and an engaged community with fans across the globe. At some point WakaWaka started to repost social media content produced by its fans and later realized that this content also served as a powerful marketing tool, leading to more sales.
In the long run this was not only an inexpensive marketing alternative but also a great way to engage with members of the WakaWaka community, reflect their personal stories and further establish an authentic brand that is based on kindness and attention. It serves the message, the mission and in the end the business, too.
The example shows that for SSCs, compound impact can be of great value whether it occurs through strategic planning or coincidence.
In your organization these three questions provide an easy framework to ensure you focus on your goal and make the most of your resources. After all, efficiency is a competitive advantage. As you will witness the impact unfold, you will increase the odds of raising and sustaining a profitable business.
Photo Credit: Frederique Peckelsen