Doing Good is Good Business

Doing good is good business. “Social good” can be the base of a strong business model, and I believe we’re steadily coming closer to a point where a business without a “social good” is not a sustainable business. And I’m not talking about environmentally, culturally or morally sustainable, but strategically, economically and financially sustainable.
By Taylor Davidson | May 17th, 2010

When I hear the words “social entrepreneurship”, the first thing I hear is “entrepreneurship”, not social. I come from to the world of social business from the perspective of an educated and trained hard-core capitalist, a management consultant, an Excel geek, an MBA with a concentration in finance and accounting, an ex-private equity / corporate raider and a man who thinks numbers first. And since quantifying “social good” is hard, I tended to push it aside.

But over time, I learned that “social good” matters. It matters to us, our lives, our communities, our environment, our society. That’s obvious.

It also matters to business.

Social good has traditionally been an externality that businesses could not value, measure and rank, so they choose to downgrade or ignore it as an input to business decisions. It’s not just a choice between short-term impact and long-term impact, but a choice between the impact we can see, measure and be accountable for and the impact that we have. The full impact that we have can be difficult to measure even in the short term, as the cost and value of our business model externalities tend to disappear from our profit and loss statements. We’ve tried to bring these externalities back to the table with “modified” accounting statements, balanced scorecards and other decision-making frameworks, but they’ve failed to gain the same traction as the simple, culturally-known and corporate-benchmark corporate financial statements.

But we haven’t given up, because companies have come to learn that unaccounted and unvalued business model externalities lead to sub-optimal decision-making and reduced performance: financially, operationally and competitively.

Umair Haque, Why Betterness is Good Business:

Striving to do more good is associated with greater profitability, equity and asset returns, and shareholder value creation. But that’s still not good enough. Today, the bar is being raised: success is itself changing. Those are yesterday’s metrics of success — more importantly, maximizing good lets companies outperform on tomorrow’s measures of success.

More and more, investors aren’t just looking for near-terms financial returns: they’re looking for financial returns *plus.* Why? Because the *plus* makes returns less risky, more defensible, and, the biggie, more meaningful. As the expectations of people, communities, society, and investors change, the definition of outperformance itself is changing.

Umair supports this with data from a number of research reports proving the need for companies to adapt their measures of performance, for the simple reason that people now demand a different kind of performance. Financial isn’t enough. Financial returns *plus* is necessary. And interestingly enough, as we get better at measuring the *plus*, the *plus* will disappear, because we’ll have developed new measures of business model success. Based on ideals or “betterness”, these business models will matter, and that’s why they’ll succeed.

They’ll succeed because they’ll tap into “The Power of Pull”, tap into the edges of their networks, bring the edge to the core, tap into the power of serendipity, and open themselves up to “that which cannot be completely measured today”.

These business models will leverage the passion of individuals, create networks and build communities. They’ll provide ways for people to connect, to build, to contribute, to give. They’ll let employees be people. They’ll build products with a purpose. They’ll build companies with a purpose, with a mission that is understood, supported and created by their employees, customers and fans.

We won’t do it just because it’s socially responsible. We won’t do it because we’re in some utopian “post-consumer” era. We’ll do it because it’s strategically, economically and financially necessary. We’ll do it because these are the types of innovations that can be disruptive and sustainable today. We’ll do it because

Rising hyperconnectivity and the increasingly publicly available trails of intentions and actions by individuals and corporations are creating the opportunity for an ethical edge to “pay” in a wider range of products, markets and industries.

We’ll do it because information, stories, content and context scale easier, cheaper and faster than ever before. We’ll do it because companies will have to understand how to create and tell stories about their business, impact, relevance and meaning to stay competitive. We’ll do it because obfuscating the truth or hiding externalities will be an expensive, inefficient, suboptimal business strategy.

We’ll do it not because it’s “social good”, but because it’s good business. And that’s the type of social entrepreneurship I care about.