Social enterprises, benefit corporations, blended value organizations, conscious capitalism; there are no shortage of buzzwords describing this monumental movement to create a new model of business.
But if you want to build one of these “force-for-good” businesses, is there a model to follow? How do you measure your success or failure? And if you want to work at one of these purpose-driven orgs, how do you find and differentiate the performers from the pretenders?
For the past three years I’ve been on a quest to answer these questions. I had watched one too many friends grow numb in profit-at-all-cost corporations, and couldn’t sit on the sidelines any longer. Why is it that we spotlight the Fortune 500, a list that benchmarks success based on revenue alone? What if we created a new list that showcased the growing movement of organizations maximizing their positive impact rather than just maximizing their profit? My “Aha” moment had arrived and the idea to create a GameChangers 500 (GC500) list was birthed—a list that would help emerging graduates find meaningful careers and plug their potential into powering a better world.
Equipped with blind ambition, I gave myself the title of social entrepreneur and then proceeded to spend three full months deliberating between a non-profit, for-profit or hybrid legal structure. It felt like choosing between broccoli, spinach or broccoli-spinach casserole—all of which were overcooked and a week old. Further, figuring out a unique profit-sharing model took so much time that I nearly went out of business in the process! Where was the playbook of best practices on how to build a business that helps people and the planet thrive? And how could I possibly create a database of the best “force for good” businesses if the rules of this new game weren’t defined?
Before the performers could be praised, the objectives, rules and point system of this new game needed to be determined. It was clear that the objective wasn’t to maximize profit but rather to maximize benefit to people and the planet. What wasn’t clear, however, was how to keep score.
After receiving valuable input from experts in the field, we assembled a research team to comb the globe, reviewing thousands of organizations. Our team arrived at nine categories of best practices that these “force for good” businesses followed.
We then turned these nine categories into badges that organizations could earn as symbols of success in this new game. To further simplify the framework, we organized these badges into the following three sections:
The Players: It was clear that this movement could not be defined by existing legal models. Non-profits, For-profits and new legal breeds were all players, united by a common worldview that business as usual needed to change. Together they were stretching the traditional paradigm to innovate a new model. Here’s how: Non-profits: There is a clear trend to use a non-profit entity in an enterprising way which moves beyond the limitations of grants and donations by earning income through the sale of a product or service.
These organizations benefit from having a purpose embedded in their ethos, while enjoying the flexibility and scalability of earning revenue. Overcoming the pressure to minimize operational overhead, these non-profits can more easily invest in things like empowering their employees and minimizing their environmental footprint. As Dan Pallotta says, “Our generation does not want its epitaph to read, ‘We kept charity overhead low.’
We want it to read that we changed the world.” New legal breeds: The birth of new legal entities such as Benefit Corporations in the USA, Community Interest Companies in the UK, and Community Contribution Companies in Canada are paving the way for a new category of organization. Although it will take time for these models to build credibility and scale internationally, the hope is that one day the For-benefit structure will be an equal choice with For-profit and Non-profit. For-profits: Whole Foods, IDEO, Google, and Zappos are great examples of major corporations that have used traditional for-profit structures to scale their growth while implementing many untraditional practices that aren’t profit motivated. For example:
- Whole Foods created Community Giving Days where 5% of that day’s net sales are given to local non-profits.
- Google invested in creating an exceptional work environment with themed work spaces, slides between floors, free gourmet food, and radical amounts of employee autonomy.
- Zappos innovated ways to “deliver happiness”—their mission—through untraditional benefits like surprising 80% of customers with free overnight shipping.
- IDEO created IDEO.org to solve poverty related challenges by offering their talented designers to communities who need them the most.
Although they are unlikely to switch to a new legal entity, like a Benefit Corporation, these organizations are clearly part of this movement and are constantly innovating best practices that go beyond making a buck. As doing good continues to prove to be good business, it can be expected that more major corporations will join this “new game”.
Studies show that their ability to retain talent and market share rely on it. Considering the budget some large organizations spend on coffee filters alone is equal to the total revenue produced by many social enterprises, a small shift in this sector equates to an enormous positive impact. Thanks to great progress being made by law makers around the world, and organizations, like B Lab, we can expect this new model of business to continue taking shape.
Until then, we will define organizations by their best practices, not by their legal model and celebrate the GameChangers in business that don’t let rules or outdated paradigms define them. Although it took a lot longer than expected, I’m proud to say that the GameChangers 500 list (GC500) was announced on November 9th 2013 at Harvard’s Igniting Innovation Summit. Joining me in this announcement were executives from three exceptional organizations that qualified for the GC500—Warby Parker (benefit corporation), Life is Good (non-profit/for-profit hybrid) and New Balance (for-profit corporation).
Although each organization represents a different legal structure, they share a commitment to use business to create a better world. In this presentation they brought the audience on a tour of their best practices across the 9 badge categories. I’m thrilled to showcase the GameChangers with the next generation of leaders, and offer an alternative to the profit-first organizations that have been heavily recruiting on campuses for decades. Game on!
Andrew Hewitt is the creator of the GameChangers 500 list (GC500) that profiles the world’s top purpose-driven organizations using business as force for good. He has been recognized as one of Canada’s top young entrepreneurs, is a bestselling author, and a guest lecturer on Social Entrepreneurship at the United Nations University of Peace.