This article was originally published on Forbes.
In this article, “What Today’s C-Suite Executives Can Learn From Social Enterprises (And Vice Versa),” FINCA International President and CEO, Rupert Scofield, shares how social enterprises offer a powerful guide for businesses looking to address movements of social change.
Since the Business Roundtable announced that they were redefining the “purpose of a corporation,” some skepticism has permeated the surrounding public dialog. In August, more than 180 global industry leaders, from the heads of Apple to PepsiCo to Amazon, issued a joint statement asserting that companies should no longer focus exclusively on shareholder profits, but also invest in their employees, protect the environment and support the communities in which they work.
What does this mean in practice? In response to the Business Roundtable’s announcement, 33 certified B Corporations — companies formally assessed for their social and environmental performance — urged members to put their words into action, pointing to the proven power of stakeholder capitalism.
I believe the Business Roundtable’s call is an important first step, and I also suggest a road map: If industry titans are truly committed to a broadened definition of “value,” they should look to social enterprises for direction.
Today, more and more consumers want to engage with companies that align with their conscience. Brands see real market impact when they promote philanthropy, green practices and fair trade, and are challenged when their policies are behind the curve. Meanwhile, impact investing, which promises the double bottom line of both doing well and doing good, continues to gain in popularity.
From the office to the consumer marketplace to the capital markets, these are more than just trends; they are cultural forces driving business investment and social change in tandem. For businesses looking to meet these movements, social enterprises provide a powerful guide.
1. Develop strategies and measurable targets for generating social returns.
A social enterprise works to solve a social or environmental problem by pairing a market-driven approach with a mission-driven mindset. Following this example, CEOs looking to adapt to today’s socially conscious market should aim to identify specific problems for which they’re uniquely positioned to help find or fund a solution. From there, they can develop targeted strategies, forge new partnerships and seed new innovations from their employees and stakeholders.
They should also set measurable targets for social returns, just as they would for revenue generation. These could include funding a certain number of entrepreneurs in a developing country or having a philanthropic project become self-sufficient by a certain deadline. A clear social-returns strategy with targets will also ensure that businesses review their internal systems and maximize efficiencies, just as they would in driving profits.
2. Foster a culture of empathy.
The Business Roundtable’s call also includes a commitment to investing in employees through fair compensation, training and cultivating “diversity and inclusion, dignity and respect.” Social enterprises can offer guidance here, too.
A successful social enterprise is led by a team with empathy for their customers and the populations they serve. That team is committed to solving problems, not just chasing profits. Mission-driven employees view their work as unfinished until those social outcomes are achieved, often going above and beyond the call of duty.
The U.K.’s Metro Bank, which trains employees to “surprise and delight” its retail customers, shows how this mindset can be applied in the for-profit sector. The company even drives customers to the airport if they have a plane to catch and a transaction has taken longer than expected.
For-profit companies can also encourage employee empathy — and pride — by integrating philanthropic activities such as partnering with local charities for volunteer opportunities and matching employee donations. In this way, teams feel better about their company, confident that it’s making a difference.
3. Share for-profit learnings with social enterprises and NGOs.
Companies can also catalyze social returns by returning the favor; the learnings should go both ways. Social enterprises deepen their impact by integrating lessons from for-profit companies.
At FINCA, we apply the best practices of the for-profit sector in order to be more efficient and effective. This enables us to access capital markets, leverage more dollars and, in turn, do more good in the world. We borrow wholesale from formal financial systems when it comes to processes, management principles and emerging technology. Instead of relying solely on donations to finance FINCA, which would have made it nearly impossible to reach the millions of people we have invested in over the past 35 years, we chose to access capital markets to raise and deploy more funds to reach more beneficiaries. As a result, we give our stakeholders a better return for their investment — both social and financial.
We’ve seen the interplay of social enterprise and for-profit best practices at work in many situations, including in our chairman’s business. Bob Hatch set up shop for his company in the American Midwest, which many manufacturers had abandoned. In this unlikely landscape, Bob struck many public-private partnerships, created jobs and spurred the local economy. This model has also worked in developing countries, where it offers pathways out of poverty for people living on only a few dollars a day.
Since the Business Roundtable’s announcement, many have called for more concrete action. While the Business Roundtable’s commitment may be the initial step in an ongoing process, it’s clear that most influential business leaders are seeing that social good has as much, if not more, value than shareholder profits. The social entrepreneurship community is here to help companies change the world for the better.