When I spoke about the need and the opportunity for purpose-driven leadership, I mentioned that there's a changing role of business, so we have new perceptions of an ideas about what business can and should do. And I want to talk more about that in this segment. So the old view, the old view is nicely captured by a quote from Milton Friedman, a leading economist who won the Nobel Prize, he was a public intellectual, he was really a thought leader. And in the 1960's and 70's, he talked a lot about the purpose of business. So for example, in 1962 he wrote "There is one and only one social responsibility of business, to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud". So again, Milton Friedman's view, the traditional view has been, there is one and only one social responsibility of business, to increase its profits. That view is changing these days and we have this sense that a new view is emerging, a new view of what business can be and should be. It's definitely a work in progress. One of the ways we see that is that there is not one term for this new view, there are a lot of terms. Let me mention some of those terms, terms like CSR or corporate social responsibility, social impact, social entrepreneurship, sustainable business, the triple bottom line. The triple bottom line is profit, people, and planet. Conscious capitalism, impact investing or ESG standards. ESG standards are standards that evaluate businesses on not only their financial performance but on their environmental performance, their social performance, and on governance. And then sometimes we also hear about benefit corporations and B-Certified companies. So, a lot of terms. At the heart of all these terms is a new and big idea and it's basically this, the idea is "yes, if you're a business, a for profit business, you're going to need to make profit". Making a profit is how you stay in business, but it's not enough. Businesses can and should pursue a larger social and/or environmental purpose. That's the big new idea. And really there are three arguments about, why businesses can and should do this? I think those arguments are worth exploring. So the first argument about why business can and should pursue a larger social or environmental purpose is really captured by the idea that, businesses ignore social and environmental issues at their peril, businesses are not immune to these risks. So, there's a quote from Paul Polman that I like a lot. Paul Polman is the CEO of Unilever, a leading company, a leading purpose-driven company. And Paul Polman wrote "It's not possible to have a strong functioning business in a world of increasing inequality, poverty and climate change" That gives you an idea of this first argument. The second argument about, why business can and should pursue a larger social or environmental purpose, speaks to the difficulty of solving the most pressing and complex social and environmental challenges in the world. And the argument is basically, we can't solve those problems without the involvement of the private sector. We need business innovation, we need capital to solve the world's toughest problems, business must step up. And this argument is nicely captured by a quote from Judith Rodin, she's been the president of the Rockefeller Foundation, one of the largest foundations in the United States. And she wrote, again a philanthropy "At the Rockefeller Foundation, we have a vested interest in understanding how finance can be used to solve problems that affect the world's poorest or most vulnerable people. Philanthropy and donor governments alone no longer have the resources to solve these challenges, so we must engage the talents, resources and expertise of the private sector." And the third argument about why business can and should pursue a larger social or environmental purpose, is basically the argument that business can do well and do good at the same time. Business can do well and do good at the same time. And in the long-term, doing good is likely to be a key driver of doing well. So, a quote that exemplifies this comes from McKinsey, one of the largest most prestigious consulting firms. They wrote, "Sustainability- a term we used to describe the business programs, products, and practices built around environmental and social considerations- is often seen as a luxury investment or a public relations device. We think that view is cynical and increasingly untenable. Sustainability programs are not only strongly correlated with good financial performance but also play a role in creating it." So, three reasons, same principle, business can and should pursue a larger social or environmental purpose. And those three reasons again are one, businesses cannot ignore social and environmental risks, they're affected by them. Two, we need the innovation and financial resources of business to solve the world's toughest problems. And three, business can do well and do good at the same time, and in the long-term, doing good is likely to actually be a driver of doing well. So what's driving these changes and what's driving these ideas? You probably have some sense of this from what I've already described. A key driver is declining trust and confidence in government. So you may have heard about the Edelman Trust Report and the surveys of, how much do people trust different institutions? This company surveys people in 28 countries, and what they found in the most recent survey is that, a across these countries, countries all over the world, government is less trusted than NGOs, non-profits and the like. Government is less trusted than business. Government less trusted than media organizations. So there's not a lot of trust the government can solve our problems. We used to have more confidence in government all over the world. A second cause for this change in view of business is, an increasing awareness of the limits of philanthropy. There is just an understanding an increasing sense of, wow, philanthropy is a driving force, people are charitable that's really important. But charities, philanthropies can't solve the world's most pressing and ongoing problems. So people will talk for example, about the United Nations sustainable development goals. Goals to end poverty, protect the planet and ensure that all people enjoy peace and prosperity throughout the world, really laudable goals and a hope of achieving those goals by 2025. But when it comes to the money to fund those goals and to create those goals, there's a $2.5 trillion funding gap. That's 12 zeros, 2.5 trillion funding gap. Philanthropy is not going to do it alone. And a third factor that's driving these changing views of business is increasing understanding that businesses stand to benefit when they pursue a larger environmental and social purpose. How might they benefit? Well, employees find it meaningful and valuable to work in companies that are pursuing this larger purpose. Employees want to fulfill that purpose, have purpose at work, so they're more attracted to those companies that they stay longer, they're more motivated. Customers also want to shop from companies that have a larger sense of purpose. So purpose-driven companies can attract and retain customers particularly effectively. Companies may also experience innovation and cost savings when they try to reduce their carbon footprint. When they try to solve problems, they may find better ways of doing business. And finally, another benefit to companies is they often can move into new markets, gain new customers when they try to pursue a larger purpose. So, how are businesses, for profit businesses, actually pursuing social and environmental impact? Let me describe five models, five ways in which companies can pursue social and environmental purpose. And I want to give credit to Fred Keller, the CEO and founder of Cascade Engineering, definitely a purpose driven company, who suggested this framework to me. So, the first category are profit maximizers. They're actually not pursuing social and environmental impact. Their stance is effectively, "Hey, you know, the business of business is business. Purpose? What are you even talking about?" The second category- and here's where we do get into purpose-driven leadership- the second category of business is what I like to call generous contributors. These are companies that have CSR, corporate social responsibility offices. They're giving back through their philanthropy. And so, they're making money in their traditional business line but they are philanthropists as well. They give as well. And their stance is basically, "Hey. We have a responsibility to give back. Our philanthropy benefits the world, and it also benefits our brand." The third category is, what I'd like to call, impact innovators. So, these are companies that have maybe started out as traditional businesses, but have become increasingly interested in pursuing a social and environmental purpose. And they've started to look for ways they can change their businesses, change their practices, a little, and achieve greater positive and social and environmental impact. Their stance is basically, "Hey, our traditional business pursuits come first, but increasingly we're looking for and finding new ways to do well and to do good at the same time." Nike is one of those companies that comes to mind. Nike has done a lot to figure out how it can use less water, have a more positive environmental footprint as it goes about making its shoes and other products. A fourth category, is what I would called, impact first businesses. These are businesses that were really created for their social impact. They were designed to solve a social problem. So, the stance from these companies is basically, "We're in the business of social impact. We designed the business in order to meet our social and/or environmental impact goals." And one of the companies that comes to mind when I think about what's an impact first business is Greyston. So, Greyston makes the brownies that are in Ben and Jerry's ice cream. But it's their model. And their tagline gives you a little bit a sense of their model. Their tagline is, "We don't hire people to make brownies. We make brownies to hire people." So, their goal is really to create employment opportunities for people who would be otherwise unemployed. They figured out they could do this, making brownies and making a profitable business this way. And last and definitely not least, our impact investors. These are folks who are investing in other kinds of purpose-driven companies and their stance is basically, "We want to align our investments, not just our philanthropy, with our larger social or environmental purpose." They're investing with a goal of making a financial return and a social return. Companies like Bambu finance, a smaller investment firm, and Goldman Sachs, a really big one, are getting into impact investing these days. Okay. So, you may be thinking, "Well what do you mean by environmental and social challenges? And what really constitutes purpose and environmental and social purpose?" It seems to me that purpose has three elements. Or really companies are pursuing this larger environmental and social purpose in one of three ways typically. The first is, they're really going after environmental challenges. So, it's a significant social impact by tackling environmental challenges. They're working to increase environmental sustainability. Maybe it's by creating renewable energy. Maybe it's by recycling. Maybe it's improving water conservation. Maybe it's electric cars. But the goal is to make the world more environmentally sustainable. That's one area of environmental and social impact. A second area is about meeting individuals' basic needs. So, this is a focus on eradicating the negative effects of poverty, inequality, conflict, and crises. And making sure that all humans have access to the resources to meet their basic needs. So, clean water, healthy food, protection from physical harm, energy and increasingly digital access to. And a third area is, ensuring fair and equal opportunity for all. So, this is about ensuring that people's ability all throughout the world, to pursue meaningful work, to pursue education, to grow personally, to learn and to make a contribution. And these may be companies that are working to increase access to education for example. Or are working to develop new markets and create jobs for people who would otherwise be unemployed. All right. So, to recap a little bit, there's a new view that businesses can and should pursue a larger purpose for social environmental good. It's born of declining trust in government, increasing awareness that philanthropic dollars aren't enough to solve the world's challenges, and a sense that business can do well and do good at the same time. It takes different forms. We talked about generous contributors, impact innovators, impact first businesses, and impact investors. You'll hear more about those companies, those kinds of companies in the next videos that are coming up. And finally, these companies are working to tackle three different kinds of problems usually. One is, how do we increase environmental sustainability? The second is, how do we alleviate poverty and meet people's basic needs? And the third is, how do we increase opportunity, education, achievement for all?
