What if more startups were founded with social activism as a core value?

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What if more startups were founded with social activism as a core value?
Jon Mertz
Founder, CEO Activate World

Businesses that act in ways that benefit society will create a bond of trust with millennials and improve their communities at the same time.

Uncommon
Voices

With the impending rise of millennials as the dominant generation, social activism can no longer be an afterthought in business. Now, and into the future, businesses must be formed with a social consciousness as part of their core values.

Successfully launching a business is challenging enough, so why would I suggest that entrepreneurs need to be thinking about addressing tough social issues at the same time? It’s pretty simple. With this change in generations, with millennials as both employees and customers, businesses that act in ways that benefit society will create a bond of trust with the new generation, while improving their communities at the same time.

Good corporate citizenship practices increase profitability while building a stronger brand and improving operational efficiency. Across metrics of employee engagement and consumer willingness to buy from companies with a social purpose, the benefits for a startup are tangible.

Because entrepreneurs are competing with established businesses for the crucial quality first employees they need to get their businesses off the ground, having a social purpose can be the difference in attracting the right people. The 2019 Edelman Trust Barometer revealed that 58% of all employees look to their employers to be a trustworthy source of social issues, including divisive ones.

A Deloitte survey reinforces these findings. While millennials are somewhat pessimistic about the future, they do trust business leaders more than religious and political leaders, and are "eager for businesses to more aggressively commit to making a tangible impact on the society."

Effective entrepreneurs cannot ignore the expectations and standards of the people that they need on their team.

If you need further evidence, you need to look no further than what established brands – those that compete with startups for resources – are doing to orient themselves toward social impact. Big companies like Salesforce and Microsoft focus on issues such as immigration and homelessness. Patagonia is vocal about environmental issues. Yes, these companies have significant money and talent advantages, but it doesn’t take those to start a business in the right way – purpose can be scaled.


Scaling purpose

Startup Activation Scale

Startup Activism Scale, from Activate World.

So, the question is not when to consider social purpose, but how. As they work on their business plans, entrepreneurs need to integrate a greater purpose within it. When new ventures begin to hire and scale, founders also need to take a step up and decide how to take on a larger role than just the business. No matter the stage, leading from the middle of business and society will be challenging yet necessary.

To think through how to take on this greater leadership role, entrepreneurs can consider certain options, each with opportunities and challenges. Let’s walk through the "purpose scale."

Status Quo

Given the changing generational landscape we’ve discussed, the status quo is not a valid option for entrepreneurs intending to grow a company over time. The only exception is if the founder’s purpose is to get to rolling out an appealing product or service quickly, then sell the company. This will only work if the startup’s horizon is less than two years, and the founders are transparent about this fact with the team. Without a short-term exit strategy, building beyond revenue and profit growth requires purpose growth.

Corporate Citizenship

For founders who want to build a lasting business, the minimum option to consider is "Corporate Citizenship." Corporate Citizenship is the recognition that business has a responsibility to the communities they serve. Embedded in this model is consideration of stakeholders including employees, customers, partners, suppliers, and investors. Corporate Citizenship can mean embracing a diverse mix of initiatives that make the community better than before, such as environmental, sustainability, philanthropy, and other programs.

For an example of this model, we can look to OneHope Wine, a startup for which giving back to the world was embedded in their business model. They have contributed well over $2 million has to different charitable organizations, enabling more than 11,000 cancer clinical trials, delivering more than 1.6 million meals to children, and creating homes for shelter animals. Another example of this model can be seen with Trifacta, a data preparation company. Apart from their for-profit work, Trifacta works with local nonprofits to help them better understand their data, improving their social cause work and efforts.

Purpose-Profit

Another option is to build a business model that embeds purpose and profit. TOMS made the one-for-one model popular by giving away a pair of shoes for each one purchased. Variations to this model have sprouted with other startups that include a defined percentage of revenues or profits going to a specific cause. Whatever the choice, it is built into the business model, and the expectation is set with all stakeholders.

The leadership challenge with this option is to show progress on two fronts: business and society. Results need to be reported on both. Investors need to know the financial metrics, and the community needs to know what is being delivered to the selected cause. Transparency is critical.

Activator

The ultimate intersection between business and society is using a business platform as an "Activator." Activators engage in relevant policy issues, driven by what is happening locally or nationally that may impact the company’s stakeholders. If a policy negatively impacts the people who support the business, then the company may want to engage in that policy conversation.

Activators can do more than just express opinions. They can build alliances with other organizations to stop bad policies or promote good ones. For example, startup Countable embeds activism in both their mission and the product solutions they offer, enabling citizens and individuals to build coalitions and engage in better conversations with legislators through their toolset.

The leadership challenge with Activators is to ensure their actions are aligned from the inside out. For example, pay equity is a key issue. If entrepreneurs are not paying equally between genders for the same jobs, then there is a hollowness to what is said and done externally. Buffer started their company with pay transparency as a core value and through their transparency values, they are discussing and closing their gender pay gap. Entrepreneurs can set new standards on issues of social importance.

Can purpose scaling be additive?

Entrepreneurs can’t start with the status quo and assume they’ll get to social purpose later, but they can start at a low level and scale their overall impact over time.

Consider Airbnb, which delivered free nights to those displaced by hurricanes and called on their community to not discriminate based on race or other factors. Chobani has raised their voice on immigration, calling for humanity first. Salesforce has worked to prevent gender discrimination in states, while working to solve homelessness in San Francisco.

Imagine a world with more purpose-oriented companies like these. It’s not that complicated. Along with developing a new venture’s profit model, entrepreneurs simply need to develop a purpose model at the same time. As a company grows, the purpose should grow along with it, and so should the societal impact. A venture can thrive, and so can society, when entrepreneurs connect their businesses to the greater needs in the world.

Jon Mertz is CEO of Activate World, a podcast and modern think tank focused on CEO and business leader activism. Follow Jon on Twitter at @jonmertz.



Uncommon Voices columns bring outside perspectives into the the Kauffman Foundation's coverage of the future of learning, work, and place. If you have an idea for a column, please read the guidelines for contributors.

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