A world on the brink: purpose-driven businesses are set to redefine capitalism

Whether their leaders like the term or not, purpose-driven businesses still sit within the capitalist system, despite endeavouring to do business in a better way.  These new businesses are not charities, nor indeed the business arm of a charity, but ordinary businesses with shareholders, just doing business differently that helps make the world a better place.  Julian Richer notes in The Ethical Capitalist that, “It is interesting that most entrepreneurs do not describe themselves as capitalists but prefer to use softer words such as ‘entrepreneur’, ‘founder’ or ‘business leader’.”  The word capitalist has become associated with the excesses of capitalism rather than the system of buying and selling that has been with us for millennia.

This is the challenge of purpose-driven businesses: to create a new capitalism, one that is fair and ethical, does not exploit the people and planet and one that creates a fairer world rather than a more unjust one.  The so-called founder of capitalism Adam Smith said, in The Wealth of Nations, ‘It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from regard to their own self-interest.’  One might think that Smith was advocating the greedy capitalism that many are now moving away from, but he also said, ‘No society can surely be flourishing and happy, of which the greater part of the members is poor and miserable.’

So, it would seem that at its initiation capitalism had a heart after all and it is this compassion and justice that many new businesses are rediscovering.  Purpose-driven business are businesses where people, profit and planet and held in equal measure.  Profit should never be made at the expense of either and it is these businesses that consumers are flocking to in their droves.  There is a growing disillusionment with capitalism as we knew it but a complementary growing desire to buy products and services from companies that may describe themselves as ethical capitalists.

I would perhaps go further and say that businesses that remain in the ‘profit at all costs’ mentality will decline to the benefit of these new purpose-driven businesses.  Consumers are the ones driving this change and modern consumers, particularly from Generations Y & Z, have a much keener desire to see injustice in the world reduced and see climate change reversed using their purchasing power.  There is a very good chance that those businesses stuck in the 20^th century will be left behind.

Many traditional businesses have noticed these consumer trends and think that they can gain the benefits of purpose-driven business by adding in some Corporate and Social Responsibility (CSR) and some more ethical HR policies.  However, consumers are savvy and very easily see through this ‘greenwash’ to the heart of the company.  They know that a truly purpose-driven business will have fundamentally changed their business DNA and will look, smell and act in a completely different way to traditional businesses.

A growing number of these purpose-driven businesses have chosen to be measured on how good they are for the world and are called B Corps.  These companies within the B Corporation movement are not just rigorously assessed on their behaviour and culture but have also changed their Articles of Association to reflect this new DNA.  Legally, they no longer exist simply for the benefit of the shareholders, but for the benefit of all stakeholders, which includes their employees, the people within their local communities, those people within their supply chains and the whole world community as they work towards being carbon neutral.

It is certainly long overdue that our broken capitalist system is fixed.  The general public have had enough of CEOs who are paid more than 250 times more than the average salary within their companies.  They are frustrated about the lack of progress larger corporations are making against climate change and dissatisfied with the growing rich-poor divide within the world community.  It is indeed time for capitalism to be re-defined before the economy and environment of this planet is irrevocably broken.  It is down to this generation to restore balance and the onus is on businesses to do that by changing their motivation away from purely profit to taking account of the wider world community.

Paul Hargreaves is the author of new book Forces for Good: Creating a better world through purpose-driven businesses. He is also the CEO of the fine foods wholesaler Cotswold Fayre.

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