Every year in Davos, a small Swiss ski resort nestled in the Landwasser Valley southwest of the country’s capital, Zurich, government and business leaders from around the world gather to discuss the most pressing issues facing the planet.
Earlier this year, at the 54th annual meeting of the World Economic Forum, and against a backdrop of increasing pressure to address major global challenges such as climate change, poverty, and healthcare access, delegates committed to the Rise Ahead Pledge, which aims to support socially responsible organisations prioritising societal wellbeing alongside profitability by closing the social innovation funding gap.
By addressing the $1.1 trillion funding requirement for these organisations, which now produce approximately $2 trillion annually in global revenues, this corporate commitment exemplifies the importance of investing in social profit.
The initiative directly supports social enterprises that align with the spirit and principles of a “social profit orientation” by proactively investing resources to enhance the common good.
Not all profit is equal. Profits involving a social purpose represent a higher form of #capitalism, one that creates a positive cycle of company and community #prosperity. #CSV #WednesdayWisdom https://t.co/NU7F85ywWS pic.twitter.com/yEnJHROpnm
— Michael E. Porter (@MichaelEPorter) December 5, 2018
It differs from corporate social responsibility in that social progress is part of the organisation’s central mission, rather than a byproduct of its activities.
But how do organisations strike a balance between purpose and profit?
International research involving Monash University has found that the two aren’t necessarily mutually exclusive.
The research, led by Professor Leonard Berry from the Mays Business School, Texas AM University, with researchers from Monash Business School, Gabelli School of Business at Fordham University, Tobin College of Business, St John’s University and NHH Norwegian School of Economics, was published in the Journal of Marketing.
The study investigated social purpose organisations such as financial services company Oportun and educational not-for-profit First Book. It also included the global giant Salesforce, and Australian medical research organisation Children's Cancer Institute (CCI).
It found both for-profit and not-for-profit organisations achieved a competitive edge, attracted top talent and drove innovation when adopting a social profit orientation (SPO).
Professor Tracey Danaher, from Monash Business School’s Department of Marketing, and a co-author of the study, explains:
“Organisations with a social profit orientation proactively invest resources like knowledge, infrastructure, labour and money to enhance the common good. They're focused on improving people’s wellbeing and/or protecting the planet.
“It represents a fundamental shift in how organisations approach their mission. It goes beyond traditional corporate social responsibility, embedding social and environmental goals into the core of business strategies.
“The research confirmed that organisations can achieve financial success by embracing these principles as part of their core mission,” she says.
The study was based on 62 in-depth executive interviews across 21 global organisations, and highlighted compelling examples of social profit orientation (SPO) in action.
US healthcare provider Gundersen Health System, for instance, became the first to offset 100% of its fossil-fuel use with self-produced energy. Dr. Jeff Thompson, former CEO, said:
“Our mindset was: How do we protect the environment so it is a part of how we work, how we live, and how we work with our communities.’
Oportun, a financial services company, is another that tackles financial exclusion by providing affordable credit to underserved communities. By year-end 2023, Oportun had provided more than $18.2 billion in credit, saving customers $2.4 billion in interest and fees.
And, Australia’s Children's Cancer Institute’s (CCI) ZERO Childhood Cancer initiative aims to provide personalised treatment options for every child with cancer in the country.
CCI Executive Director Professor Michelle Haber said:
“CCI’s ZERO Childhood Cancer initiative aims to provide the most comprehensive paediatric precision-medicine program in the world by using all available genomic data from each child’s cancer, to identify the optimal treatment.”
“From reducing carbon footprints to enhancing healthcare accessibility to promoting financial inclusion, these organisations are setting benchmarks in their respective industries,” Professor Danaher says.
“These examples of social profit orientation benefited the organisations through enhanced reputation and trust, stronger stakeholder relationships, improved employee retention, engagement, and attraction, which ultimately positively impacted their financial performance.
“They are illuminating, inspiring, and offer guidance to other organisations seeking to invest in societal wellbeing.”
The researchers offered key strategies for other organisations looking to adopt social profit orientation:
1. Align employee and organisational values
2. Allocate resources to maximise societal benefits
3. Inspire leadership commitment to social profit goals
4. Focus investments on high-impact initiatives
5. Rigorously measure and evaluate social impact
6. Foster partnerships and communicate purpose effectively
A call to action
As global challenges intensify, the need for businesses to play a transformative role in society has never been greater. The study’s findings suggest that adopting a social profit orientation is not just ethically sound, but also a smart business strategy.
“We're pushing for organisations to go further in tackling some of the grand challenges the world faces,” says Professor Danaher.
“Our research suggests that by adopting a social profit orientation, organisations can create a win-win situation. They can drive positive change in the world while also strengthening their own position in the market.
“As consumers become increasingly conscious of the social and environmental impact of their choices, companies that embrace this approach may find themselves with a significant competitive advantage.
“It's a powerful reminder that doing good and doing well in business don’t have to be mutually exclusive.”
The research team has developed practical teaching resources available at SocialProfitOrientation.com to support educators and business leaders in implementing these principles.
