Nov 12, 2014 slush
Today, more myths than truths predominate for both questions. After having overcome the first obvious handicap regarding the term (“impact” as such merely means an effect, whether negative or positive), we are left with 3+1 myths confusing us when talking about societal contribution and companies. It’s time we break them!
A common first association of “impact startup” often may be something along the lines of: a bunch of idealistic kids making organic bags out of used hemp and giving them for free on the street. This image is both unfavorable and untrue: “impact” or “societal” companies are merely firms with a broader and often also a slightly higher level of ambition. It’s all about answering a very common sense question: “what does this company actually do and why”. In addition to building a viable business, these companies target to contribute to the society in some other way. Financial performance is not enough: they strive to cause more good than harm to the society, not just the owners.
We often tend to think being a “societal” company has something to do with industry. We may assume a random startup in healthcare is somehow automatically more societally beneficial than one in, say, the financial industry.
Having impact has nothing to do with industry. It has to do with what the company actually does, and what could be done with its resources otherwise. It means the resources (e.g. smart energetic people, lots of knowledge about a topic, funding from an investor) are used to create more good than harm. Impact startups are needed and founded wherever our globe’s biggest challenges lie – also in banking, transportation, oil, retail and insurance. Respectively, a startup in healthcare is not automatically any more beneficial for the society than one in banking.
Saying that something has to do with values is often a fancy way of saying we don’t know what we’re talking about.
Many underlying commonly accepted values already exist and prevail in our society. Taking Finland as an example, we can list a fair amount of things we already build our society on: education for all, healthcare for all, living in harmony with the environment, to name a few. Even without stepping into topics of more debate (e.g. taxation, income distribution, international relations), already with these established values we have what it takes to start building a first cut of a measuring system more balanced and up-to-date than the one we use today – utilizing just one parameter of many, namely financial performance.
Let’s imagine two companies with the same growth rate, number of employees and financial performance. One produces and sells plastic forks, the other develops new service concepts for more efficient city mass transportation.
According to the measuring systems in use today, these two companies contribute evenly to the society. But do they?
A common problem with impact is its perceived vagueness and immeasurability. It is often argued that impact cannot be measured perfectly, since the externalities of different benefits to the society are theoretically speaking endless.
I don’t think “since it cannot be done theoretically perfectly” is a good excuse of not doing it at all. Using the simple system of ranking companies against to some commonly accepted societal values (such as health, education, environment – see Myth #3), we can start to understand how companies actually influence the society in which they operate. By making these implicit and fractured pieces of data into transparent, systematic and explicit information, not only employees (demanding more and more meaningful work) but also investors can start utilizing this information in their decisions.
In a traditional view of a company, the purpose is to serve the owner by creating profit. Looking at the rapidly changing world around us, I like to play with an idea that in the new system, the society is the owner: the purpose is to create profit for a community, of which the owner is a part. Obviously, this means our definition of “profit” is also undergoing a transformation and becoming richer.
Why is all of this pretty cool and exciting to all of us? Because it is not (just) the green hippies, but the best businesswomen and men of our time who play a key role here. We have a chance to start building ambitious solutions to the world’s biggest challenges, one company at the time.
Photos by Jussi Hellsten
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