In the 1970s Milton Friedman declared (in the New York Times) that “the social responsibility of business is to increase its profits”.  

We’re all in business to make money, I hear you say, which is true. However, this shift came at great expense. The loss of purpose. Lost in the short-term pursuit of increased shareholder value. Fast forward to now and, to really thrive, businesses need to adapt once again (and in a radically different world). The great forces of technology and climate change creating unanticipated complications that call for new business models. Fit for the 21st century.  

Are you still stuck in a 20th century business model rut? 

With their emphasis on short term shareholder value and profit, at any cost, the 20th century business uses products and services as vehicles for making money. Efficiency is big on the agenda. As are short-term cost cutting exercises. With supply chains tasked with buying in bulk and cheap.

Leadership tends to take the form of carrots and sticks. With people seen as a resource, where you either “fit the mould” and conform, or your time in the company is limited. It's no surprise, therefore, that many 20th century companies struggle to recruit and retain good talent. 

Purpose is a tick box exercise of values and mission statements that no-one truly believes in or follows. Work is a must-do, not a love-to-do. 

For me, the story of Kodak as told by Simon Sinek in his book “The Infinite Game” sums this business model up perfectly.  

Kodak was founded by George Eastman in 1888. His purpose, to make photography available to the masses at a time when it was only accessible to professional photographers. This purpose was one to be admired, the driving force behind the business that by 1976 85% of all film cameras and 90% of all film sold in the US was Kodak (source: https://petapixel.com/2018/06/14/a-brief-history-of-kodak-the-camera-giants-rise-and-fall/). 

But when a Kodak engineer invented the first digital camera, Kodak executives hid the discovery. Why?  

Ignoring the brilliance of the team of people they had in their business, they were convinced that people wouldn’t buy it and, with a whole business built on film photography, they feared it would destroy shareholder value. Ten years later, the digital camera had been built by other businesses and decimated Kodak; forced to declare bankruptcy (in 2012).  

What of Kodak? Kodak became a business used by professional photographers, the total opposite of why the company had been founded. 

The 21st century business model 

In stark contrast, the winners in our new digitally-led and environmentally-conscious 21st century world, are the businesses that have a purpose bigger than being solely to make money. Apple and Tesla make money as a result, not a goal. Among those who recognised they needed to add value to ALL their stakeholders not just their shareholders.  

Products and services are still there but with people and planet at their core. 

Businesses that thrive take personal responsibility for contributing positively to the world. They have harnessed the power of diversity and inclusion, creating environments where everyone across their value chain has an equal opportunity to thrive. 

Businesses who make sustainable products will survive. At a minimum they will be net zero but soon this will become just the starting point. The move to carbon negative will be what sets a business apart from others. 

Profit will be achieved in the context of having acted responsibly. And, even later in this century I believe will be more evenly spread across a business value chain as leaders seek to achieve a win-win for all. Where the developed world continues to thrive, and the developing world are enabled to grow.  

A great example of a business who has got it right is Whogivesacrap. With toilet rolls made out of bamboo wrapped in recycled paper, 50% of profits go to building toilets and providing clean water to people in the developing world. 

Not convinced? 

Let’s take a look at the commercial benefits: 

• In summer 2020 there was a 4,550% increase in google searches related to “how to live a sustainable life”.
• Data shows that sustainable funds outperformed both traditional funds and indexes, on average, according to a 2021 report by Morningstar. 

And the cultural benefits: 

• In his book Drive, the best-selling author, Dan Pink talks about a new motivation framework for the 21st century. Replacing the carrot-and-stick model with purpose, mastery and autonomy. 
• The younger generation are more climate aware and are looking to work for businesses aligned with their values. 

Mission possible 

It’s not going to be easy, but this change must happen if we are to reverse the damage we have done to our beautiful planet; and build a fair and equitable world. 

I believe it is possible, if we look at products and services through a different lens.  

The global tile manufacturer Interface, for example, introduced a new line of products called Entropy® after the product design team observed the random patterns of a forest floor and were inspired to create a new product mimicking the randomness found in nature. Not only did it reduce waste from 14% down to 1.5% on installation, it quickly became a top-selling product doubling their US business between 2002 and 2007 (source: “Lessons for the future: The Interface guide to changing your business to change the world”).  

Clearly demonstrating that what’s good for the planet is good for business, Interface is now on a mission to achieve Climate Take Back. Today they are sourcing materials for carpet tiles from discarded fishing nets. Want to be inspired, check them out! (https://www.interface.com/EU/en-GB/sustainability/climate-take-back-en_GB)  

Not sure where to start or how to measure your change?  

The World Economic Forum (WEF) has defined a core set of metrics in the white paper titled “Measuring Stakeholder Capitalism – Towards common metrics and consistent reporting” published in September 2020. It provides a common set of metrics that establishes a consistent baseline and enables us to more easily share our learning within and across industries.  

Are some initiatives going to fail, yes. But it is through failure that we achieve our greatest successes. 

In the words of Winston Churchill, “I never worry about action, but only about inaction”.