In one of his many essays providing advice to young entrepreneurs, Y-Combinator co-founder Paul Graham says that instead of looking for startup ideas, one should be looking for problems. He goes to illustrate this with the examples of Apple, Yahoo, Google and Facebook, saying that none of them were initially meant to be businesses – they were things that their founders had built to solve a problem (specifically, in these cases, a problem that they themselves had). They then discovered that the purpose of their ventures was actually commercially viable – people were willing to pay, in one form or the other, to use the solutions that they had developed. And the rest is history.

If we do look at business historically, we’ll see that this is not a new idea. If we imagine a wheat farmer and a dairy farmer in the same medieval village in some corner of the world several centuries ago, then the former would have a problem – he required milk products, while the latter would have the problem of needing wheat or bread. They would barter or sell to each other and this primitive business would be able to exist as long as they continued to have their respective problems and sought one another for the solution.

But, over time, another factor came into play. Businesses began not just to solve problems, but to cause them. The more we learned about the world around ourselves and its limited resources, the clearer we understood that may of the everyday activities were causing short-term and long-term harm. The more enlightened our societies became, the more obvious it was that many commercial policies and practices were encouraging pollution, discrimination, exploitation and other negative phenomena. So, what happens when a business, while meeting a commercial need, ends up creating social and environmental problems?

The Art of Corporate Storytelling

Towards the end of the twentieth century, the concept of corporate social responsibility was born during what one could call a “midlife crisis” in the private sector. For people, a midlife crisis has been called a “transition of identity” where one realizes that the “best years have gone by” but there is no sense of major achievement to show so far. The situation was not very different for the private sector. Businesses that had become big names in the world began to be embroiled in social responsibility crises that exposed what had been a greedy and purely commercial purpose so far.

Let’s take, for example, Nike’s infamous use of sweatshops in Vietnam, Indonesia and other Southeast Asian countries in the 1990s. Some factory workers that produced Nike goods made only $1.25 a day, while the items that they helped make would go on to sell for 40-50 times that sum. Faced with facts like these, how would a Nike employee or customer define the purpose of the company?

It took Nike several years to put things on the right path, and many recognize then-CEO Phil Knight’s 1998 speech as the turning point. Knight outlines a range of actions that would be taken, including raising wages, improving monitoring mechanisms and developing the Fair Labor Association. Strikingly, he said, “These moves do more than just set industry standards. They reflect who we are as a company.” Equating good business practice with the identity of the business is arguably the same as elevating it in status to be the purpose of your business.

Another dramatic example of midlife crisis is now part of the corporate story at the carpet company Interface. In 1994, the company chairman, Ray Anderson said what he felt was like a “spear in the chest.” Customers began to ask questions about the environment that anyone working in the petroleum-intensive carpet industry would be unable to answer. At the age of sixty, when executives like Anderson would usually be making plans for a comfortable retirement, he made the commitment to lead Interface into an era of sustainability.

For many other companies as well, corporate social responsibility soon evolved into sustainability. Along the way, businesses realized that while they do cause problems in society when pursuing their commercial aims, there is also the opposite situation to consider. It is clearer today more than ever that there are numerous problems in society that directly and indirectly impact businesses, making them less profitable and threatening their long-term sustainability. Just to name a few, skilled labor is a serious problem in countries with poor education systems, outdated agricultural practices mean lower quantities and inferior quality for the food industry, and inefficient healthcare systems result in greater employee absenteeism or lower productivity. So, you might be trying to solve a commercial problem with your new company, but the social and environmental issues in your country make that much more difficult to do.

So, Graham said that a business should be created to solve a problem, but history has shown us that this might be too naïve a viewpoint. Yes, providing a commercially viable solution to a problem is a great way to start a business, but it only provides part of the picture in the real, modern world.

Purpose in Brand Value and Sustainability

Another big name in the business world, Unilever CEO Paul Polman, provided a different opinion on the purpose of business during an interview in 2013. His view suggests that the focus goes beyond the problem that the “commercial side” of the business is solving, to a more profound raison-d’être. He said that the everyday jobs that employees in a company do has to come from a deeper sense of purpose. “You have to be driven by something,” he said and emphasized that this played a fundamental role, because “if that purpose isn’t strong enough in a company, if the top doesn’t walk the talk, then the rest will not last long.”

Unilever has managed to distil this thinking into a very simple corporate statement of purpose – Unilever wants “to make sustainable living commonplace.” This is a statement that would resonate with each employee in any part of the business where they work. It fits both the commercial side of the business and covers the social and environmental problems that relate to using the everyday items that Unilever produces. And it gives them equal importance.

So, irrespective of whether you own shares in the company, manage a large team there, just started your first day, or are regular customer, you see that the problems your company is trying to solve go beyond a simple commercial need.

Facebook adjusted the company’s mission statement earlier this year. They had earlier said that the mission was “making the world more open and connected.” But as Facebook grew, its immense power led to a sense of greater responsibility and a focus on how the company would use this potential. With close to 2 billion users, Facebook now says that its mission is to “give people the power to build community and bring the world closer together.”

Microsoft has also managed to articulate a purpose that goes beyond their commercial offer. The company’s states its mission as “to empower every person and every organization on the planet to achieve more.” Software solutions to help companies work together efficiently and communicate across the globe? Check! Innovation and education centers that teach young people computer skills and encourage new entrepreneurial ventures? Double check!
Perhaps the briefest statement of purpose for any major company that I have come across is that of Interface. Their corporate message is “we are in the business of making change.” Of course, their internal communication goes on to elaborate the kinds of change that they are pursuing, and the inspiring thought at the heart of all this is that the company sees itself as leading from the front to make the world a better place.

Nike’s mission statement, interestingly, is “to bring inspiration and innovation to every athlete in the world” with a tongue-in-cheek definition for the word “athlete” dating back to Nike co-founder Bill Bowerman – “if you have a body, you’re an athlete.” Does this mission statement reflect issues of sustainability, social awareness or responsibility? It is not explicitly stated, and Nike should consider adjusting their statement of purpose to give it more power, and show a stronger commitment to the issues that dogged them from the 1990s into the early 2000s.

The Significance of Purposeful Business

So, given our current level of advancement in society, the purpose of business remains the same as it was in medieval times – to solve problems. Paul Graham was not wrong. But it is the nature of these problems that has changed over time, and will possibly continue to change in the years to come. The best businesses today are the ones that are helping solve commercial, social and environmental problems.
This includes political issues as well. The Conflict-Free Sourcing Initiative of the Electronic Industry Citizenship Coalition (EICC), for example, has been using the combined power of some of the biggest names in the electronics industry as buyers. This means more than 350 of the largest electronics companies are taking clear and coordinated steps to avoid indirectly financing conflict through their purchase of minerals. Procurement is a serious business problem, but responsible companies do not contribute to the political problems faced by military dictatorships in mineral rich countries when meeting their business needs.

It is also worth focusing a bit on why a business should rethink its mission statement and give itself a broad and inspiring sense of purpose. First, it clearly gives employees a new sense of motivation and a cause that provides them with a greater sense of satisfaction than a paycheck ever could. Second, it’s also about talking to your customers about the things that matter most to them. People who pick up a cup of coffee on their way to work care about all kinds of causes, and it is great knowing that coffee shop you stop by shares these concerns. You want to buy your child toys that help develop her creativity and skills, but you also want to get them from a company that understands your concerns about product safety, gender equality and responsible sourcing. Companies that express a clear sense of purpose can create powerful communities with their customers if their message resonates. Finally, having a clear mission statement also helps companies and their stakeholders to better define what success means to them, and consequently, to measure this success.

So, the next time you address your employees, buy from a company or want to partner with one, you should pause to ask yourself whether there is a clearly defined sense of purpose. Is the company solving one or several real problems? Are the problems purely commercial, or do they have a positive impact on other issues important for our planet’s sustainability?

The answers that you get will give you a better understanding not just of why the company exists, but why it does or does not deserve your time and contributions as an employee, or your money as a customer.

Author: Nazareth Seferian

Source: Responsible Business