Chapter 1: The Importance of Values in Business

At the core of a thriving and sustainable organization lies its values and culture. These elements are essential for making a significant impact in the business world.

Impact investment has been extensively discussed in literature, covering everything from definitions to emerging opportunities. Rather than delving deeply into this topic, we will briefly highlight some key benchmarks. According to the Global Impact Investing Network (GIIN), "Impact investments are made with the intention to generate positive, measurable social and environmental impact alongside a financial return." Kelsey Miller from Harvard Business Review emphasizes the significance of sustainable business strategies, stating that their primary goal is to positively affect society and the environment while benefiting shareholders. Business leaders are increasingly recognizing the potential of sustainable practices not only to tackle pressing global issues but also to enhance their firms' success. However, establishing a clear definition of sustainability, setting achievable goals, and crafting a strategy to attain them can be quite challenging.

One common framework referred to is the "triple bottom line," which advocates for measuring social and environmental impacts alongside financial performance. This concept encourages companies to focus on "three Ps": profit, people, and the planet.

What does this entail? In addition to the conventional Profit & Loss (P&L) statement, businesses should also maintain an "Environmental P&L" and a "Social P&L." Are all three positive? While some may view the triple bottom line approach as unrealistic in a profit-driven world, numerous innovative companies have demonstrated that it is indeed possible to achieve financial success while doing good.

The triple bottom line does not inherently prioritize social and environmental impacts over financial profitability. In fact, many companies have found that committing to sustainable practices can lead to financial gains.

This idea is not new; corporate social responsibility (CSR) and "greenwashing" have been topics of discussion for years. The European Commission's Green Paper on CSR, published over two decades ago, highlighted that many European companies are adopting CSR strategies in response to various social, environmental, and economic pressures. These companies invest in their futures with the expectation that their voluntary commitments will enhance profitability. A call to action by President Delors in 1993 led to significant mobilization within European businesses to combat social exclusion.

What are companies often saying? Many express skepticism, claiming their business cannot adopt such practices. They argue that they were not raised in this culture or that their sector is indifferent to social and environmental concerns. They fear that investing in these "new" P&Ls would put them at a competitive disadvantage.

Such arguments are prevalent, indicating that change will need to come from both internal and external influences. Consumers' beliefs and attitudes are evolving, pushing for products and services that align with their values, which will inevitably lead companies to adapt.

Imagine a future where businesses must articulate their purpose and impact goals, including key performance indicators (KPIs) for measurement. Picture a world where companies are legally required to disclose their three P&Ls, similar to the current requirement for financial statements. Envision a scenario where businesses committed to the triple bottom line have easier access to financing, as consumers demand "impact assets" from their banks. Nowadays, almost all banks offer portfolios with "green funds," "social funds," and "impact funds."

Impact funds are defined as "investment funds aimed at contributing to social change by targeting high-impact opportunities that seek measurable social and environmental outcomes as part of their operations."

In this environment, especially within the entrepreneurial and startup sector, the "Social P&L" becomes crucial. Engaged, healthy, and high-performing teams are fundamental to achieving success. Do you want your employees to feel valued and proud of their contributions? It’s essential to understand their needs better than your own assumptions.

A vital factor to consider is the alignment of startup culture and values with social and environmental P&Ls. As noted in a Forbes report, nearly 80% of job seekers evaluate a company's mission and culture before applying. This emphasis is especially pronounced among younger generations, with 65% of individuals aged 18-34 prioritizing workplace culture over salary. A negative culture can lead to high turnover rates, decreased motivation, and reduced productivity.

However, many first-time founders may overlook the importance of defining their company culture early on, only to realize later how impactful it can be. Experienced founders who prioritize culture from the outset often find less stress as their businesses grow. A workforce that understands its core values will know how to navigate challenges even in the absence of leadership. People are your greatest asset and can either foster or hinder a positive culture.

What exactly is culture? Edgar Schein, a professor at MIT, defines it as "a pattern of shared basic assumptions learned by a group as it solved its problems of external adaptation and internal integration."

From the European Innovation Academy’s perspective, startups should incorporate six key principles into their values:

1. Passion/Happiness: A passionate workplace leads to greater productivity and fewer issues.
2. Education: Emphasizing continuous education nurtures talent and improves results.
3. Innovation/Creativity: Fostering innovation is crucial for maintaining a competitive edge.
4. Transparency: Authenticity builds trust with consumers, who can see through inauthentic marketing.
5. Superior Customer Service: Prioritizing customer satisfaction is essential for business success.
6. Give Back: Socially responsible brands attract consumers who value ethical practices.

For some, culture is seen as the "glue" that holds an organization together, while others view it as the "compass" guiding its direction. This foundational work is crucial for businesses aiming to make a tangible and lasting impact in their communities, marking the first step toward becoming a genuine impact-driven organization.

This video titled "Is Your Business Ready to Transition to the Next Generation?" discusses how businesses can prepare for the evolving landscape of impact investments and the importance of aligning values with practices.

Chapter 2: Taking Action on Your Business's Social P&L

The video "You're Ready To Start Your Business, TODAY (No Experience Needed)" provides insights and encouragement for aspiring entrepreneurs to take the leap into business with a focus on impact and sustainability.