The way forward: Balancing profits and purpose for business
- Posted on April 21, 2021
- Estimated reading time 5 minutes
The article was originally published in The Business Times.
“The sole purpose of a business is to generate profits for its shareholders” - this was the thinking that the Nobel Prize-winning economist, Milton Friedman, espoused in the 1970s.
Fast forward half a century later, businesses reside in a very different landscape where they are expected to be more responsible in the way they treat the environment, resources, and people. In Singapore, almost 90% of consumers believe that businesses have a responsibility to do social good. Being a responsible organization is necessary for businesses to stay relevant with current times and position themselves for the future.
However, the questions at the forefront of many leaders’ minds are the extent to which they should integrate social responsibility practices into their business strategy and the business value these initiatives can bring.
Upholding higher standards while making business sense
Besides assuaging rising pressure from stakeholders, companies need to recognize that making positive social impacts do make business sense. It is no coincidence that close to nine in ten companies in the S&P 500 Index® published sustainability or corporate responsibility reports.
Social consciousness among consumers is on the rise for many years, and more consumers are now reflecting on their consumption habits and purchasing choices. Four in five consumers in ASEAN shared that they value environmental sustainability and have made greener lifestyle choices. This presents an opportunity for responsible brands to grow their customer base, cement customer loyalty and increase their profitability.
For businesses championing environmental sustainability, there are several business advantages that it can bring to the table. For example, reducing the company’s carbon footprint can result in smaller carbon tax. For companies in Singapore, initiatives such as the Singapore Green Plan 2030 provides businesses with the chance to identify and act on the whitespaces in the budding green economy. In fact, going green can potentially deliver US$1 trillion in annual economic opportunities to Southeast Asian economies by 2030. From the development of green innovation to the creation of resource-efficient systems, these are all potential growth areas for businesses.
Furthermore, being a responsible business gives companies a more competitive brand positioning and an advantage in the ongoing war for talent.
Beyond profitability and pragmatic business sense, the commitment to create genuine social impact can imbue the organization with a greater sense of purpose. As the author, Peter Drucker, said: “Profit for a company is like oxygen for a person. If you don’t have enough of it, you’re out of the game. But if you think your life is about breathing, you’re really missing something”. This sense of purpose can be a rallying cry to unify the employees behind a common goal.
Harnessing the momentum to change and making a genuine human impact
While some leaders might think that their immediate priority is to deal with the economic fallout from the pandemic, the global disruption actually gives them a chance to reflect critically on how they should transform their business models, drive new value and position themselves for the future.
Companies can, and should, use this opportunity to identify the social causes that align with their core business and values, leverage the change readiness accumulating in their organization to build momentum around what matters.
While there is no shortage of challenges confronting our society, two particular social issues stand out in today’s landscape.
- Preparing the workforce for the digital future
The pandemic has compressed years’ worth of digital transformation into a matter of months. In the following months, more organizations will ramp up on the adoption of technologies such as cloud and artificial intelligence (AI) as they continue to build their organizational resilience and agility. Even before the pandemic, nearly 70% of hiring managers in Southeast Asia already had difficulty filling tech positions. These trends will continue to exacerbate tech talent shortage and existing digital skills mismatch.
Businesses have a major role in addressing these challenges and rebuilding the nation’s human capital for the future. They are well-positioned to empower individuals with the skills they need to succeed in a cloud and AI-enabled world, allowing them to capitalize on the burgeoning digital sector’s job opportunities.
By fostering stronger partnerships between educators and employers, businesses can develop relevant curriculum that aligns with workplaces’ current and future requirements and create internship opportunities that will enable students to gain practical, industry experience. This will help nurture a dynamic future digital workforce equipped with vital soft skills and relevant technical skills.
- Building an environmentally sustainable business
Contrary to what some believe that environmental challenges are non-immediate concerns, tackling climate change is not an issue that can be put off any longer. A United Nations Intergovernmental Panel on Climate Change (IPCC) study warns that many coastal cities in Southeast Asia might be submerged by 2050 due to rising water level. Addressing these challenges will require urgent actions and sustained commitment.
Businesses will need to harness the power of technology to adopt sustainable business models and create environmental impact sustainably. For example, through data modernization and AI capabilities, enterprises can enable continuous monitoring and impact assessments, reducing risk and averting costly and environmentally devastating disasters.
The use of AI and IoT technologies, coupled with cloud solutions, can also enable companies to monitor and track the environmental impact of an organization’s technology estate. This allows them to make more informed decisions and implement more impactful measures to reduce carbon emissions. Companies in Singapore can also tap on the newly unveiled Enterprise Sustainability Program to defray the cost of developing and deploying these solutions.
The way forward
As social responsibility, profitability and business sustainability becoming increasingly intertwined, businesses will need an integrated strategy and a long-term plan to genuine human impact on their communities. Achieving this would require companies to find their purpose beyond profitability, capitalize on the digital transformation momentum to rethink their business model, and make meaningful changes to how they operate and bring value to stakeholders in the years ahead.