FiBAN blog post by Jari Ala-Ruona and Sampsa Fabritius
One year ago, Black Rock CEO Larry Fink published his landmark letter. His key message was the call for companies to make a positive impact to the society. The letter was very clear; companies failing to do so, are likely to stumble and fail. Many journalists interpreted the letter as an ultimatum to either fulfill the criteria or risk losing their support. With almost $6 trillion under Black Rock’s management, the industry clearly paid attention to the request to measure their impact.
The societal implications of automation and climate change are increasingly recognized, as more people and companies assess the long-term feasibility of their strategy. The financial world is realising the risks caused by global change. As an example, one reason for the PG&E bankruptcy was found to be climate change, which increased wildfire liabilities. An investment strategy for long-term sustainable wealth creation is different from that of short-term value creation. And this, we believe, is Mr Fink’s perspective. Genuinely sustainable leadership is needed, as the society is transforming to a new era. Hence, the call for being grounded on good purpose.
Impact investing is the term used for investments that are aiming to build businesses by fixing some globally noted problems. For example, UN Sustainable Development Goals provide a good reference for globally acknowledged problems, eventually influencing everyone. One study found that socially responsible business practices can explain as much as 33% of the profit increase and 47% of cost reduction, on an experiment with socially responsible German SMEs. Millennial research suggests that the demand for social responsibility will accelerate, as the Y and the Z generations are increasingly concerned with the future of the planet.
Our assessment combines scientific evidence for transformative entrepreneurship, and it results in a demand for business leaders to take the responsibility for the society they create. Beyond impact investing, often driving the change within one industry, we need to look at the society more holistically. Transformative business combines the good for the society with profitable business models. Thus, transformative businesses weave their societal purpose into their DNA, making the core of the business to advance their noble purpose. Most successful startup founders are driven by impact - by making a change, underscores the Ecommerce Genome study. Companies driven by a purpose are more likely to change the world.
The global impact community is exploring the recipe for transformative businesses. Connecting transformative entrepreneurs and investors is exactly what Oxygen2050 is set to do. Being the change you wish to see, like Gandhi famously said, is a critical part of personal transformation. The new business models are driven by the new mindset. Perhaps this transformative mindset shift is exactly what Mr. Fint is pushing forward.
The next transformative business unconference is on the 15th of February 2019. Join here.
Jari Ala-Ruona and Sampsa Fabritius are entrepreneurs and founders of Oxygen2050.com - a community that brings together entrepreneurs, investors and other stakeholders to network and discuss about how to build genuinely good and profitable businesses to create a better society and to protect the nature.