For entrepreneurs in particular, work life and personal life are inextricably linked. The pandemic has, in many ways, made us more grateful and appreciative of what we have — and has highlighted the importance of taking care of one another in all areas of our lives. To this end, many business owners and their companies are more deliberately making win-win decisions — that are designed to make us better people and are also good for business.
In Jim Collins’ book, Built to Last, he references a study that examined a group of visionary companies between 1926 and 1990. He found that companies that were guided by a higher purpose, other than turning a profit, created up to six times more value for shareholders than companies without. The conclusion is that when you work with a purpose, you will ultimately feel more tied to the company and more empowered to make the company successful.
Contributing to worthy causes is not only good for the soul of the entrepreneur and his or her employees, but a company’s higher purpose is very important to customers, and even investors. Today’s customers are savvy — they research how a company makes its money, what causes it supports, who the company employs, and how products are made.
Investors are also very focused on ESG scores (Environmental, Social, and Governance criteria). An ESG score, similar to a credit score, indicates how socially conscious a company is, including their level of positive impact on social justice causes, the environment, and the betterment of society as a whole. A good score and documentation of sustainable, socially conscious practices may affect your company’s valuation and make you more attractive to potential investors or companies who want to buy you outright. Salesforce, for example, is one of the highest rated companies on the ESG scale due to its leadership in privacy, data security, and human capital issues. Alphabet, better known as the parent company of Google, is investing in solar and wind energy projects around the world and plans to run its data centers using these sustainable technologies. Even investment companies like BlackRock are lauded by investors for their attention to companies with low environmental risk scores and their desire to promote social causes through their investments.
This trend has been simmering for some time, and we currently see a growing number of companies donate a percentage of their sales to worthy causes. For example, Bombas socks donates one pair of socks to those in need for every pair purchased. In addition, 1% for the planet, an international organization, is composed of member organizations and companies that contribute at least one percent of their annual sales to environmental causes. Cross-marketing campaigns tie the company and cause together in the public eye.
Take-away: Sometimes it’s the intangible or non-financial factors that drives successes for a company’s bottom line. If you would like to have a free diagnostic on other ways to maximize your cash flow that you may not find directly on your financial statement, reach out to Brian or Scott at email@example.com.
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