Profit meets purpose: Unlocking growth through sustainable business models | EU-Startups

The adoption of purpose-driven business models has gained considerable momentum in recent years, disrupting the corporate status quo of finding niches to sell and building niches to create social or ecological impact. There is growing recognition that having a strong sense of purpose and values meets ever-evolving societal expectations and enables businesses to operate at their full potential while contributing positively to society. Sustainable business methods can be profitable and beneficial, leading to increased funding, loyal and expanded audiences, and more.

Sustainability, once considered optional, is now crucial as we address the climate crisis. More businesses, both large and small, are adopting the idea of responsible business. Some, however, remain cautious, believing that sustainability and profit are incompatible.

Profit is typically thought of as the lifeblood of a business. Without profit, many companies can quickly spiral out of financial control; therefore, for many business owners, increasing profitability is a primary concern. While lower profits indicate inefficiencies or issues that need addressing, higher profits typically show that operations are running smoothly and efficiently, allowing businesses to make well-informed decisions about the company’s future. In general, the more profitable your business is, the better it is perceived to be performing.

Despite the significant increase in consumerism over recent decades, consumer behaviour is evolving frequently, quickly, and in unpredictable ways. To make effective decisions, businesses need to anticipate and react to changes in customer preferences and demands. Trends such as conscious consumerism among customers and corporate social responsibility (CSR) within businesses are becoming more and more prevalent. Although labelled as trends, many believe they are here to stay.

According to Forbes, 88% of customers remain loyal to companies that promote social and environmental causes. In the corporate world, trust is crucial, and organisations that disregard sustainability often lose the trust of their local communities. A 2020 Edelman poll found that 71% of customers no longer trust brands they believe prioritise profit over people. For example, the Dakota Access Pipeline demonstrations showed that local communities may oppose businesses that degrade the environment, resulting in protests and potential closures.

As more companies embrace corporate social responsibility (CSR), the traditional three-pillar model of business — environmental, economic, and social — is evolving into a new standard and becoming a prerequisite for long-term success. A sustainable strategy is not only better for the environment, people, and businesses, but it is also essential for remaining compliant and competitive in the long run. According to a Morgan Stanley survey, 85% of individual investors are interested in impact or sustainable investing. Consequently, companies that have not yet embarked on their sustainability journey may find it more challenging to attract investment.

In fact, companies can become highly profitable by going green. Despite some scepticism, increasing evidence suggests that adopting sustainable practices can lead to successful commercial ventures. A recent study by EcoVadis and Bain & Company found that businesses integrating sustainability into their core strategies tend to be more profitable over the long term. The study assessed the impact of Environmental, Social, and Governance (ESG) initiatives on the financial performance of 100,000 companies. It revealed that there is no discernible negative association between financial growth and most businesses improving their social and environmental impact.

Pandora is a prime example of a company that has successfully integrated this dual focus. The major jewellery brand recently announced that it would use 100% recycled gold and silver. It achieved its goal of eliminating the use of virgin silver and gold a year ahead of schedule. As a result of its switch to sustainable sourcing, Pandora’s sales have increased significantly. Despite the global jewellery market’s decline, the brand’s ongoing revenue outperformance demonstrates the profitability of purpose-driven business methods.

Ignoring sustainability in business processes has several negative social effects. Businesses that disregard sustainability risk engaging in exploitative labour practices, such as poor working conditions and inadequate wages. This can exacerbate socioeconomic inequalities and lead to instability. Unsustainable land use activities, such as mining and deforestation, can displace local communities and disrupt their way of life and cultural heritage. Businesses that haven’t integrated sustainability should also be aware of the costs associated with litigation and regulatory compliance. For example, after the Deepwater Horizon oil spill in 2010, BP faced clean-up and legal costs totalling over $60 billion.

Transitioning to a more responsible business model starts with strong leadership. Fostering a culture that values both impact and profitability is crucial. The founder team, C-level executives, and all senior leadership must fully commit to this approach. To gain widespread support, the triple bottom line—environmental, social, and economic factors—must be embraced at the highest level. Sustainability should be at the core of the business. This will build trust capital, which in turn can drive profitability through environmentally conscious actions and practices. This is the only way the mission can trickle down to every level of the company.

Companies must be transparent about their sustainability efforts and commit to continuous improvement. This includes providing detailed information about product materials and manufacturing processes, such as material certifications, supply chain transparency, and reliable certifications. Such transparency not only supports your team’s sustainability goals but also demonstrates to customers your genuine commitment to environmental protection. As a business leader, it is crucial that everything is measurable and quantifiable. For instance, in a report we conducted with the Fraunhofer Institute to assess the product footprint of electronic devices, we found that new electronic devices generate 80% more e-waste than refurbished ones. Ensure that all communication is transparent, verified, and certified, reinforcing the credibility of your sustainability claims.

Looking ahead, future companies will need to innovate to deliver value and enhance customer experiences—exactly what today’s customers demand. By integrating meaningful and sustainable practices, businesses can unlock new opportunities, boost their brand reputation, cut costs, and drive positive change. Ultimately, while businesses contribute significantly to environmental issues, they also have the potential to lead in creating a more sustainable future. Every business must be both ecologically and economically sustainable to succeed in the future.

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