Profit-with-Purpose Business

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Fundamentally, a profit-with-purpose business is one that:

  1. has made a primary and long-term commitment to social impact, which will be locked-in through its governance and/or embedded in its business model; and
  2. creates duties upon its directors to work to achieve this social purpose; creates and reports transparently on its social impact; and has not created restrictions on its ability to distribute its profits or deal with its assets (see also ‘asset lock’).

Making this commitment to a primary purpose other than profit, allows profit-with-purpose businesses to demonstrate their social impact credentials (for example, to impact investors), and to stay true to their purpose in the long-term, helping avoid mission-drift (for example, upon the founders’ exit).

Unlike a social enterprise, its commitment to its purpose does not restrict how the profit-with-purpose business uses its profits and assets; it is fully profit-distributing. This allows freedom to offer returns to investors, as can any for-profit commercial business.

The use of this specific terminology could be critiqued because “profit-with-purpose” might be taken to suggest that profit is primary, ‘with’ purpose accompanying it, bolted onto the businesses. The type of business described above, which has purpose at its core and achieves its commercial success by way of pursuing that purpose, could therefore alternatively be described as “profit-through-purpose”.

An overlap exists in the terminology used to describe types of purpose-conscious business and it will develop over time. It may help to think of them on a scale of commitment to social purpose, rather than always being clearly delineated.

See also: Mission-led business; Purposely; Responsible business; Social enterprise.

Links

Profit with Purpose website