Balancing purpose versus profit

Companies like Patagonia and Mars prove that purpose and profit can coexist. But feel-good brands alone never create value — the balance requires disciplined leadership.

Purpose-driven rhetoric is everywhere, yet the hard truth is that no amount of lofty intention can mask a business model that fails to deliver real value—and real profit—to real clients.

It’s one of the key questions of our time: how does a for-profit company balance between ‘doing good for society’ versus the need to generate a healthy profit? In the last few years, vision and mission have often been replaced by purpose statements. Why does a company exist? Or, in other words: ‘what would the world miss if we were not around as a company?’ If we turn the question around, it becomes perfectly clear what our added value is. Because if we don’t have added value, we should go bankrupt. At least, if the capitalist system works well. No added value means no clients, so, no revenue, no business, no money. Simple.

Key takeaways

• Leaders must ensure their company’s purpose clearly articulates the unique value they add to the world—if clients wouldn’t miss you, your business model is fundamentally at risk.
• You can’t ignore that profit is the oxygen your company needs to survive and invest in the future; purpose without profit is simply not sustainable.
• Committing to a purpose bigger than short-term self-interest will inevitably impact profitability, so you need to decide how much profit is enough to serve both your mission and your stakeholders.

Back to balancing purpose against profit. Every for-profit company must generate a healthy profit at the end of the day. Simply because profit is what oxygen is for humans. Profit to survive and to invest into the future. A no brainer. The question then becomes, how much profit?

Profit is what oxygen is for humans. Profit to survive and to invest into the future.

We see nowadays many companies working on their purpose. They are, by applying reverse engineering, trying to find an answer to the question: why are we here on this planet? Many companies are answering their purpose question. But, we have to be very honest here. At the end of the discussion, doing something bigger than your immediate short term self-interest will have an impact on the profitability of a company.

Companies leading the way

What are the companies that seem to have found this purpose versus profit balance? Which businesses are generating a healthy profit and are purposeful? These companies can serve as inspiration for others. Whether you’re running a big or small business, you’re starting or legacy, whether you’re private or public.

There are no perfect companies. We all have our issues, make no mistake. But some companies seem to be in the forefront of balancing this Purpose vs. Profit tradeoff. And it’s probably a bit easier for private companies to find a good balance. The shareholders of Mars Inc. for instance take roughly 10% dividend from the companies’ profits each year. The rest is reinvested into the business. Which is significant and allows management to really develop the company.

Inspirational examples

Patagonia (privately owned)

Mars Inc. (privately owned)

Unilever and Ben & Jerry’s (public)

Electrolux Professional (public)

Icebreaker (private)

Most of the companies listed here are quite well-known. But there are many more! There are so many small private companies that work under the radar that seem to have found a healthy balance.

So, we’d love to hear from you too! Let us know if you know of any companies that we should add to the list and that can serve as inspiration for others?

Feel-good brands alone will never create value. There must be a real value proposition!

Over to you.