Now Is the Moment for Socially Conscious Entrepreneurs
WHY YOU SHOULD CARE
Because people are demanding corporate responsibility.
By Joe Sanberg
With millions suffering amid the pandemic, it’s natural to feel pessimistic these days. After all, there’s a need for action in so many areas, from public health to the economy. Yet there’s one group of Americans who may benefit from an optimistic outlook: entrepreneurs.
The history of entrepreneurship has proved repeatedly that it can be wise to start new ventures, grow into new areas and invest for the future when other entrepreneurs are skittish. In fact, many of the most successful companies today were born or came into their own during the last two economic downturns. When our financial system was fundamentally broken in 2008 is when Facebook, Airbnb, Uber, Lyft and the sharing economy came into its own. Or consider 2001–02, amid the burst of the dot-com bubble. That’s when Google and Amazon gained their long-term footing as profitable market leaders. At both times, the world was clearly transforming.
Moments of transformation offer the greatest opportunities for growth — economically, politically and otherwise. So too is this a moment when our economy will transform. And one metamorphosis may be into an economy where we place value on aligning our conscience with our consumption.
If 2001–02 pierced the trend of valuing internet companies on eyeballs (which led to financially sustainable companies like Google and Amazon), and 2008 pierced the trend of ownership (which led to the sharing economy), then 2020 could pierce the trend whereby a business exists to serve its shareholders (rather than all its stakeholders). A “conscience” approach means valuing workers, customers and the social good. As an added bonus, shareholders do better in the long run when the interests of all stakeholders are valued.
As an entrepreneur, you can’t participate in the transformation to a conscience-based economy if you retrench in fear based on the notion that the economy is ending. If you step back and consider the roots of the current crisis, it’s clear that what comes next will be a response to why our economy and society broke.
In one sense, our economy broke down because it was divorced from conscience. The mentality of many in the business sector over the past decade was to bleed workers dry and leave them with no social safety net, a direct result of the insistence on satisfying the shareholder alone. When the pandemic struck, people were even more vulnerable.
The transformation is being led by entrepreneurs who respond to that root issue by building enterprises of conscience.
As an example, consider successful investor Jeff Ubben, who in late June retired from the firm he founded, ValueAct, to start a new investment company that focuses on social change and the environment to achieve what he calls the “reversal of corporate harm.” Ubben observed the intensifying corporate concentration that has left many industries with just three major players, noting, “Elizabeth Warren is right” in her critique of monopoly power.
BlackRock CEO Larry Fink has also expressed an urgency to move business toward a broader accommodation of stakeholder interests, saying it’s the right and smart thing to do. As he wrote in his 2020 letter, “the importance of serving stakeholders and embracing purpose is becoming increasingly central to the way that companies understand their role in society.”
These trends are manifesting outside of core investing and at the forefront of the largest consumer product companies. For instance, Deanna Bratter, director of sustainable development strategy for Danone North America, successfully led the B Corp certification of Danone, which made it the largest B Corp–certified company in the world.
In the case of Aspiration, the company I co-founded, a record number of customers have enrolled in a feature whereby they dedicate the spare change of each debit card purchase to plant a tree. In just three months spanning this crisis, the Aspiration community has planted more than 1 million trees.
There is ample precedent to suggest that businesses that listen to the public’s demand for purpose and social action will be rewarded. Recently, Nike’s sales soared after spotlighting NFL quarterback Colin Kaepernick in an ad, after he was edged out of the league for speaking out against structural racism. We are seeing many businesses and their leaders promote social causes and reforms, including Citigroup Chief Financial Officer Mark Mason and Northern Trust Asset Management President Shundrawn Thomas speaking about the need for police reform.
It’s clear that the movement toward conscience is led by the general public. According to the 2020 Edelman Trust Barometer Special Report on brands and racial justice, 60 percent of Americans said that how a company responds to racial injustice will determine whether they buy from or boycott it in the future. But just as important, 63 percent of the Edelman survey respondents said that companies “need to follow up any statements in support of racial equality with concrete action or else they will be seen as exploitative or opportunistic.”
Ultimately, there is opportunity right now for entrepreneurs willing to be bold and deliver on popular demand for authenticity and social good. While some understandably talk about a depression, in 10 years we may in fact see an economy that’s populated by companies founded during this period. And, if we do, there’s a good chance they’ll become leaders of conscience approaches — ones that value workers and customers as much as shareholders.
Joe Sanberg is an entrepreneur, an investor and a co-founder of Aspiration
- Joe Sanberg, OZY Author Contact Joe Sanberg