Profit from Purpose: Elephants on the Balance Sheet

Purpose and profits are now indelibly linked.

When a group of computer science professors at South Africa’s University of Pretoria started global software integrator EPI-USE in 1982, all they wanted to do was generate funding for their department by providing IT services. They did that and then some, employing more than 3,000 people in over 30 countries to date, according to EPI-USE associate partner David Allen.

But company leaders weren’t satisfied. They wanted to hit the magic US$1 billion mark in revenues. To get there, they created a novel strategy: reorganize the business model around saving Africa’s dwindling elephant and rhino populations. In other words, they used purpose as a powerful motivator to drive profits.

“Our wild elephant population has dropped from millions to less than half a million in the last 100 years, and South Africa’s rhinos, which represent some of the last viable wild populations in the world, are down to just a few thousand,” says Allen. “The thought that in just a few years we might not see them anymore was a powerful thing.”

Other people might resign themselves to the relentless loss of wildlife or try to soothe their feelings of despair and powerlessness by writing a check. Not the leaders of EPI-USE. They took it on as a personal challenge.

Africa as a whole loses four elephants an hour to poachers, and South Africa alone loses five rhinos a day. Company leaders weren’t going to let that continue happening to their wildlife on their continent. They knew that taking action would boost their profile, motivate their employees, and inspire their customers – and they knew they had the expertise and resources to make a concrete, significant difference.

They understood what many other organizations are now beginning to understand: customers are increasingly aware of the environmental and human costs of traditional ways of doing business, and employees are showing a powerful desire to work for companies that make a difference in the world. At the same time, the latest technologies create efficient – and profitable – methods of conserving resources and introducing more sustainable business models. As a result, purpose is no longer a siloed PR exercise. Instead, it’s something to embed into operations as a driver of growth.

So the company created an umbrella organization called Group Elephant and split itself into three parts under that umbrella. The first part is the organization’s for-profit business, comprising 11 enterprise resource planning (ERP) software, testing, engineering, and services companies.

The second part is also known as ERP – for Elephants, Rhinos & People. It’s a nonprofit that runs conservation and poverty-fighting initiatives. Initiatives include an app that Allen created, ERP Air Force, which repurposes the company’s existing systems, including drones and satellite tracking tags, to monitor the whereabouts and well-being of elephants and rhinos in real time. There’s also a project that returns land privatized by the apartheid government to the communities that once owned it and then works with those communities to develop ecotourism preserves where elephants and rhinos can live safely while attracting tourist dollars.

The final part is a private investment firm that funds like-minded “for good” initiatives until they can become self-sustaining and supports communities building ecotourism preserves by helping them manage their assets and the development process.

Values fuel growth

Group Elephant’s for-profit businesses support the nonprofit by contributing 1% of their global revenues, free infrastructure support, and as many hours of volunteer time as employees want to give. Employees can also suggest ideas for new nonprofit projects – or turn an idea that originated on the nonprofit side into a revenue-generating product or service, as Allen has done.

“I started out thinking that if one of our solutions can run a massive petroleum factory, there’s no reason it can’t run a nontraditional, conservation-related project,” he says. “Then I realized that if I was using it to track elephants, there was no reason we couldn’t use it to track valuable animals elsewhere, like racing stables, commercial game ranches, and livestock farms. So we’re going to introduce that and create a whole new for-profit market.”

The company keeps its purpose front and center by reminding everyone, from top executives to interns, that their daily tasks create the revenue for the ERP project. It’s a powerful motivator – and not just for employees. The project has enticed customers to hire Group Elephant to set up and help run their own conservation initiatives.

“The best way to grow your business is to get people to buy into your business, and one powerful way to do that is to get them to want to participate in your business for more than just financial gain,” Allen explains. “Our initiatives to save animals and create economic alternatives so people don’t need to poach them fascinate customers by showing them creative new uses of technology. They open new markets by inspiring new offerings for our customers. And they improve our retention and sales by giving employees a sense of purpose.”

In a typical year, Group Elephant conducts 7,500 hours of elephant monitoring and moves 130 elephants and 30 rhinos from places where they were endangered by humans to wildlife preserves and other safe locations, according to Allen. It also collars some of these animals for ongoing monitoring and funds reconstructive surgery for rhinos injured by poaching attempts. Allen adds that the company has also helped turn 17,000 acres of community-owned land from low-income uses to high-income ecotourism. It leases the land from the community and involves residents in building, running, and providing services to ecolodges, where tourists can visit to see animals roaming safe and free.

Reaching a tipping point

There have always been small businesses driven by faith, politics, or some other sense of purpose, but their patrons tended to be willing to pay more for less attractive or functional products for the sake of supporting a cause. Combining purpose with profit at scale seemed impossible, at least not without buyer sacrifice. More recently, however, a confluence of trends has shifted the conversation.

In the 1970s, governments began passing regulations to better protect consumers and the environment. This inspired individuals and groups to leverage these regulations to push for the common good, leading to a flood of lawsuits in the 1980s about everything from pharmaceuticals to consumer goods.

Companies began to realize that they needed to become more invested in their impact on people and the planet. They took small steps at first. In the 1990s, corporate social responsibility (CSR) programs started to become common. They tended to be low-cost, high-PR activities, such as support for local schools or participation in company-wide days of service, with little connection to business strategy.

But even these small efforts, dismissed by most executives as marketing, showed business benefits. Customers and employees began paying attention to and distinguishing between companies that merely did well and those that did good. And they started giving more loyalty to companies that paid more than lip service to purpose.

Today, organizations are starting to think about their business goals in the context of global parameters for sustainability. For example, more than 700 companies worldwide with a collective market capitalization of more than $10 trillion have committed to meeting targets for reducing their greenhouse gas emissions and proving that climate awareness and profitability can go hand in hand.

It’s not that companies can’t grow without purpose. They can, and they do. It’s that purpose seems to create greater opportunities for growth as well as greater mindshare among customers.

Researchers at the Center for Sustainable Business at New York University’s Stern School of Business recently reported that “sustainability-marketed” consumer packaged goods (CPG) are outperforming equivalent conventional products. They calculated that the market share of products with sustainability messaging on their packaging grew from 14% in 2013 to 17% in 2018, and that these products accounted for approximately half the growth in overall CPG sales in that time. What’s more, they found that products with third-party certification of sustainability on the packaging significantly outperformed products with sustainability messaging but no third-party certification.

Businesses are also finding value in creating new growth models based on purpose. This may mean creating better products that also happen to be more sustainable, like the Adidas x Parley line of high-performance running shoes and sportswear made from recycled plastic waste recovered from coastlines and beaches.

It may also mean cutting costs by demanding that partners take less resource-intensive approaches to manufacturing, packaging, and shipping.

Decades of research indicate that motivated employees are more productive, more satisfied with their work, and more likely to remain at their jobs. Companies with purpose have an additional tool by which to motivate them. In fact, international market research firm Atomik Research has found that employees who are happiest in their current jobs say “meaningful work” is the reason why.

Finally, investors are beginning to take an interest in the potential of companies that have the long-term literal health of the market in mind. In the United States alone, socially responsible investing hit $12 trillion in assets in 2018, a 38% increase from 2016, according to The Forum for Sustainable and Responsible Investment (US SIF), which surveys socially responsible investing trends every two years. Worldwide, global sustainable investment assets reached $30.7 trillion, a 34% increase in two years.

Investors are ensuring that their money yields return by exerting their influence at the board level. Half of the Standard & Poor’s (S&P) 500 companies now link (PDF) top executives’ compensation to CSR goals. Companies that adopt this “CSR contracting” see their value increase 3% in the ensuing five years, reduce their greenhouse gas emissions by 9%, and are more likely to invest in research and development (R&D) for innovative green technologies.

In short, businesses are confronting an uncomfortable truth: They can’t serve markets if consumers in those markets are at risk. United Nations (UN) Secretary-General António Guterres warned in October 2019, “Science tells us that on our current path, we face at least 3C of global heating by the end of the century. I will not be there, but my granddaughters will. I refuse to be an accomplice in the destruction of their one and only home.” Meanwhile, the UN Office for the Coordination of Humanitarian Affairs says that in 2020, nearly 168 million people – one of every 45 people in the world – will need humanitarian help and protection, and if current trends in conflict, disease, and natural disaster continue, that number could top 200 million within two years. The need for enlightened self-interest has never been greater.

Measuring the path to purpose

It’s difficult to identify the key components of a purposeful organization because as of now, there’s no centralized or consistent movement across companies or industries to support purpose. One move in that direction could be the World Economic Forum’s proposed framework for businesses to assess their long‑term sustainability, which melds traditional financial metrics with other criteria, such as environmental, social, and governance (ESG) considerations, gender equity, fair compensation, and supply chain transparency. The proposal includes four “pillars” of metrics – principles of governance, planet, people, and prosperity – as well as core metrics and disclosures in areas ranging from the consumption of fresh water in water-stressed areas to the risk of child labor or slavery in a company’s supply chain.

Until the world adopts a global standard, though, we need to look for other markers to indicate progress toward purpose. One broad indicator is technology-driven transparency throughout the product lifecycle. Digital tools that increase transparency in the value chain make it easier to track and trace internal operations and those of supplier networks to discover where components of different products are coming from and who’s making and handling them. This allows companies to assure stakeholders that, for example, products are made without additives or that the people at various points in the supply chain are paid fairly or that materials are being sourced sustainably.

Any company can integrate making a difference into business strategy and leverage technology to create new, purpose-driven business models, measure efforts, and demonstrate results.

Walmart, for example, issues an annual ESG report detailing its progress in reducing waste, lowering greenhouse gas emissions, creating jobs, and evaluating suppliers against a detailed sustainability scorecard.

This is in line with the broader trend toward integrated reporting, which links a company’s value creation over time with both financial and non-financial indicators. It’s also reflected in the rise of Certified B Corporations, which embed purpose into their bylaws alongside fiduciary responsibilities. For these companies, doing the right thing is simply part of the daily work of running a company.

Another indicator of purpose is a move toward sustainable and circular design, which reduces waste and pollution by making it easy to upgrade, refurbish, and recycle products. For example, automaker Renault is redesigning its cars to be more easily taken apart. This supports a thriving market for certified rebuilt or second-hand Renault parts while keeping recyclable materials like copper, aluminum, and textiles out of landfills.

Digital on purpose

Customers, employees, and investors are demanding profitable purpose. Digital transformation is enabling it.

By reducing the expense and broadening the possibilities for acting in a responsible manner, digitalization is helping companies find a path to profitable purpose. Here are some ways to do it:

The purpose of purpose

Purpose isn’t limited to specific industries, demographics, or product lines. Any company can integrate making a difference into business strategy and leverage technology to create new purpose-driven business models, measure efforts, and demonstrate results. It also doesn’t have to be as flashy as a new business model. The right planning and the right technology can bring sustainable improvements to fundamental business processes like procurement or sales – efforts that can fuel a greater purpose as much as a new product or service can. It also should not be viewed as charitable giving. Purpose is about finding new core business value while solving global challenges.

What matters is your company’s ability to demonstrate that it’s actively working to create new solutions to old problems, like the poverty and lack of opportunity that drive people to poach Africa’s precious pachyderms. In the process, your pursuit of purpose will earn you not just revenues but also respect and loyalty from stakeholders of all kinds.

For EPI-USE’s Allen, the elephants and rhinos are symbolic of a new definition of business success, one that makes going to the office each morning that much easier. “It definitely keeps up our enthusiasm and energy as we chase that $1 billion revenue goal,” Allen says. “I’m happier working with people I like and respect and who have a real sense of social responsibility, and I can tell that our clients feel the same. But also, for an hour every day, I can be on the phone with a ranger who tells me how my elephants are doing, and I can open up my app to see where they are, using the technology I work with the rest of my day. And that’s just plain old nice.”