Five Ways to Realize Profits and Missions

Companies may preach sustainability — the need for employees, shareholders, and the public to operate in a way that grows and preserves natural resources and protects people and cultures. But few have figured out how to successfully pursue both profits and social change.

We recently undertook a study of 50 companies that are employing “hybrid” business models. From clothing maker Maggie’s Organics; to coffee-alternative company Guayakí; to emerging technology firm PAX Scientific — they’re all focused on making money, but they remain steadfastly committed to their causes. They’ve integrated their core values into every aspect of their businesses.

So how do they do it? How do these hybrid organizations balance financial performance against ethical correctness? How do they maintain their commitments when leadership, shareholders, and market conditions change? We found that hybrid organizations embody five critical practices — business approaches that have been cultivated over months, and sometimes years, of trial and error.

1. Put the mission into action. The company’s explicit environmental and social mission is embedded not only in the business model but also in every major business decision and in daily aspects of the company’s operations. At Guayakí’s company meetings, for instance, leaders pass a gourd filled with mate (an infused beverage) from employee to employee — the organization’s way of connecting its people to the traditions of the company’s core products and mission.
2. Market premium products. Customers who value sustainability are willing to pay a premium. Maggie’s Organics, which sells clothing made of 100% organic cotton, initially identified potential consumers’ broad preferences and price points for their products. But when the company began selling its wares in natural-food stores, it found that customers were willing to pay more. Because hybrid companies spend far more time, expense, and effort investing in equipment, people, and relationships that match their core values, a premium price tag is more than good marketing; it’s financially necessary.
3. Get comfortable limiting the rate of growth. Hybrid businesses understand that scaling too fast inevitably brings ethical dilemmas that make it hard to square growth with mission-critical values. The solar cooking oven maker Sun Ovens International learned that the hard way: It chased after a fleeting Y2K market only to find itself struggling eight years later under the debt obligation of that decision. It has subsequently learned to balance short-term business decisions about finances (whether to sell off shares) or operations (where to allocate resources) with its long-term social and environmental missions.
4. Cultivate patience. Hybrid organizations are case studies in taking the long view. These companies recognize not just the reality of but also the value in changing customer habits over not months or even years but generations. For nearly a decade, PAX Scientific emphasized small, measured experiments (and accepted the inevitable hiccups along the way). More recently, though, the organization has very consciously begun to pick up speed — in response to market shifts that now strongly favor its position in the clean teach space.
5. Make it personal. Hybrid companies reject the idea that “it’s just business.” They create unusually close relationships with suppliers, producers, customers, and other stakeholders. Michael Potter, CEO of Michigan-based Eden Foods, says his employees’ personal relationships with the company’s supplying farmers and their families have created a competitive advantage for the organization: Eden has developed several new product ideas and capabilities based on input from these growers’ groups, he notes.

These five practices aren’t a prescription for “going green.” Rather, they constitute a framework for understanding how the true integration of a mission — be it environmental, social, or cultural — is hard, long, and constant work. Not all businesses will become hybrid ones. But they can take a few lessons from some innovative companies whose mission is their work and whose work is their mission.

Emily Reyna is a project manager for the Environmental Defense Fund’s Climate Corps Program. Daniel Wang is a senior practitioner in Deloitte & Touche’s Sustainability and Climate Change practice in Toronto. They are two of the coauthors of “Hybrid Organizations: New Business Models for Environmental Leadership,” from Greenleaf Publishing and the University of Michigan’s Erb Institute for Global Sustainable Enterprise.