The future of business: Being good to your core
Increasingly, good business isn't just about making money. It's also about doing good for the long term - for people and the environment. That's a step change for many New Zealand companies and one that isn't easy. Business editor Nikki Mandow talks to Deloitte partner Adithi Pandit about profit with purpose.
This article originally appeared in Newsroom.
In late 2018, highbrow arts and culture magazine the New Yorker ran an article about New Zealand shoe company Allbirds. Fifteen hundred words of glorious prose under the headline “The algorithmic emptiness of Allbirds shoes.”
Of course, they didn’t call it a New Zealand company. “San Francisco-based” is what they said, despite it being co-founded and still run by our own former All-White Tim Brown.
Writer Rachel Syme extolled the softness, the bendiness, the “slightly geriatric silhouette”, the fact that everyone from Bay area tech entrepreneurs to kooky aunts to Leonardo DiCaprio, Mila Kunis, Jennifer Garner and (later) ex-president Barack Obama, were wearing them.
“The shoes are, for all my attempts to describe them, excessively nondescript. This is perhaps their biggest innovation,” Syme wrote.
No, Rachel, no. Allbirds' biggest innovation is being able to produce shoes and now clothes everyone wants to buy, made out of exciting natural fibres (merino wool, sugar cane and, apparently for the new t-shirts, crushed Newfoundland snow crab shells) in a way that is low-carbon, ethical and sustainable.
In her 2018 New Yorker article, Syme barely touches on the social and environmental side.
Three years later, if Syme was writing in 2021, that would almost certainly be different, says Deloitte strategy and business design partner Adithi Pandit.
Increasingly, doing the right thing around climate change and social equity is seen as part of the core credentials of a business - not a nice-to-have add-on, she says.
“The spotlight on business and Government doing the right thing by people has definitely increased,” Pandit says. “Small companies, because they are disruptors, are challenging the industry to do something different.”
Customers too are interested in the “social purpose” behind the companies they are buying from, and are getting more savvy about spotting tokenistic responses.
“People are calling out businesses claiming to be tackling racial and gender equity but with all white men on their board, for example,” Pandit says.
“They are looking at whether you are paying the living wage and treating your workforce in line with your stated values.”
Pandit sees the move towards purpose-driven organisations coming in three stages.
First, managing risk and compliance - like meeting minimum wage requirements. "We are pretty good at that in New Zealand."
Second, companies moving up the curve with standalone projects - charitable partnerships, climate change initiatives, and social responsibility and sustainability reporting.
“Mostly companies are using this to build brand and goodwill with their employees and reputation with their customers, in an environment where it’s increasingly expected that stakeholders will be looking beyond benefits to shareholders,” she says.
The trouble is, this approach risks being (or being seen as) greenwashing, Pandit says, and these projects are often the first things to be dropped when the chips are down.
Stage three involves organisations putting purpose and impact at the core - the Allbirds approach.
It's a strategy also adopted by New Zealand plastics-free shampoo bar and skincare company Ethique, another for-profit company which started from a sustainability and social responsibility foundation but found those principles propelled it to where it is now - the fastest selling shampoo & conditioner brand on online marketplace Amazon.
“Sustainability is still at the heart of everything we do,” founder Brianne West says on the company’s website. “Our ingredients remain cruelty free and vegan, palm oil free, ethically and fairly sourced, we still pay staff a living wage, donate two percent of sales to charity and are 100 percent plastic-free.
“So far we’ve saved over 10 million plastic bottles from entering landfill, and we’re just getting started. Our next goal is half a billion by 2030.”
West's products and purpose got her media coverage in Forbes and Huffington Post, as well as endorsements from Britney Spears and Ashton Kutcher.
And that made her company successful.
Pandit says being a stage three purpose-led organisation requires leadership from executives and the board.
“Often purpose doesn’t sit at the top table. Having a purpose-led strategy is saying ‘What does success look like?’ And rather than it being about being the biggest, or the most profitable, it’s about delivering for society and for the environment.”
She says organisations Deloitte works with almost always have a stated purpose bigger than making money. “But in effect, the way the business has always operated has been focused on the making money part. 'Purpose' has not always been embedded into everything they do.
“I would like to see every business become a social enterprise.”
The post-Covid dynamic
The Covid-19 pandemic has been both a push and a hindrance in the move towards purpose-led organisations.
"It's made everything better and everything worse," Pandit says.
On the one hand, there’s been a spotlight on companies doing the right thing - in terms of employees’ health and mental wellbeing, for example. Meanwhile the lockdowns forced organisations to rethink the way they did businesses - including more local supply chains and less CO2-producing travel.
On the flip side, Pandit says, some companies have gone into survival mode, and that means pushing pause on some of the social and environmental projects they were involved in before.
And in an attempt to get back to ‘normal’, there have been missed opportunities to make positive change.
“During lockdown, from a social perspective people had more flexibility and there were benefits with reducing the burden on overloaded and congested infrastructure. We had a chance to say ‘How can we make this work for people?’
“Instead there was a directive to come back to the CBD because businesses were hurting. Could we have done something different to support business to make a transition, to help them adopt new service delivery models?”
What can be done?
Companies wanting to embed purpose need to look at all aspects of their business – from supply chains to their recruitment and retention practices, Pandit says. But it's not just companies needing to act - the Government, with its $42 billion annual spend, has a big role to play in terms of encouraging purpose-led New Zealand business.
“Officials have an opportunity to ask suppliers to show their climate strategy, their targets, their measures of employee wellbeing. They should weight those things when it comes to procurement and make them a bar companies have to meet to qualify.
“It’s a way to give more small players the opportunity of an equal playing field. But also, if big organisations are expected to meet a higher standard, it starts to shift the dynamic.”
Helping clients with ethical procurement and supply chain verification is another crucial part of the work Deloitte is doing - and not an easy one, Pandit says.
Some targets around getting rid of child labour or slavery from a supply chain, or verifying an overseas company’s environmental performance are still a few years off.
“Supply chains are a big lever, but we aren’t there yet.”
Diverse talent, especially at leadership levels, is a great enabler for being a purpose-led business, she says.
"When people can bring their whole selves to work, they represent the interests of communities, families and societies better in their work decisions."
It is with this in mind that Deloitte has shifted its recruitment and employee review practices, for example, to try to prevent unconscious bias as much as possible, and encourage diversity.
“We shifted our screening process to look at a wider set of competencies, including how a candidate has demonstrated resilience, inclusion and empathy.
“And when we assess our people now we assess them against our core values.”
For example, Deloitte looked at the words used in its performance appraisals - words like “hungry”, “assertive”, and “driven” and balanced them with words like “empathetic” or “team player”.
“We have a list of these words to make sure we aren’t falling into the trap of emphasising words that are masculine,” Pandit says. “And that benefits men and women, and means we get a greater diversity of people. Not all men are hungry, assertive and driven.”
“It’s an ongoing process and people buy into the big picture. It's happening at Deloitte and it’s shifted a lot with our clients. But how do we make it real and practical and also ensure the necessary diversity at leadership levels?”
Measurement and accountability
Pandit says the most critical part of developing a purpose-led organisation is holding yourself accountable. It might be about reducing carbon emissions or narrowing the gender pay gap or increasing supplier diversity.
Whatever you do, you have to measure it and report progress - internally or wider.
Pandit believes there’s real merit in companies reporting more widely, including to customers.
“Customers care about a basket of things, like quality, and price points. But they also care about whether a company is living with values that align with theirs.”
Companies which are proactive can benefit in the long term - in terms of being ahead of future regulations, gaining credibility with their customers, and helping employee recruitment and retention.
“There’s a war for talent and increasingly talent is asking to work for socially and environmentally responsible businesses - companies they can be proud of.
“You have to be thinking about that.”