Achieving Equitable Impact Through Your Business Model

If you want to make an equitable impact that lasts, you will have to make certain that what you do is the “main course” of your business, and not a “side dish.” This is critical because if it’s merely a side dish, your customers will smell it, call out your BS, and you’ll be seen as inauthentic and miss out on the benefits of doing well BY doing good.

What follows is a personal story to show the importance of authenticity. In my day job at CapEQ, I have the privilege of working with different types of entrepreneurs and businesses around the country who are trying to grow their businesses by “doing good.” They bring me in to help them with anything from a talent management plan to market analysis to project implementation. Because the work I do is so different depending on the client, I always spend a lot of time getting to know the people I’m working for and understanding their unique needs. I pride myself on the recommendations I give, but, as you might expect, my recommendations don’t always land right away.

THE ROLE OF AUTHENTICITY ON SOCIAL IMPACT

Several years ago, I consulted with a company that had recently been acquired by a small private equity firm. I’ll call it Doc-Scan. Doc-Scan was a midsized company with several hundred employees providing digital imaging services to corporations and government agencies. They work with clients to digitize their old paper files and also help them store those new digital files in a way that improves the client’s business operations.

When the private equity firm invested in Doc-Scan, they were doing well, but needed a push in order to grow bigger and faster. They had been around for decades and their operations had stagnated. I did my due diligence and began to walk them through how I would help them shake up their work, attract new clients, and expand their operations.

I went through the three different sections of the Good Business Worksheet with Doc-Scan—how you make your money; how you spend your money; and how you invest in your people—but my recommendations and support focused primarily on how they made their money through their core service—document scanning.

To me, this was a no-brainer in terms of reorientating their work. Document scanning and digital information management cut down on paper, and therefore reduced unnecessary waste. If they positioned themselves as an environmentally-focused organization, Doc-Scan would be able to access a completely new market—companies looking to “go green”—and build on their decades of success to reach a new level of growth.

Well, let’s just say this “green” recommendation fell pretty flat. My recommendation didn’t fit their Equitable Impact Venn Diagram. It wasn’t authentic. I was suggesting something focused on an environmental root cause, when they wanted to focus on changing their talent management practices to better invest in the well-being of their community.

As we worked through the different elements of the framework, they decided they wanted more support—with how to invest in your people (see Chapter 4), which ended up being a better fit for the company. This more authentic focus led to a better product at a better margin and also gave them access to new customers. After a few years, they received additional investment and further expanded their operations.

This example illustrates that regardless of what you do to engage with social issues, it must be authentic—the “main course” of your operations, not a side dish. If it’s not, it can detract from what makes your business unique, and can cost you customers who know a marketing scam when they see one. Remember: two-thirds of consumers want to buy from companies that create social impact,¹ and authenticity is important to over 90 percent of consumers.² You cannot have social impact without the authenticity.

HOW TO ENSURE EQUITABLE IMPACT IS PRIORITY #1

This chapter and the two that follow walk you through one element of the Good Business Worksheet. Each begins with a “business case,” which outlines trends around the world that highlight the need to focus on equitable and social impact within your core business operations. They then offer a “first step” process for how you can begin analyzing and changing your company’s practices. Once the “first step” is complete, the Innovate-Accelerate-Decelerate cycle will help you determine what to consider for further action. There are also specific callouts and resources that will help you on your journey.

BUSINESS CASE: HOW YOU MAKE YOUR MONEY

How you make your money is the most essential part of any business. Right? Your products and services are core to your operations, and it is there that you will find the most opportunity to embed social or environmental components.

But don’t jump to conclusions too quickly. What you offer is only one side of the equation. On the other side of how you make your money are, of course, your customers—the people who buy your products and services. For this reason, today’s demographic shifts and changes in consumer behavior make the strongest business case for why it makes sense for you to do well BY doing good.

The first big trend is the massive wealth transfer and increased purchasing power of the millennial generation (those born roughly between 1980 and 2000). They have surpassed boomers as America’s largest generation,³ and their spending is commensurate with their size. Their total purchasing power is $200 billion annually,⁴ and it will only increase as they begin to inherit wealth from their parents. By some estimates, over $68 trillion will be transferred to the millennial generation by 2030.⁵

As I noted in Chapter 1, the millennial generation is much more socially conscious than previous generations, especially when it comes to their spending habits. They are much more likely to purchase a product from a company they see as “sustainable.”⁶ Almost 90 percent of millennials are willing to switch their purchasing decisions to support a company that is committed to a social cause,⁷ and 42 percent say corporate responsibility is important to their purchasing decisions compared with just 35 percent of the general population.⁸

These trends are even more pronounced among millennial women. Consumer research from Merkle showed that more than 80 percent of millennial women said that a company’s sustainability practices influenced their purchasing decision. Almost the same number said price was an influencing factor. They also found that millennial women make up the bulk of the purchasing power of their generation, about 85 percent of the total annual spending of the market.⁹ Their influence and their focus on social issues will only continue to grow as they advance in their careers and take more ownership of their family’s finances and spending habits.

The top five issues millennials care about, according to a Nielsen survey, are food and hunger, environmental sustainability, education, public health, and racial equality (see Figure 2.1). Again, don’t jump to conclusions. As we now know, authenticity and values alignment are more important than simply “taking on a cause.” As one respondent told Nielsen, “Brands should engage with issues related to the product. I don’t care if a candy company cares about net neutrality, but a telecom company better be on the right side of the issue.”¹⁰ Their numbers back up this idea too: about 74 percent of survey respondents said they were more likely to buy from a company who cares about issues they care about, and a similar 70 percent said they were more likely to buy from a company that handles social issues well, no matter what the issue is.¹¹ This reinforces the idea that if you want to respond to the changing habits and desires of millennials, you’ve got to do the work to make sure the social causes you’re engaging with are authentic and aligned with your business model.

FIGURE 2.1 Top 10 issues important to millennials¹²

(Note: Although the top issues on this list are food, the environment, and education, I have used examples from my own experience—education, workforce training, and racial equity. No matter the area, the process is the same, and you can apply the tools and resources to any issue.)

Another core feature of the millennial generation is that they are more diverse than earlier generations, racially and ethnically. A little over half of millennials are white, as compared to two-thirds of those 55+.¹³ This means the growing millennial consumer market is going to look and behave significantly different from previous consumer groups. Perhaps as important, the research on changing demographics of the younger generations show this trend will continue, creating opportunities into the future.

Companies should be ready to respond to these demographic trends in the same way they are shaping their products and services based on shifting consumer preferences around social causes.

One obvious change that businesses can make is ensuring more diversity in the marketing of their products. Consumers won’t want to buy your products if they don’t see themselves in how you present what you are selling. This change is already happening across the industry, with more Black and brown people showing up in ads in all industries. However, surface-level changes are not enough. You have to go deeper and authentically engage in what your new and changing consumer market wants.

The two biggest groups of color within the millennial and post-millennial generation are Black and Hispanic/Latino. Digging into the consumer preferences of these groups, you’ll find similar interest in and motivation around social issues and causes. Around 40 percent of Black adult consumers of all ages expect companies to support social causes; that is a higher percentage than the overall population.¹⁴ Hispanics and Latinos—the largest and fastest growing demographic group—also think that engagement in community issues is important. Over 80 percent of Hispanics and Latinos say that if a company is more engaged with their community, they will be more likely to support that company. But only around 50 percent of Hispanics and Latinos say that their values are shared by major brands.¹⁵ A Hispanic Sentiment Study found that Hispanics and Latinos overwhelmingly feel they are not sufficiently valued by companies. Over 80 percent of them say that they should be more valued by companies than they are today.¹⁶ Authentically connecting with and engaging with this group can lead to increased loyalty and customer acquisition. (All of this data speaks to broad trends within groups, but of course, there are variations within groups: a young man of Puerto Rican descent living in New York may have different preferences than an older female Cuban immigrant living in Miami, just like a southern Black women in her sixties has different motivations than a teenage boy in the Midwest with mixed-race ancestry. The nuances of your brand message will have to depend on the specifics of your market.)

Both of these demographic groups represent massive untapped consumer purchasing potential. Nielsen research found that Black consumer choices are increasingly becoming mainstream products, and “investment in connecting with Black consumers can often yield sizable general market returns.”¹⁷ Nielsen gives the example of the health and beauty industry and its increasing recognition of the need for a range of products to meet the needs of Black consumers, which has created a multiplicity of products that appeal to both Black customers as well as the general population.

These demographic trends and shifting consumer preferences mean one thing for your business: you need to think differently about your products, services, and operations if you want to attract and retain customers and employees, and the biggest and best way you can do that is to think through how your business model is aligned with equitable impact.

THE EFFECT OF HISTORIC DISCRIMINATION ON MARKETING TO COMMUNITIES OF COLOR

There’s been an active and negative interpretation of what’s possible from investments in people and communities of color. Stereotypes remain about what groups are seen as “risky” investments and which are not. It is is true that Black and brown communities have significantly less wealth and purchasing power than white people, as a result of generations of under-investment and outright discrimination against people of color.

Policies like redlining limited people of color from buying property in desirable neighborhoods. Japanese internment during World War II literally ripped apart communities and the wealth and investments that were being built there. Historical and persistent employment discrimination has prevented people of color from advancing in all major industries. All of these trends have led to an ongoing income and wealth gap between white people and people of color. In 2016, the wealth of the average white family was over $700,000 higher than the average Black or Hispanic family. This means the average white family had five times the wealth of the average Hispanic family, and seven times that of the average Black family. Gaps in income are similar: the average white man will earn over $2.7 million in his lifetime compared to $1.8 million for the average Black man and $2 million for the average Hispanic man.¹⁸

What this means for business is that the economic growth of our country is limited for everyone; we’re all leaving money on the table. The W.K. Kellogg Foundation found that if all racial gaps were closed by 2050, we could add $8 trillion to the economy.¹⁹ Similarly, if businesses owned by Black people had the capacity to hire the same number of employees as white businesses, there would be an additional $55 billion in the economy.²⁰

FIRST STEP: UNDERSTAND YOUR BUSINESS MODEL

Once you acknowledge that how you make your money can improve your customers’ trust and engagement with your business, the first step is to look at your business model to see how you can better leverage it for equitable impact. For some companies, this requires actually understanding their business model for the first time.

As a current business leader, future business leader, or someone who works closely for one, it may seem silly for me to ask you to take time to better understand your business model. I can hear you now, “Of course, I understand my business! I commit my blood, sweat, and tears to it every single day!! Don’t tell me I don’t know what I’m doing!”

Well, that is definitely true, but sometimes it’s important to take a step back from your day-to-day work to examine the bigger picture: what you are doing, why you are doing it, and how you are doing it. These kinds of strategic planning conversations are frequent in successful, long-term businesses. A good way to ensure equitable impact becomes your business’s main course is to integrate questions about how and why you are creating equitable impact throughout your core business operations. Given the work and focus of your company, what could your unique role be in creating equitable impact? Remember the young Nielsen survey respondent’s comment: “I don’t care if a candy company cares about net neutrality, but a telecom company better be on the right side of the issue.” What’s your version of net neutrality? What issue is so core to your operations that you better be on the right side of it?

The Equitable Impact Venn Diagram (Figure 1.2) can help you determine your core business purpose. What is authentic to your company that you do that no one else does? What sits at the intersection of the problem you are trying to solve, your company’s values and passion, and the assets contained within your company? These are the bigger picture questions that can help you see your company in a different way.

Let’s revisit Doc-Scan, which we examined earlier. I was brought in during a period of transition; the company had recently been acquired and the new owners were looking for changes that would increase profitability and growth. Doc-Scan had been operating in a certain way for decades, and I helped them walk through all aspects of their business model and operations, from how they hired their employees, to how they worked with clients, to how they sold themselves in the market.

Using the Equitable Impact Venn Diagram, I helped Doc-Scan come to understand their unique role in creating equitable impact. They believed that accessing information can unlock innovation and progress, leading to more innovative companies, thriving economies, and sustainable communities. Once they defined this as their core purpose, it allowed them to look at their business model differently: they saw their company could better support their employees and, by extension, build stronger and more prosperous communities (more on how they did this in Chapter 4).

This repositioning helped them stand out from their competitors in the paper scanning industry, which is frequently a competitive “race to the bottom” industry where companies compete against each other to have the lowest price-per-page-scanned cost. Their understanding of purpose helped them stand out with clients, particularly government agencies, who were able to partner with Doc-Scan as a way to invest in a community’s residents, and even allowed them to charge a premium for their services.

This example shows how, in the real world, these components are interrelated. Rethinking your business model may lead you to change your company’s hiring policies. Steps discussed in future chapters may make you want to come back to this section and answer some questions differently. That’s because a company truly operating at the highest level will have all of their business components aligned and committed to equitable impact.

Every company can tap into the good business of equitable impact, just as Doc-Scan did. In the rest of the chapter, I will walk you through the steps of how to do so.

HOW TO CREATE IMPACT USING YOUR BUSINESS MODEL

There are many great resources out there to help you understand your core business model and leverage it for increased growth and customer acquisition. Books like Good to Great, by Jim Collins, Switch: How to Change When Change Is Hard, by the Heath Brothers, and To Sell Is Human, by Daniel Pink are just some of the many great resources to help with strategic planning and creating a solid business model poised for growth.

Once you take that first step in identifying how your core business model can be leveraged for equitable impact, there are a few areas you can consider to help you shift your core business operations.

Acquisition

There’s nothing like buying another company to help shift or expand your business model. The work has already been done for you! All you have to do is sign the check.

OK, OK . . . it’s not that simple, and of course I know most companies are not big enough to buy a company that adds another product line to their business or helps them expand into other markets. But, if you are at that level and can consider acquisitions as a way to diversify your business operations, are you thinking about equitable impact when you have those conversations? In the same way you would consider acquiring a company for their strong track record in customer service and then applying its impact across your company, you would consider acquiring a company with strong evidence of equitable impact and then applying its effect on other areas within your company.

In fact, if you are looking to acquire a company for any reason, make sure that you screen them for aspects of equitable impact; do your due diligence just as you would on other aspects of the company’s operations. Does the company value the same things you do? Is the company actively doing harm on social issues in some way? Will it be as committed to your equitable impact processes as your existing team?

Product or Service Innovation

Acquisition is not the only way companies can adapt or change what they are doing, of course. Most of the time, these business model shifts come internally—Apple didn’t start out making cell phones, after all. You hire good people to work at your company, and they are probably just as aware of the social impact trends as you are. Bring together a team of people to think about how equitable impact can be better integrated within your existing products or services, as well as new ideas for revenue streams that can be developed that both solve problems and increase profits. This is a great project to assign to younger employees looking to make their mark on the company, because, in keeping with their demographic tendencies, the younger generations are more interested in social impact and doing work that aligns with their values.

With an internal social innovation team in place, you can think through how to change your existing products or services as well as new products you may develop. Maybe you can go greener with your supply chain (more on that in Chapter 3), or develop a partnership with a nonprofit through a service you offer. Anything that your company creates or does has an impact, and so considering how that impact could be more positive for society or the environment will only help strengthen your connection with your customers.

Customer Engagement

Finally, also consider how you are directly connecting with customers and creating an “experience” for them. The ubiquity of social media has made it easier to connect directly with customers and create a community around your products or your brand. Businesses frequently leverage these communities to help sell their products, but what about achieving some equitable impact goals? Maybe you can leverage them for a fundraising drive for a cause, or coordinate a call-to-action campaign around an important bill or policy that aligns with your business operations. While it may not be directly related to your business model, these kinds of asks can increase engagement with your customers and strengthen their identity as a member of the community you are creating around your business.

Later in the chapter, you’ll find Table 2.2, an expanded version of the Good Business Worksheet focused on “how you make your money,” which includes these questions and will help you apply the lessons discussed in this chapter. If you are doing this exercise yourself, you can answer the questions right on the page (you can find a downloadable and editable version at CapEQimpact.com). If you are doing this as a group, you’ll also find a facilitation guide online there. I usually do these exercises with the leadership team of a company, and recommend doing this with a team of at least three people from across the organization.

The next section will help you go deeper into each of these three areas of impact—Acquisition, Product or Service Innovation, and Customer Engagement—and illustrate how you can use them to integrate changes across your company. As you go through the steps of the Good Business Worksheet, remember to think about what’s authentic to your business. Some proposed changes may not sit right with you because they are outside of the core scope of your business model; for example, if you are a catering company, you may want to stick to food-related innovations and not try to acquire a company that sells jewelry from artisans in sub-Saharan Africa. Doc-Scan could have gone with an environmental focus, but it didn’t seem like the right fit for the team at the time, and it wouldn’t have been authentic to their company. Don’t be afraid to push yourself to think differently, but also don’t push yourself so far that you are uncomfortable with where you land, or it takes you away from what makes your business unique. This is a delicate dance, but in the rest of the chapter I will take you through the right steps.

THE INNOVATE-ACCELERATE-DECELERATE CYCLE TO LEVERAGE MAKING MONEY

Once you have explored the different areas of impact within your core business model and what they mean for your company’s alignment with equitable impact, it’s time to move into what I call the “Innovate-Accelerate-Decelerate” cycle, which is a repetitive process of analyzing your company’s operations and determining what you can double down on and what you can change to make equitable impact a core part of your operations and offering to your customers. It involves innovating on your existing processes to bring in or develop new ideas, accelerating the good work you are already doing, and reducing or removing the aspects of your business that are doing harm.

TABLE 2.1 Innovate-Accelerate-Decelerate defined

Innovate

The first component is “innovate,” by which I mean, consider what changes you can make to your company to increase your ability to solve social problems. Often this could be importing a leading edge from your industry that can drive impact or developing an idea of your own based on your company’s unique value proposition to customers and communities.

Innovate Through Acquisition: As I mentioned earlier, acquisition is a great way to innovate for equitable impact, and a great example of a company importing innovation is Gap’s acquisition of Athleta in 2008. Athleta is a women’s apparel company that has made strong external commitments to both women’s empowerment and sustainability efforts—and, at the time they were acquired, they were on the cutting edge of the industry in terms of their commitment to social causes. Athleta makes its social impact goals public on its website, and revises them as they achieve them (or don’t) to hold themselves accountable. They have committed, for example, that 80 percent of their materials would be made with sustainable fibers, and 25 percent of their products would be made using water-saving techniques.²¹ Because of their commitment to making a social impact, in 2018 they received B Corp Certification, which requires an intensive process that sets standards for social impact in business.²² Athleta is one the largest apparel brands to receive this distinction.

Athleta is Gap’s fastest growing brand.²³ Acquiring it has helped the company commit more to social causes and integrate social impact across all of its affiliates. (In 2019, it committed to using 100 percent sustainable cotton in all of its brands by 2025.²⁴) I worked with Athleta to help them diversify and expand their customer base beyond predominantly white women to allow them to fully realize their corporate brand promise of empowering all women.

Acquisition is a great way for companies to bring in innovation and learn from that experience, but it isn’t always possible. (Not everyone can make a $150 million investment like Gap did to buy Athleta!²⁵) Sometimes you have to create innovation within your company to be able to leverage the full potential of your business.

Innovate from Within: Another way to innovate on a business model, as I said earlier, is to do it internally. When I worked at GE during the early days of the internet, internet startups were seen as a big threat to GE’s bottom line. Instead of going the acquisition route, which was certainly available to a large company like GE, management decided to create our own innovation team within the company to develop our own, internal internet startup. Because of my computer science background, I was brought in to help that team as an e-business analyst (back then, we put “e”s in front of everything). We ended up creating the cheekily named DestroyYourBusiness.com, which helped GE conduct transportation logistics via an internet web platform. In fact, doing this successfully helped GE understand the positive innovation the internet was and apply it across all of its other business areas.

Accelerate

Chances are you are already doing something that aligns your corporate values with equitable impact. Whether that’s an employee volunteer day or a donation of some of your profits to a cause, most businesses already include some element of social engagement in their company. The problem is that they are frequently a “one-off” or to the side of core operations—the side dish not the “main course.”

If that is the case in your company, take those elements that already exist and accelerate them within and across your company. For example, if you are looking to connect with customers and tackle social problems, why not begin with what you are already doing? It can be easier to start with something that is already in place, no matter how small, than to start from scratch and spin in circles to determine the best ways to proceed.

Let’s say you have a charitable giving program. A lot of companies donate to local nonprofits or community-based organizations to be good stewards in the places they operate. If you have a charitable giving program in place, take a look at it and think about how you can make it a core component of your business model. You may want to pick charities that are aligned with your products and services—such as women’s empowerment if you are a beauty brand—and incorporate a charitable incentive for customers when they purchase your products, such as donating a certain amount of your profits on each item sold.

This “embedded donation” model has become a standard mode of operations for recent startups and more established companies. Companies like TOMS Shoes and Warby Parker have a “buy one, give one” model in which they give away one product for each one sold (a pair of shoes in the case of TOMS and glasses for Warby Parker). These companies (and many others) were founded with this model in mind, and have always seen their purpose as both delivering quality products to customers and giving back to communities who need it.

This kind of “buy one, give one” model, or the similar “we’ll give X percentage of our profits to charity,” is typically easy for a company to start doing, but it is usually just a first step. Some companies, including TOMS, which is probably the most well-known company using this model, have been criticized for actually harming the communities they support by sending free shoes to developing countries, rather than investing in those communities by creating good jobs by manufacturing the shoes in those countries, which could provide more economic empowerment and long-term sustainability.

Commitments to donate to nonprofits are sometimes seen as pandering or less-than-authentic steps, particularly for those companies that have a history of bad corporate practices. Taking on these types of business practices isn’t inherently a bad thing, as it can create a strong bond with customers and provide a powerful signal about your values in a way that advertising can’t. But like all the advice I present, it needs to be done in ways that are both authentic to your company and actually create a real, tangible impact.

Cotopaxi, a company that develops sustainable outdoor products, is an example of a company that takes the idea of giving and accelerates it through its organizational operations. Cotopaxi is an outdoor apparel and gear company that was started by Davis Smith, who started several successful e-commerce businesses before he decided to create a company that would pair fighting poverty with the sale of products. Not only does Cotopaxi, which, like Athleta, is a B Corporation, give 1 percent of its profits to fighting poverty, it also ensures that its supply chain meets the highest ethical standards. It partners with factories to set expectations around worker safety and labor practices as well as to incorporate “remnant fabrics” that would otherwise be discarded in its products. It has also received Climate Neutral certification, which means it operates with a 100 percent carbon-neutral footprint.²⁶

I don’t bring up Cotopaxi to suggest that your business should reach that level of equitable impact right away. These types of operational commitments take a lot of time and energy, and require thoughtful planning. But Cotopaxi illustrates what is possible when impact is the main course and not just a side dish.

As you think about what to accelerate to help incorporate equitable impact into your business model, consider the concept of community building as a different way to think about customer engagement. Community building (sometimes called network building or simply “brand ambassadors”) is becoming a more common practice as social media takes on greater importance as a marketing or communications strategy. Community building is when you intentionally allow your customers to engage with and define your brand for you, and become “ambassadors” for your products and services. This limits some of your ability to define your products and services, but it makes your outreach and engagement with your customers so much more authentic because they themselves are defining what your business means to them.

Athleta has a brand ambassador program that helps spread the message of their work and connect with other customers. Called “FitPros,” they use female fitness instructors and other health and wellness professionals who are part of a community of people who love and use Athleta products and are also committed to women’s empowerment.

In another life, I was a FitPro myself and gave Athleta some shout-outs during my classes. Athleta has been able to create an enthusiastic and loyal customer base because they identify with its social cause and its authenticity commitment to it, which is why ambassadors like me spread Athleta’s message, products, and services like a parent sharing videos of their kids in the school play.

Decelerate

Now we get to the hardest part. Deceleration is when you have to take a long, hard look at what your company is doing with and think about what you should stop doing to be more aligned with your values and your customers’ values.

If you are reading this book, you’ve probably started this process, or at least have some ideas about what company practices you think should change. If you are the boss, they may be within your power to change. If you aren’t the boss, raising ideas that require your company to step on the brakes a bit could be very challenging and take a lot of personal political capital. My hope is that what you’ve read so far gives you the tools to make the case for why stopping bad practices needs to happen sooner rather than later if your company wants to remain competitive going forward. There are so many examples of companies changing the way they do business, either because of customer pressure, employee pressure, or a combination of both. As globalization and corporate consolidation become more and more common, the impact of companies, good and bad, has become clearer. Consider the beverage giants Coca-Cola and PepsiCo. Both of these companies’ flagship beverages have been around for over a century. They are among the most recognizable brands around the world. Their operations are massive, and use up a massive amount of water too. Leaders of both companies have recognized that they need to have good water practices to remain competitive. Neither has set out to be a sustainable environmental company, but because of how they operate, they needed to make that shift. Coca-Cola has set a 2030 water security strategy and, so far, has replenished 1.75 trillion liters of water.²⁷ PepsiCo has improved its water use efficiency by 15 percent and delivered safe water access to 55 million people.²⁸

If you are a small- or medium-sized business, large shifts like these may not be feasible, but there are smaller changes you can make to your business model that are easier and will even save you money. Maybe you have a wasteful supply chain. Spending time eliminating that waste could reduce your costs. Maybe your labor practices aren’t great. Increasing employee benefits could improve the livelihoods of your employees and also reduce turnover (more on that in Chapter 4).

Again, pointing out the things that need to change isn’t an easy task—even if you are the boss. The tools and resources included here can help you make these conversations clearer and easier. The next section will walk you through how to put this all together.

PUT IT ALL TOGETHER AND CHANGE HOW YOUR COMPANY MAKES MONEY

We’ll use the Good Business Worksheet to put all these elements together and see what these changes mean for your company. Table 2.2 is another iteration of the Good Business Worksheet. It is designed to help you dive into your business model and how you make your money. Once you work through this worksheet, summarize what you came up with or agreed to with your team on the sheet—which you can download at CapEQimpact.com. As with each chapter, you will also find a Good Business Agenda (Table 2.3) to help you and your team walk through completing this iteration of the worksheet.

TABLE 2.2 Good Business Worksheet, Part 1: How you make your money

TABLE 2.3 Good Business Agenda: How you make your money

This worksheet has two essential purposes: identifying (1) the areas of impact within your company and (2) the opportunities that exist within those areas. You begin by understanding your company’s business model. Once you’ve done this, the Innovate-Accelerate-Decelerate cycle guides you through implementing these changes. Each iteration of the worksheet at each step of the Innovate-Accelerate-Decelerate cycle also includes a standard question—Will these changes affect certain groups more than others and will they worsen 59or ignore disparities?—adapted from a tool used by the Race Matters Institute, to help you consider diversity, equity and inclusion (DEI) throughout this process. As you make decisions for equitable impact, it’s important to consider what blind spots you may have and who isn’t included in your decision-making process that might need to be. By integrating this into each step of the Good Business Worksheet you can ensure you are not replicating inequitable processes and policies that may be in your company. I tell my clients this makes DEI “built in, not bolted on.”

The worksheet in this chapter focuses on “How you make your money”; the next two chapters contain their own versions of the worksheet. Once you complete them all, I recommend you go back to Chapter 1 and complete the full worksheet overview.

Steps to Completing the Good Business Worksheet

Let’s go through the steps:

Step 1: Understand your core business model. This should be pretty simple, as most people in the company should understand the products or services you offer as well as your unique market niche. But don’t assume this; begin the meeting with a discussion of what people think your business model is and why.

Step 2: Consider what changes to make once there’s agreement or understanding about your core business model based on the following areas of impact:

•   Acquisition

•   Product or Service Innovation

•   Customer Engagement

You don’t necessarily need ideas for each area of impact; in fact, you probably shouldn’t, because that means you aren’t focusing enough on what is authentic to your company and you could spread yourself too thin. You want to focus on what makes sense for your company. Acquisition may not be an option for you, but redesigning a product line might. This worksheet isn’t about checking each box, but actually for determining what makes sense for your company for equitable impact integration. Once you have chosen your top areas for impact, circle them on the worksheet. Make sure you do this! Physically interacting with the worksheet is a way to ensure everyone is on the same page, since it’ll literally be written in black and white.

Step 3: Go deeper into each area’s potential once you know its impact. The first thing to consider are the low-hanging fruit opportunities. These are things that are easy to do and can be thought of as quick wins to show the value of equitable impact on your business. It could be something like setting up a campaign for your customers focused on a social cause they care about, or buying carbon credits to offset the environmental impact of your supply chain. Once you figure out all your quick wins, write these opportunities down underneath the low-hanging fruit question.

This isn’t just about easy fixes, though, so you also should think about the longer-term options that will take more resources but have a higher impact on your company and society. This may be an acquisition opportunity or the development of a new product line. Don’t be afraid to think big and bold for these. Once you’ve got your ideas, write them under the high impact question in the first column.

Step 4: Implement these changes using the Innovate-Accelerate-Decelerate cycle once you have your ideas and opportunities nailed down. Start with innovate and determine which areas of impact you’ve selected could benefit from innovation, either from outside your company or by encouraging it from within. You could start a cross-functional, social-impact-focused innovation team to take a look at all your product or service offerings. These could be related to your answers to the low-hanging fruit or high impact question, or something else you want to consider.

Once you have the areas of impact that can benefit from innovation, write them down on the worksheet. Then, answer these questions to help with implementation and next steps:

•   How will you bring innovative practices into these areas of impact? Another way to think about this question is: What innovative practices would be a good fit for your company and your team?

•   What are the next steps to implementing these changes across your company? To put it another way, What needs to get done to allow these changes to happen? Will these changes affect certain groups more than others, and will they worsen or ignore disparities? You may recall, this is the standard DEI question referenced earlier. Another way to think about it is: What blind spots might you have as you think about implementing innovative ideas?

Write your answers down on the worksheet, and move on to the Accelerate column.

Step 5: Consider how you could accelerate good things already happening to support the opportunities within the areas of impact you’ve identified. Write down which areas of impact you think would benefit from this acceleration in the Accelerate column. Remember, acceleration can be things happening within your company as well as good work happening outside your company. You may have a competitor or partner that has established a social impact initiative, and you can join them in that. Answering the following questions can help you create your implementation plan:

•   How will you accelerate impact practices within these areas of impact? Or: What is already going on that you can support and encourage?

•   What are the next steps you have to take to implement these changes across your company? Or: How can you support team members to implement these acceleration strategies?

•   Will these changes affect certain groups more than others, and will they worsen or ignore disparities? Or: Is there a group of people who isn’t represented in this decision-making process who should be consulted on this change?

Step 6: Think about the harm your company may be doing, and how to decelerate those practices. Then, answer these questions to formulate your plan of action:

•   What changes can you make in these areas of impact to decelerate the harm being done? Or: What can you stop doing that would help strengthen your core business model or operations?

•   What are your next steps to implementing these changes across your company? Or: What steps do you need to take to stop these practices from continuing?

•   Will these changes affect certain groups more than others, and will they worsen or ignore disparities? Or: Who has been most harmed by these practices, and how can they be empowered?

Step 7: Make sure the team agrees on your answers to this section of the Good Business Worksheet. Then distribute it to those you think need to understand what you plan to do and why. You may want to post it in your workspace. Then, get to work and move on to the next part of the worksheet—“how you spend your money”—which I’ll cover in the next chapter.

As you go through the different iterations of the worksheet, you’ll probably find that some of the steps are similar or that your answers overlap. That’s OK; that’s how it should be. The Good Business Worksheet is intended to be a way to ground the process of integrating equitable impact into your company’s operations; it is not meant to be a strictly rigid process. Sometimes, it’s going to be more of an art than a science. My intention is to provide you with the tools and resources to help you through the process of changing how you do business to help you better prepare for the shifting demands of your customers and the changing nature of our economy. The process is iterative; for this reason, you should revisit your answers to these questions every so often. There may be new things you want to accelerate within your company, or something you realize you need to decelerate as soon as possible. The steps provided in the Good Business Worksheet are not fundamentally different from a typical continuous improvement process—I’m just suggesting additional questions to help you think through how to improve and measure your equitable impact alongside your normal business performance metrics.

HOW YOU MAKE YOUR MONEY: SYDNEY’S JEWELRY SHOP

My seven-year-old daughter, Sydney, loves jewelry.

Her love of jewelry started very young, and as she got older, she was more and more interested in making her own. My husband and I bought her different jewelry-making kits, but she ignored them because she thought the materials in the kits were too constraining. Instead, she makes jewelry out of anything she can find. We now have set her up with a big box of art supplies that she can add to and take from whatever she needs. Her latest creations were bracelets that she likes to put on before she uses her Taekwondo moves on our other child, Dylan. She likes the warrior princess vibe they bring when she is charging into Dylan’s room without permission.

She likes to make pieces for her family and friends, and while she hasn’t quite gotten into selling them just yet, she might one day. I figured a potential jewelry-making business might be a helpful example to run through the Good Business Worksheet to illustrate what it might look like for any company.

Let’s spend some time with Sydney to see how she would use these steps to change how she made her money to embed equitable impact across her business. (To be clear, this is hypothetical; no, I did not make my child actually do this!) You can see her final result in Table 2.4.

TABLE 2.4 Good Business Worksheet, Part 1: How Sydney’s jewelry shop makes its money

Step 1: She first thinks through her core business model. This is pretty easy since it is a straightforward business. She makes jewelry using the materials she has purchased and sells them for a little bit more than what she bought the materials for. She uses the revenue to buy more materials.

Step 2: Looking at the three areas of impact for how she makes her money, she isn’t big enough (yet!) to acquire another company or product line, but she thinks she can make an impact in the other two areas.

Step 3: With a focus on product innovation and customer engagement, she considers what low-hanging fruit she can tackle first. Sydney decides she wants to form a partnership with a nonprofit because girls’ empowerment is very important to her. An easy thing she can do is donate a part of her proceeds to a local nonprofit that helps girls learn how to code. Doing this helps create a bond with customers who care about this issue and increases their loyalty to her product. She knows this kind of “percent of profits donated” model is a pretty low bar for impact, so she also wants to think about the environmental impact of her product and how to reach the point where she has a carbon-neutral product.

Step 4: In terms of the Innovate-Accelerate-Decelerate cycle, she decides to innovate with her low-hanging fruit idea and partner with the nonprofit and create a bigger relationship than one focused solely on donations. In addition to donating part of her profits, she decides to give free pieces of jewelry to the girls in the program. The girls wear the jewelry at all their coding competitions, expanding her customer base and giving her access to those girls’ networks as well as those of their parents.

For accelerate, she follows the Athleta example and sets up a community of those who believe in girls’ empowerment and girls in STEM around her jewelry. She has a group of friends who love her jewelry, and leans into that and builds on the excitement that’s already there. They are able to support the work of the nonprofit, and also connect with each other around the jewelry, make specific requests, and tell their friends about Sydney’s product.

For decelerate, Sydney wants to use less and ultimately stop using environmentally unfriendly materials by creating a supply chain that has a better environmental impact. She knows that this may be hard to accomplish, but it’s a long-term goal and something that’s important to her product and her brand.

At each step of the Innovate-Accelerate-Decelerate cycle, she thinks through her blind spots and considers what she may be missing. Under innovate, she considers that the nonprofit she partners with may not actually be reaching the girls who are most in need, and decides to ask her point of contact how the organization can expand its outreach. For accelerate, she considers that by relying only on her friends, she may exclude some people who want to participate, so she puts up fliers to recruit others to join the group. As to decelerate, she considers that some smaller suppliers may not have a big presence online, so she considers expanding her research beyond the internet.

Table 2.4 is Sydney’s completed “How you make your money” worksheet. Once she’s done with this, she hangs it up over her jewelry-making table and gets ready to focus on part 2: How she spends her money!

ADDITIONAL RESOURCES

Equitable Impact: A Blueprint for Racial Equity

Lately, conversations about social impact and corporate social responsibility are broadening to include a discussion about race and racial equity. Many companies are not only mindful of their social impact, but also how they are talking about race, diversifying their workforce, and considering how their practices have an effect on people of color—positive or negative. This is driven by consumer trends similar to others I’ve discussed: 75 to 80 percent of Americans believe that companies should not only condemn structural racism, racial injustice, and police violence, but that they should take steps to create a more equitable future.³¹

The Good Business Worksheet and ideas presented in later chapters are designed to help you pull all the levers in your company to create equitable impact. Deciding how success in your company should be defined can be hard, but if you want to go deeper into what successful development of equitable impact could look like, I recommend using the CEO Blueprint for Racial Equity, developed by PolicyLink, FSG, and JUST Capital in partnership with CapEQ, which has also helped organizations operationalize the tool and embed it in our approach.

The blueprint advises CEOs who are attempting to integrate racial equity across their company and want to consider their company’s influence on communities of color in their decision-making. The blueprint recommends that CEOs consider company impact in three areas:

1.   Inside the company

2.   Within the communities where the companies are headquartered and conduct business

3.   At the broader societal level³²

Many of their recommendations in these three areas align with recommendations in this book:

•   Developing equitable HR practices

•   Considering racial outcomes of the products they create

•   Working with partners on policy changes

There is a companion resource to the blueprint that highlights how CEOs have used the recommendations and shares their insights.³³ You can find both resources at PolicyLink.org.

Racial Equity Investing

Investors have a huge influence on how our economy operates, which should require them to take an even more nuanced approach to creating equitable impact through how they make their money. Racial equity has taken on more salience and importance for investors in the last several years. Persistent racial gaps in income and wealth have been increasingly recognized as an emerging threat to economic growth and social resilience, and shocking events like the murder of George Floyd and other Black men and women by police, along with the disproportionate effect of the COVID-19 pandemic on communities of color, have forced investors to become more interested in racial equity practices when making investment decisions.

Investors are now looking to integrate a racial equity lens into their investing strategies to both increase their ability to close racial gaps within their own organizations and within the businesses and communities they invest in.

To support these efforts and encourage standardization in racial equity investment strategies, the Global Impact Investing Network (GIIN), in partnership with CapEQ and PolicyLink, a research and action institute, created a framework for racially equitable investing. This framework has three strategic goals:

1.   Increasing the power of historically marginalized populations due to race and/or ethnicity

2.   Shifting the perception of riskiness of investing in those populations

3.   Creating just systems that produce equitable outcomes

We shorthanded these goals as “power, risk, and justice.” Within each of these goals, investors can take a number of investment approaches to increase racially equitable outcomes:

Power: Shifting power through investing requires addressing racial bias and ensuring equitable representation and decision-making within both investment firms and investee companies. Investments should aim to change the makeup of existing decision makers around capital allocation and implement racially equitable policies to promote and increase the deployment of capital to businesses owned by and employed by marginalized populations disadvantaged as the result of race and/or ethnicity.

Risk: Creating equitable deal sourcing, due diligence, and terms can shift perceptions of risk. Investments should aim to change the concept of what are “risky” investments to allow more capital to flow to businesses and communities of historically marginalized populations due to race and/or ethnicity.

Justice: Working toward racial justice with investing requires increasing the amount of capital devoted to creating equitable outcomes for communities of color. Investments should use inclusive capital allocation to improve social, economic, and environmental outcomes for historically and currently marginalized populations. These activities will create a more just society that allows for more equitable distribution of resources, and lead to more equitable outcomes between majority (often white) populations and populations that have been historically marginalized.

Included within each of these strategic goals are recommended indicators and metrics to guide investors on how to implement these recommendations into their investment strategies and set targets to hold themselves accountable to their racial equity commitments. You can learn more and see the indicators and metrics on GIIN’s website, https://thegiin.org/.

CASE STUDY: PRIVATE EQUITY FIRM PROFITABLY PROMOTES EQUITABLE OUTCOMES

Private equity firms have a pretty straightforward business model: They buy a company and work with the management team to make changes in their operations to maximize efficiencies that they hope, leads to increased profits for the company, which can then lead to returns for the private equity firm or a sale to another company that brings in more money than the original firm spent. Like the holy trinity of capitalism, private equity can be a tool to help companies create a product or service that brings value to the lives of their customers and employs workers to create that value in exchange for a wage that offers a quality standard of living.

Not all private equity firms operate using the principles of the holy trinity of capitalism concept, but I know at least one that does, Jacmel Growth Partners. Jacmel is a growth private equity firm that focuses on acquiring and growing midsized companies grossing around $5 to $50 million each year. They specialize in family-run businesses, specifically those that offer business services to other companies. To date, Jacmel has deployed $45 million into five companies across two platforms.³⁴

Jacmel’s founder, Nick Jean-Baptiste, had a long career on Wall Street, where he oversaw over $10 billion in financing private equity transactions.³⁵ He decided to start his own firm, which he named after the small village in Haiti where his father was born, because he wanted to focus on investing in communities in addition to companies. Jacmel is “anchored to the values of reciprocity and care common in Jacmel village. The firm aims to treat all its partners, investors, and portfolio company employees as members of its community.”³⁶

Jacmel has redefined what it means to create a private equity partnership with a company, and takes a different approach with all the stakeholders involved.

TABLE 2.5 Jacmel Growth Partners vs. traditional private equity

Source: Jacmel Growth Partners

Critical to Jacmel’s success is its “Office of Impact,” which supports Jacmel to invest in employees to improve job quality, a company’s bottom line, and its overall goodwill in the community when it acquires or invests in a company. The Office of Impact is managed in partnership with my firm, and deploys investment strategies in three areas:

1.   Wealth Creation: Through the creation of an Option Pool companies put aside a certain percentage of stock in the company for nonexecutive staff to share. This gives employees greater incentive to perform as well as giving them wealth-building opportunities.

2.   Economic Mobility: To do this companies strive to provide:

a.   Workforce Development: Hiring military service members and returning citizens who worked as civilian support staff

b.   Education: Providing college classes and professional training to employees

c.   Career Opportunity: Creating advancement opportunities for all employees

3.   Equity: companies actively promote:

a.   Diversity: Recruiting and developing BIPOC (Black, Indigenous, and people of color) executives

b.   Fair Pay: Addressing institutional bias in pay

4.   Benefits: Providing equitable benefit solutions for all employees. Offering these benefits to employees of acquired companies has not impacted their bottom line—it actually has improved it because it facilitated employee retention and growth as well as through reimbursements and incentives they receive from workforce development programs. (More on how investing in your people differently can help your bottom line in Chapter 4.)

Success Metrics

Despite taking this nontraditional approach to private equity, Jacmel has experienced the same performance level as similar private equity firms. Through its investments, it has created over $90 million in value, with their invested capital growing more than two and a half times within a few years. In addition to these financial metrics, they also track the number of families they have supported through their investments, which currently total over 800 and counting.³⁷

Jacmel shows what is possible when we think innovatively—outside standard convention—within an industry. Often what we consider normal or a best practice is just an assumed way of doing things, and doing things differently can help unlock different business models and different ways to generate value. You may not be a private equity investor, but undoubtedly there are standard practices in your industry that can be re-examined to help you do well BY doing good.

What are those practices and how can you shift them to find new ways to make money and have an equitable impact in your industry?