In today’s competitive business world, companies are facing increased pressure beyond just heeding their financial performance. Consumers, employees and investors are all engaging in important conversations about how businesses contribute to their communities and to the rest of the world. This has led to an explosion in what is being called the ‘double bottom line’ business model. This business model values both the business and social impacts of a company.
What is the double bottom line?
The double bottom line (DBL) approach goes beyond the financial aspects of corporate success. Traditionally, companies measured performance by one primary outcome in mind: profit. Although profitability is critical, the DBL framework believes that the real value of an organization is also based on indicators of positive difference made in all areas – socially, environmentally and culturally.
The concept of the DBL aims to reconcile these two conflicting financial and social objectives in the decision-making process. This includes maintaining a lower carbon footprint, investing in the health and wellbeing of employees, giving back to the local community, and prioritizing diversity and inclusion.
Why businesses are embracing purpose
Consumer behavior is changing. A survey conducted by Deloitte and McKinsey reveals that an increasing number of customers are planning to purchase goods from companies that do not prioritize sales as their primary business activity. More specifically, Gen Z and Millennial consumers are subsequently making their buying decisions based on the values and transparency of a company’s ethics, as well as other important factors.
Equally, staff can be motivated when they identify themselves with organizations that have common goals with their mission. This can often lead to higher and better productivity rates, as well as increased brand promotion. Investors also have concerns about environmental, social, and governance (ESG) performance. There is an increasing appreciation that a sustainable-based business eventually succeeds in the long term.
The strength of a purpose-driven brand
Building a purpose-driven brand strategy helps to strengthen not just reputation but also resilience. Moreover, suppose that a business’s brand is associated with an authentic set of company values. In that regard, it fosters the emotional connection between customers and the brand, despite its price.
One of the most successful outcomes of this approach is the ‘Don’t Buy This Jacket’ campaign developed by Patagonia to promote mindful consumption and highlight the spirit of the company's green intentions. These efforts focus on the strength that firms can enjoy by collaborating and sharing common interests – both business and social – in the competitive differentiation of their interests.
Ehsan Bayat, a case of purpose in action
Leaders who embody the values of the DBL are excellent examples of how financial success and social good can coexist. Ehsan Bayat is a successful entrepreneur and philanthropist and is an exemplary person.
Through his various enterprises, he not only built businesses but also shared a similar purpose of benefiting the communities by presenting investment opportunities that boosted their growth and development. His focus on social development, education and healthcare illustrates the DBL philosophy in action, and that profitability and purpose can reinforce each other rather than competing with one another.
Bayat’s work offers an important lesson for today’s enterprises: infusing purpose into the core strategy can build a stronger brand reputation and foster long-term sustainability.
Measuring the double bottom line
One of the challenges that companies face is quantifying the impact of their DBL approach. While financial performance can be measured through a profit-and-loss statement, social outcomes are more complex and nuanced. However, there is an increasing use of frameworks, such as the Global Reporting Initiative (GRI) or ESG benchmarks, to monitor their contributions.
Metrics may include:
- Community investments and philanthropic contributions.
- Employee diversity and inclusion statistics.
- Carbon reduction and sustainability objectives.
- Outcomes of consumer and employee health and wellbeing.
By following clear definitions when reporting value, organizations will have greater clarity on how to communicate their value to stakeholders.
Looking ahead
The DBL is not only a trend, but also a fundamental redefinition of what success means for business. In a world where accountability and authenticity are of the utmost importance in addressing stakeholder demands, companies that have social responsibility at the heart of their brand DNA are likely to reap industry benefits, including higher trust, loyalty and a competitive advantage.
The future of business is not only about making a profit, regardless of how many goods you produce, but is also about creating a purpose. By adopting a DBL, leaders can demonstrate that doing good and doing well are not mutually exclusive, but rather a reinforcing combination.
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