What does it mean when an organisation has a social purpose?

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Organisations are changing and the boundaries between them are getting blurry.

Once upon a time it was simple. The government did some things. Profit driven companies did other things. And non-profits picked up the pieces.

The regulatory structures in many countries grew up to support organisations that fell into one of these three categories.

But, that’s not enough for people any more – they want to work with organisations that do more than just make money – that have a social purpose.

But what does that mean exactly?

In this BCG article, Cathy Carlisi and Dolly Meese from Brighthouse define purpose as the why of an organisation, resulting from the intersection of two questions:

  • Who are we?
  • What need do we meet in society?

Does this become a social purpose if we just add the word social to it?

Not according to the Advertising Standards Agency, which ruled that A4E, now known as People Plus, could not describe itself as a social purpose company because its activities made a profit but people could mistake it for a non-profit.

So, while leaders in organisations are trying to make their businesses about more than just money, the system of regulation and oversight is trying to understand what this means and how it should respond.

In the U.S, the concept of a for-benefit organisation is being mooted, one that makes a profit and acts like a normal business, but whose primary purpose is provide social benefits.

The normal way to get this message across is through marketing – by structuring branding and messaging around concepts like “social enterprise” and “sustainable business” according to this article in the Harvard Business Review.

But, the article argues, it can also be achieved through organisational architecture – by creating a set of rules and operating principles that go beyond profit and involve suppliers and customers in decision making and even profit sharing.

A report by the Mission Alignment Working Group of the G8 looked at a new form of organisation called profit-with-purpose businesses – a type of organisation that has the freedom to distribute profits like a traditional business but also commits to prioritise, deliver and report on their social impact.

They also propose a way for these organisations to become formally recognised in law – with a definition, legal framework and operating model.

So… it’s not that easy to understand social purpose – the words make sense, but what does it really mean when an organisation starts to focus on the impact it is making rather than the profit it is taking?

The starting point is getting the internal and external narrative right – the story we tell ourselves and others.

And we can start by answering a few fundamental questions.

Who are we, what need do we meet and why do we exist?

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