The idea of running a responsible business that is aware of the social, ethical, and environmental implications of its products and services is undoubtedly laudable. Think tank Doteveryone makes a compelling argument that “consequence scanning” can help startups understand the full societal impact of their products. Yet, what is glaringly missing from this narrative is the most basic tenet of running a business—profitability.
The proliferation of startups that focus on ticking social justice and environmental responsibility boxes while ignoring their bottom lines is reaching a point of critical mass. The premise is simple: if a business doesn’t make money, it can’t sustain itself. Without profitability, there’s no funding for research and development, no job creation, and, ironically, no platform for making a social impact.
The Lure of Social Capital
Let’s not underestimate the power of social capital. In today’s age of virtue signaling and social justice, the brand equity of being a “woke” company is compelling. Younger generations of consumers are indeed more likely to support companies that stand for something more than just profit.
However, the trap here is that while the concept of social responsibility appeals to investors, employees, and the general public, it doesn’t automatically translate to revenue. Being ethical, responsible, and environmentally friendly often comes at a cost—one that startups with no tangible revenue stream cannot afford.
“Wokeness” Without Financial Sense
The fall of many startups is that they’ve been so engrossed in the “light bulb moment” of realising how a responsible approach adds value that they forget to evaluate if that value translates into financial sustainability. When you’re busy earning ‘wokeness’ points but neglecting to create a monetisable product or service, you are setting yourself up for failure. And this is not mere speculation; we have seen the collapse of various businesses that prided themselves on being socially responsible yet lacked a viable revenue model.
Setting a Realistic Precedent
Doteveryone emphasises that early consequence scanning can set a precedent for future decision-making. Yet, it’s crucial that this precedent is not just about being socially responsible but also about being financially sensible. If a startup bypasses this essential check and balances stage in the lure of being “woke,” it does not just set a flawed precedent—it builds a fragile business model that is hard to reverse.
The Ideal Path Forward
Responsibility and profitability are not mutually exclusive.
Businesses can indeed build ethical and responsible practices into their operations without sidelining profitability. Initiatives like “consequence scanning” are important, but they should be part of a broader strategy that also includes financial planning, customer acquisition, and scaling methods.
In the grand scheme of things, it’s not enough to be just socially responsible; a business must also be economically viable. Profitability should not be seen as an evil necessity but as an enabler that can amplify the reach and impact of responsible practices.
The Harsh Reality: Time to Wake Up and Smell the Coffee
As the world grapples with the economic aftermath of the COVID-19 pandemic, the era of seemingly limitless “Covid cash” and indulgent investments in startups with lofty ideals but no clear path to profitability has come to a screeching halt. For startups, the days of relying on the attractiveness of being “woke” to secure funding are dwindling fast. Investors are becoming increasingly risk-averse, consumers are scrutinising their spending, and the funding well is running dry. In simple terms, there’s no more free lunch; you’re going to have to work for it.
If your business model is more focused on social impact than financial solvency, consider this a wake-up call. The question is no longer just whether your company is good for the world but whether it is actually good as a company. The bitter truth is that no amount of social responsibility can rescue a business that doesn’t make money. And in the cutthroat post-pandemic economic landscape, the margin for error has shrunk substantially.
It’s high time to break out of the ideological bubble and come face-to-face with economic realities. The noble aim of transforming the world can only be accomplished if you first succeed in the business basics— chief among them, turning a profit.
So wake up, smell the coffee, and get your financial house in order, because the stakes have never been higher.