Let's start at the beginning.
Any organization has four sources of value:
(1) Talent - the people and their skills and abilities that contribute to fulfilling its mission;
(2) Business - its activity and the way in which it is able to create value for its main stakeholders;
(3) Cost of Capital - as the price of financing the activities and growth of the business;
(4) Societal Goodwill or Reputation - what allows an organization to maintain a lasting and transparent relationship with its main stakeholders.
Additionally, if we understand impact as the set of ultimate consequences of an organization's activity on society or a community, in a clear and intentional way, and the way it relates to its stakeholders, we realize how important this dimension is in the sustainability of organizations, as it is capable of affecting all their sources of value.
"if we understand impact as the set of ultimate consequences of an organization's activity on society (...) we realize how important this dimension is (...) because it is capable of affecting all its sources of value."
Nowadays, talent demands more purpose from organizations, the cost of capital is cheaper for assets scrutinized according to Social, Environmental and Governance (ESG) criteria, business depends on a generation looking for more environmentally and socially sustainable products and services, and reputation depends on the impact created in a given community or the quality of the social relationships established (positive or negative). The impact is therefore all the clearer and more intentional because of the organizational cause behind it. In this sense, organizations with a social and/or environmental mission are best placed to take advantage of this economic opportunity.
In principle, an organization with a social and/or environmental mission has a clear cause (typically an important and neglected problem in society), a business model intrinsically linked to that cause (innovative in many dimensions because it allows for the allocation of multiple resources, namely from the market, the public sector or donations), capable of monetizing the positive impact generated, as can be seen in concrete examples.
However, this type of organization faces a number of challenges. Most of these challenges have to do with external dimensions, but others have to do with internal and organizational dimensions. We should focus on the latter because they are more controllable than the former and for reasons of focus and prioritization.
At the risk of not being exhaustive, I would highlight the following main challenges:
. Organizations with a social and/or environmental mission are complex in their actions and run the risk of "Mission Drift": in other words, their mission, which is often dual, can generate a constant inability to focus and imbalance, leading to an alternation between financial performance and creating an impact on a given target audience. This challenge can lead to constant confusion about the definition of organizational priorities. This challenge often implies a redefinition of the business model;
. Organizations with a social and/or environmental mission have business models based on public funding: as a result of the first challenge mentioned, most organizations opt for stable but rigid funding models, disconnected from the impact generated on the problem that gave rise to them, becoming "Union Organizations" which implies a low, centralized negotiating capacity with the public sector, independent of the individual and idiosyncratic value proposition (impact);
. Organizations with a social and/or environmental mission tend to segment society and neglect opportunities on the basis of political dogma, i.e. they accept as self-evident a set of social and/or environmental problems generated by the way society is organized, assuming sole responsibility for solving them, legitimizing actions that generate social and/or environmental problems and relinquishing responsibility to other players in society, potential joint activities or new ways of mobilizing resources. This behavior leads to these organizations being relegated to third place in the ranking of sectors and is reflected in the different sources of value, particularly with regard to attracting and retaining talent.
In short, the inability to focus, to productize based on purpose and to activate the various sources of value means that these organizations often fail to assume their true vocation and ignore opportunities for the future. In this context, it is increasingly important for these organizations to question their organizational orthodoxies and look for new solutions to the constant but evolving problems facing society. The biggest obstacle to fulfilling this purpose has to do with the professionalization of management. The professionalization of management is an essential investment for the recovery of the identity of organizations with a social and/or environmental mission. Although tempting, the thought of how to do this is a topic for another article that is longer and more in-depth than this one.
