04/26/2012 01:13 pm ET | Updated Jun 26, 2012

Creating an Edge With Mission: Competitive Advantages of For-Profit Social Enterprises

One of the least talked about aspects of for-profit social enterprise is the competitive advantages it confers to those who do it well. Once thought of as naïve, the for-profit social enterprise model is an effective way to compete in today's competitive business climate. It presents tangible advantages around attracting and retaining human capital, brand equity, and customer loyalty to name just a few.

Don't get me wrong, I'm as hopeful and altruistic as the next guy. But the practical reality is that the more value CEOs see in being a sustainable and social enterprise, the more will fully embrace it.

Born From Authenticity: For these models to work well they really do need to be born from the authentic view of the founder, the CEO, and the management team around being a positive contributor to society. This must not be a side purpose but the core underlying purpose of which the product or service is the means to fulfill that mission. If the social mission is just window dressing and not backed up with behavior, it will likely attract cynical employees and create a toxic culture ripe for implosion.

Practicality Breeds Profitability: No venture ever really fulfills its mission until it becomes sustainable and this means driving to profitability. Profitability generates capital for further investments. It says that you have a model that can work over the long term. Being practical means that there is a mix of deeply felt passion for the greater good with the near term focus on getting to the next level of being sustainable.

The Human Talent Advantage: One of the biggest advantages to enterprises with a social purpose is the ability to attract and retain superior human capital through good times and bad. Purpose (along with mastery and autonomy) is a core primary human need. Companies who imbue their workforces with a deeply felt purpose beyond a paycheck tend to attract committed, loyal, and well-rounded employees. When the culture is strong, healthy, and full of purpose retention rates soar. Would you rather work for a soulless, data center optimization venture, or a firm that is working on a big idea for sustainability?

Brand Positioning: I have also found that brand equity builds faster and deeper when there is a deeply felt purpose by employees and customers to the company's mission. Customers will identify you in favorable ways and loyalty will be long and deep as will brand recall. On the media front, many reporters will give you the benefit of the doubt and favorable positioning. One might argue that reporters ought to push harder on how authentic many 'CSR-minded' companies truly are.

Investor Advantages: Social enterprises may receive slightly more patience and buy-in from investors, especially if they themselves are mission driven. This is not a free pass but in most companies there is a point in time where things can go either way. If investors pull the plug they go one way, if they stay in the game things can often break the other way. However, these advantages come over time. Investors generally want to make sure you are there to make them money (you are). When pitching investors, it can be highly risky to focus too much on mission issues out of the gate.

Alliances: I have found over time that many companies want to build their brand equity by partnering with those that already have it. Alliances are in large part built on trust and trust is a commodity that is easier to come by if you stand for something. In essence, if your brand has a strong social responsibility core, stands for values that are broadly embraced, has a strong following of customers, and gets positive press you may find alliance partners easier to come by.

The Punchline: The fact remains that mission-driven companies working on big problems tend to build early customer loyalty, employee commitment, receive favorable press, and have growing brand recognition scores. The long and short of it all is that corporate social responsibility can and should go far beyond just the mission. It needs to be factored in employee screening, customer treatment, alliances, and media relations. Provided it is authentic, social enterprise is an effective edge to compete. You don't have to look further than the food category to see any number of leading brands that have clearly positioned themselves as standing for more than something to eat.

Anybody for some Ben & Jerry's ice cream?