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Why Purpose Can Help Small Businesses Stand Out

December 15, 2021

In the face of climate disasters and increasing political polarization, it is no wonder consumers’ faith in institutions is at an all-time low. Whether government or business, nearly every institution has been impacted by the new age of cynicism with one curious exception: small business.

While over 43% of consumers say they have “very little” or “no” trust in big business, over 70% say that they have a “great deal” or “quite a lot” of trust in small business, according to a recent Gallup poll. Consumer faith in small business is particularly strong amongst millennial consumers, the largest consumer segment today: 72% say they’re more committed to supporting small businesses than they were pre-pandemic. But will this goodwill last forever?

One way for small businesses to stand out vis-a-vis their larger counterparts is to lean into purpose. By infusing principles of sustainability and social impact from the start, these companies can sidestep the troubled legacies of incumbents and lean into their ability to be more nimble and innovative.

Small businesses can set out to differentiate themselves by emphasizing best practices in sustainability and social impact. There are already businesses that have led by example in this space like Nisolo, a Nashville-based clothing company that emphasizes its ethical sourcing model, and Maple Hill Creamery, the leading grass-fed organic dairy company. Even small businesses that haven’t invested in this space can more easily pivot to purpose as footwear brand Atoms did by retooling its manufacturing processes to produce masks in the face of COVID-19-related PPE shortages—and building its brand in the process.

Up-start pioneers can develop a competitive advantage over large companies because they can more nimbly infuse circular and ethical sourcing strategies into their design of products and services. Today, most companies follow a “take-make-dispose” pattern driven by existing production economics and loose regulation. Re-engineering existing processes and pivoting supply chain strategy takes time.  In contrast, the purpose-driven small businesses of tomorrow can design products and services that bake in circular supply chains, adopt a resource recovery model, leverage sharing platforms, or position products as services from inception. Core to many of these approaches is the design of efficient, effective “take-back” systems which require the establishment of relationships with consumers. For example, think of the greengrocer who accepts your compost or the local sharing networks for goods and services from tools to appliances. No stakeholders are better poised to tap into this mindset than the small businesses in our neighborhoods.

Beyond goods, small businesses can also lead by taking a progressive stance on workplace policies that are likely to attract the long-neglected needs that certain segments from caregivers to Gen Z workers have lobbied for. Parents across the country are struggling to balance the demands of work and family as the cost of child care rapidly rises. With the U.S. government slow to act to solve the child care crisis, more workers are turning to their employers for support. While they may struggle to compete with larger companies on compensation, they can win on policies and programs. Here, small businesses can stand out whether it’s providing childcare facilities, negotiating discounts at local providers or simply providing information about quality, reliable options. Similarly, Gen Z employees are increasingly drawing attention to the epidemic of burnout, which the World Health Organization added as an occupational health phenomenon in 2019. Given that Gen Z reports higher levels of anxiety and depression than other generations, companies that offer programs to help employees better manage their mental health, offer generous leave policies, and provide an environment of psychological safety to discuss challenges may be better placed to attract talent.

Small businesses are also poised to benefit from the rising consumer preference for local products and services. Local spending has a clear economic impact on communities: an average of two-thirds of every dollar spent at small businesses in the United States stays in the local community, according to the Small Business Economic Impact Study from American Express. The same study also finds that every dollar spent at small businesses creates an additional 50 cents in local business activity. Not only are local products seen as contributing to job creation, but they are also (especially in the case of food and beverage) seen as more sustainable as they are not shipped over long distances. Small enterprises should lean into the principles of shared value—and share their story about how they and the local communities they serve stand to benefit.

The future of business, especially those that are new to market, lies in striking the right approach to purpose. Today, consumers increasingly make decisions based on how companies treat their communities, their employees, and the environment. But according to the Harris Poll, only 24% of companies today have embedded their purpose into their business “to the point of influencing innovation, operations, and their engagement with society.” Small businesses can use their competitive advantage over large enterprises based on their age and agility to infuse purpose into their core strategy from the start—and demonstrate authenticity and credibility to consumers in an age where brand skepticism is at an all-time high.

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