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Helpful prior knowledge and learning objectives
Helpful prior knowledge and learning objectives
Helpful prior learning:
Section 1.1.1 The economy and you, which explains what an economy is and how it is relevant to students’ lives
Section 1.1.2 The embedded economy, which explains the relationship between the economy and society and Earth’s systems
Section 1.1.4 Regenerative economies, which explains how circular, distributive and caring, needs-based and sufficient economies can meet human needs within planetary boundaries
Section 3.3.1 The deep design of firms, which explains the major transitions that business needs to make to meet human needs within planetary boundaries
Section S.1 What are systems?, which explains what a system is, the importance of systems boundaries, the difference between open and closed systems and the importance of systems thinking
Section S.2 Systems thinking patterns, which outlines the core components of systems thinking: distinctions (thing/other), systems (part/whole), relationships (action/reaction), and perspectives (point/view)
Learning objectives:
discuss the role and importance of purpose for regenerative businesses, including how purpose goes beyond mission/vision statements
In 1968, five friends in Uruguay wanted to help rural women. They started Manos del Uruguay, a business that created jobs to improve women’s lives and preserve traditional crafts.
Manos del Uruguay began by setting up workshops for women to make wool blankets and horse saddle pads. They taught the women how to manage production, run cooperatives where they shared ownership of the business, and balance work and family. Each product comes with a tag signed by the artisan, showing the personal story behind every piece.
The cooperative uses local materials like wool and leather in small batches so as not to put too much pressure on the environment. They also use traditional dyeing and spinning techniques to keep crafts alive. As part of the World Fair Trade Organization, Manos del Uruguay runs 12 cooperatives owned by the artisans. Profits are shared or reinvested to strengthen communities even further.
Figure 1. Wool yarn from Manos del Uruguay
(Credit: The Bees, CC BY-NC 2.0)
The regenerative purpose of Manos del Uruguay shows how businesses can positively transform lives and communities while caring for the planet and strengthening their cultural roots and traditions. The short video below describes the impact of Manos del Uruguay.
What is the purpose of business?
What is the purpose of business?
The purpose of a business is the main reason why it exists. In capitalist economies, many businesses are created to maximise profits and increase the wealth of their owners or investors (Section 3.2.1).
However, not all businesses are about making as much profit as possible. Some focus on solving real-world problems, meeting human needs and strengthening social and ecological systems. They work to find the sweet spot in the Doughnut Economics model (Figure 2) (Section 1.3.4).
The model has two important parts. The inner ring or social foundation, focuses on meeting basic human needs like food, water, housing, and healthcare. The outer ring represents the planetary boundaries, the limits of the nine key ecological systems that sustain life on Earth (Section 1.2.7). Businesses that follow this model aim to operate in the “safe and just space for humanity” between the two rings, ensuring they help people while protecting the planet, creating and maintaining the conditions needed for all life on Earth.
Figure 16. The Doughnut Economics model showing the “safe and just space for humanity” (Credit: Kate Raworth and Christian Guthier CC-BY-SA 4.0)
Businesses with a social and/or ecological purpose are often called social enterprises, an idea made popular by Bangladeshi economist and entrepreneur Muhammad Yunus. Unlike businesses that aim to maximise profits, social enterprises exist mainly to solve social or ecological problems, like poverty, lack of education, or river pollution. They reinvest their profits to keep working toward their social or ecological mission. Social enterprises find a balance between making enough money to keep running, called commercial viability, and making a positive impact on society. This makes them different from both profit-focused companies and charities, which usually have a strong social or ecological purpose, but rely on donations to keep running.
Figure 3 below shows some data about social enterprises in various countries.
Manos del Uruguay, described at the start of this section, is an example of a social enterprise. What is its social or ecological purpose? How does it remain commercially viable?
Given the social and ecological crises we face, it is clear that new businesses should focus on meeting real human needs within planetary boundaries, and existing profit-driven businesses need to rapidly transform their operations. All businesses should, in fact, be social enterprises.
Is a mission and vision enough to give business purpose?
Is a mission and vision enough to give business purpose?
Mission and vision statements help guide businesses in the right direction. A vision statement is a company’s long-term dream for the future. It gives a sense of where the business wants to go. On the other hand, a mission statement focuses on what the company is doing right now to reach its vision. For example, the Ellen MacArthur Foundation explains its mission and vision like this:
Our mission is to accelerate the transition to a circular economy
We develop and promote the idea of a circular economy. We inspire and work with business, academia, policymakers, and institutions across the globe.
Our vision is an economic system that’s better for people and the environment.
Figure 4. The Ellen MacArthur Foundation has a clear mission and vision on its website
(Credit: Ellen MacArthur Foundation)
In practice, many businesses blur their mission and vision, or use other ways of communicating their purpose. For example, they may instead define a core set of values. Whichever way they do it, businesses should communicate its purpose clearly to all the stakeholders, so that everyone involved with the business works towards the same goals.
While vision and mission statements are important for stakeholders, they are not sufficient to really give a business purpose. Purpose is reflected in the business’ culture, actions, and products:
culture: the values and beliefs shared by employees reflect the business’s priorities and commitment to regenerative practice;
actions: the initiatives and projects of a business, and how it organises its operations and relationships with stakeholder networks to have positive social and ecological impact;
products: the goods or services the business produces show whether the business aims to meet essential needs or promote overconsumption of unnecessary products.
Figure 5. The difference in purpose of a fast-fashion clothing manufacturer and Manos del Uruguay
(Credit: Doughnut Design for Business - Core Tool, CC BY-SA 4.0)
How a business handles trade-offs can reveal its true purpose. If a company only takes regenerative actions if those actions also maximise profits, then profit is still the main goal of the firm. You can also see purpose in what a business decides to stop doing. For example, a company that genuinely wants to improve customer health will stop selling unhealthy products even if they are profitable. A business aiming to be regenerative will stop high-CO2-emitting operations, even if it reduces its profits.
What’s the right balance of purpose and profit?
What’s the right balance of purpose and profit?
Balancing profit and purpose can be challenging, but it’s important for businesses that want to make a positive impact while staying financially stable. Businesses often face tensions between doing what’s good for people or the environment and making enough money to survive. Sometimes, making responsible choices, like paying living wages or using renewable materials, costs more in the short term. But these actions help to support a more stable and resilient society and ecosystems on which the business itself depends.
To stay commercially viable, businesses must ensure they earn enough to cover production costs and can withstand problems and disruptions. For instance, a social business that provides clean water needs to cover operational costs and pay staff. Focusing too much on purpose without considering financial stability can lead to failure. In the end, social enterprises must carefully balance their social and ecological purpose with the need to make enough money to stay resilient and grow their positive impact on society and ecosystems.
Still, it’s important to understand that providing for many essential human needs may not be profitable at all. This may be because those who need the products or services are not able to pay for them, or because social and economic systems have conditioned people to undervalue what the business is offering. This is especially true of care services in many societies (Section 1.3.7), but also applies to many other essential needs. Thus, we cannot expect for-profit businesses to meet all human needs effectively on their own through market mechanisms, and must support diverse types of organisations and strengthen other provisioning institutions (households, commons, state) to build resilient societies.
Activity 3.3.2
Activity 3.3.2
Concept: Regeneration
Skills: Thinking skills (transfer)
Time: 40-45 minutes
Type: Individual, pairs, and/or group, depending on option
Option 1: Identifying and discussing your school’s purpose
Your school likely has a mission and/or vision statement. If you do not know it, find out what it is and note it down.
Identify which elements of the Doughnut’s social foundation and planetary boundaries are impacted by your school’s business activities.
Discuss with a partner, in a small group, or as a class, or write or audio record a reflection to share with other students, your teacher or the school administration:
To what extent do you think that the school’s culture, actions, and product align with its stated mission and/or vision?
To what extent is your school meeting human needs within planetary boundaries?
What might be done to improve your school’s contribution to achieving the ‘sweet spot’ in the Doughnut?
Find out what the process is in your school for developing its mission and vision - are students involved? If not, find out how to get involved.
Option: 2: Investigating the purpose of a local or non-local business
You could undertake a similar short investigation, using the steps in Option 1 to consider a local or non-local business.
Option 3: Acumen Fund impact investing case studies
Access the case studies of the Acumen Fund, a global impact investment firm that supports social businesses around the world. Individually, with a partner, or in a small group:
Select one case study that interests you and read the description
Identify the key facts about the business:
What good or services does it provide?
Which elements of the Doughnut Model’s social foundation and planetary boundaries are involved (Figure 2)?
How does the business support itself (be commercially viable)?
Share your case study with another group, or with your class.
Option 3: Discussion - Part of the solution or part of the problem?
Note: This activity could take longer than one class period if more time is allocated for students to research.
There is a well-known saying:
If you are not part of the solution, you are part of the problem.
We face urgent social and ecological crises. To what extent should societies allow the continuation of businesses that use Earth’s limited resources to produce goods and services that do not contribute to human wellbeing, or even harm people? If it is helpful for you to consider specific examples of businesses that we might question, you might consider a sweetened fizzy drinks business, a business that creates unhealthy foods, or a cigarette manufacturer.
Use a discussion format/process that you are familiar with to consider different points related to this question and discuss in a small group or as a class. You can also write or video/audio record a reflection.
Ideas for longer activities and projects are listed in Subtopic 3.5 Taking action
Checking for understanding
Checking for understanding
Further exploration
Further exploration
Change the goal - a short video by Doughnut Economics Model creator Kate Raworth that explains why we need to shift the purpose of our economies and the businesses within them from endless, aimless growth to meeting human needs within planetary boundaries. Difficulty level: easy
Doughnut design for business case studies - a set of case studies of real businesses using regenerative business design. These can be used in the classroom to help students apply their understanding of the five design elements in real cases. Difficulty level: easy/medium
Join the Business Revolution - a short video from the World Fair Trade Organisation about social businesses. Difficulty level: easy.
Yunus Social Business - Yunus Funds supports social businesses that focus on employment, education, healthcare, clean water and clean energy to millions of people in East Africa, Latin America & India. Yunus Corporate guides multinational companies to help them transform their purpose to strengthen human and ecological systems. Difficulty level: easy
Acumen Fund Case Studies - The Acumen Fund is an impact investment firm that provides finance to social enterprises around the world. This site provides many examples of case studies to explore to see how businesses are working to meet human needs within planetary boundaries while also being commercially viable businesses. Difficulty level: easy
Regenerate: for a future that works for everyone - a study by management consulting Kearny where it surveyed 775 business leaders from companies in 19 countries in diverse regions. With your understanding of regenerative business so far, read the information on the website summarising what they found and what business leaders said. To what extent does the information match up with your understanding of regenerative business at this point? Difficulty level: medium
Sources
Sources
Doughnut Economics Action Lab (March 2024). Doughnut Design for Business DEAL’s guide to redesigning businesses through Doughnut Economics – Core workshop Version 1.2. https://docs.google.com/presentation/d/1x8flVhi7JKRRzQClrJnlGkdjd7TpIGXeQiVMQotIH0Q/edit?usp=sharing.
Kelly, M. (2012). Owning our future: The emerging ownership revolution. Berrett-Koehler Publishers: Oakland.
Kelly, M. (2013). The architecture of enterprise: Redesigning ownership for a great transition. The Good Society, 22(1).
Raworth, K. (2017). Doughnut economics: seven ways to think like a 21st century economist. London: Penguin Random House.
Sahan, E. (2023, January). Doughnut Design for Business: Introduction to Redesigning Businesses through Doughnut Economics [Video]. YouTube. https://youtu.be/ViHwewmuArI.
Sahan, E. et. al. (2022, November). What Doughnut Economics means for business: creating enterprises that are regenerative and distributive by design. Doughnut Economics Action Lab. https://doughnuteconomics.org/rails/active_storage/blobs/redirect/eyJfcmFpbHMiOnsibWVzc2FnZSI6IkJBaHBBcXNpIiwiZXhwIjpudWxsLCJwdXIiOiJibG9iX2lkIn19--259000ee416367cd44b4e63d37637ded7c89f384/Doughnut%20&%20Enterprise%20Design%20-%20CET_DEAL%20paper%20V.1.0.pdf
Terminology
Terminology
Link to Quizlet interactive flashcards and terminology games for Section 3.3.2 The purpose of firms - in order of appearance
cooperative: an organisation owned and controlled by people to meet their common economic, social, and/or cultural needs
profit: total revenue minus total cost
reinvest: putting the profit on a previous investment back into the same business or activity
capitalist: a person who has capital invested in business with the aim to make a profit
economy: all the human-made systems that transfer and transform energy and matter to meet human needs and wants
wealth: the total value (stock) of someone’s assets such as money, house, or investments
system: a set of interdependent parts that organise to create a functional whole
Doughnut Economics model: a model for sustainable development shaped like a doughnut, combining the concept of human needs with planetary boundaries
social foundation: human needs that need to be met for human survival and wellbeing
planetary boundaries: the limits of Earth systems to absorb the impact of human activity and continue to function
social enterprise: a business that operates for a social or environmental purpose
commercial viability: the ability of a business to earn enough revenue to at least cover costs of production
charity: an organisation set up to provide help and raise money for those in need
vision statement: a statement of a business’s long-term dream for the future, giving a sense of where the business wants to go
mission statement: a statement focusing on what the company is doing right now to reach its vision
stakeholder: a person who has an interest in or is impacted by some activity
culture: the beliefs, values, attitudes, behaviours and traditions shared by a group of people and transmitted from one generation to the next
value: ideas about what is important or good
living wage: a wage that is high enough for a person to cover their living expenses
renewable materials: natural resources that can be replenished indefinitely
resilient: able to recover after a disturbance
care: the act of providing what is necessary for the health, welfare, upkeep, and protection of someone or something
provisioning institution: a group of people and their relationships as they try to meet human needs and wants
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