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Five myths socially conscious entrepreneurs need to ignore

A series of powerful forces are changing business as we know it. From the speed of communication to information accessibility, all lead to increased transparency and a more global perspective.

Whether we choose to define the newest iteration of capitalism as Shared Value, Conscious Capitalism, Institutional Logic, Benefit Corporations, Triple Bottom Line, SRI, ESG, or Regenerative Capitalism, the fact is companies that don’t update their business practices are significantly less likely to thrive. Meanwhile, those that harness the power of purpose are capturing significant value and creating meaningful competitive advantages along the way.

This new, holistic approach to business may be the most significant movement of our time, as well as the most misunderstood. There are various pervasive myths surrounding stakeholder capitalism today:

Myth: The point of corporate sustainability is to improve reputation--anything more hurts shareholders.
Reality: Sustainable companies outperform their unsustainable counterparts.

A growing body of research shows that companies who invest in a holistic stakeholder approach--through policies benefiting shareholders, employees, local communities, consumers, supply chain partners, and the environment in concert--perform significantly better in the long term than those who don’t.

Using a value-weighted portfolio of Fortune’s 100 Best Companies to Work For, Alex Edmans, Professor of Finance, London Business School, strikingly found that companies who invest in the happiness of their employees see greater financial returns, as can companies who employ socially responsible investment screens. Research by Ioannis Ioannou, Assistant Professor of Strategy and Entrepreneurship, London Business School, indicates companies who voluntarily invest in sustainable practices “significantly outperform their counterparts over the long term.”

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