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Top 7 Rising Global Impact Investing and Social Impact Trends in 2020

[UPDATED JANUARY 2020] These are the leading environmental trends and sustainability trends to look forward to in 2020. What's new with impact investing and social impact statistics this year? Check out these new consumer perceptions, business practices, and venture capital finance trends in 2020.

By

Le

on

January 21, 2020

The rise of social impact enterprises, impact investing, and sustainable business practices is largely affected by changing consumer preferences and employee demands for meaningful business purposes. After reading and analyzing the latest environmental trends and green business research, these are the Top 7 Social Good Business Trends that are likely shaping the future of work, ethical business strategy, and the global economy in 2020.

These key sustainable business trends not only inspire us here at The Good Startup, but they force all of us as consumers, workers, and leaders to take action to do better for the planet and pay attention to social entrepreneurship research.

The recent green business research we've found don't show extreme promise of a flowery, utopian world of a better idea ahead. Instead, they are very concerning. There’s a huge gap between what workers and consumers demand as environmentalists and what companies are gradually working on, and as you'll see, there is still a lot of work to do.

Business Trend #1: Corporate Social Responsibility is becoming a greater expectation rather than an added benefit to a company's value proposition.

Society's expectations for corporate social responsibility (or CSR) are increasing, and it's becoming more of a requirement rather than just a key differentiator in a company.

This is a leading new business trend for social good businesses as more companies feel the pressure from younger employees, customers, and media outlets to act responsibly. While consumerism is still rampant in many developed countries, even the large consumer-facing firms are forced to have sustainable, ethical practices or face scrutiny from the public.

We're at the point where consumers are serious about social change and environmental protection, and they are savvy enough to see through attempts of "green-washing," which is a pathetic marketing strategy that tries to keep up with customer preferences by deceptively promoting "green" products that aren't actually clean for the planet.

Respondents cited societal impact most often as the top factor used to measure success when evaluating annual performance

While many consumers and even entrepreneurship researchers question whether CSR is an authentic attempt to do better or instead a shady marketing practice, the truth is that the demand for environmental, ethical practices is not a fad.

53% of consumers think that brands could be addressing more problems than governments can, and 86% of consumers expect companies to do something about social and environmental problems.

Business Trend #2: Changing consumer choice and preferences are contributing to the recent surge of benefit corporations and social purpose corporations.

Benefit corporations and social purpose corporations are the newer forms of businesses in the United States that choose to dedicate their company's existence to a purpose rather than just profits.

Benefit corporations are a legal entity that has a greater level of transparency, accountability, and social purpose compared to standard C-corp or S-corp companies. Not to be confused with Certified B Corp companies, which are certified by the nonprofit B Lab, a benefit corporation actually is required by law to uphold its impact on all stakeholders, not just shareholders. Both B Corp and benefit corporations have strict standards and greater social commitments, therefore making them more trustworthy to the public.

Social purpose corporations are legal entities that are seen as less stringent benefit corporations or a hybrid between nonprofits and benefit corporations. It's a newer form of business that is not eligible for 501(c)(3) status, but can pursue both social mission and profits. Social purpose corporations are recognized by a few states in the US and are required to share an annual report about their progress on achieving their respective social purposes.

With the increasing demand for corporate social responsibility, we've seen the growth of benefit corporations, B corps, and social purpose corporations grow. There are over 2,750 B Corp companies today alone, compared to just 82 B corps in 2007.

These mission-driven startups find this strategy better for attracting customers, employees, and investors, and with contractual obligations to be transparent and ethical, purpose-led companies are here to stay for the long-term.

Business Trend #3: Millennials and Generation Z would rather have purpose or fulfillment over financial security, but lately they've been pressuring firms for both.

According to Cone Communications, 3 out of 4 millennials would take a pay cut to work for a socially responsible company, and 76% consider the socio-environmental impact of a role at a company before deciding where to work. With that being said, over 60% would reject a job if the potential employer does not have strong CSR practices.

Millennials in the workplace want to feel meaning and purpose in their lives, and 94% of them report that they want to use their skills to benefit a cause. With these numbers rising each year, it's easy to understand why many corporate employees experience burnout. About 70% of workers report that they are unsatisfied at work!

Very similarly, 65% of Gen Z wants to personally contribute to creating something that is world-changing. The most attractive employers to them are ones that value commitment to social good, have a strong cause, and allow employees to create and see the results of their hard work.

Business Trend #4: Impact investing is the one sector of venture capitalism that has been growing exponentially.

Impact investing is a type of venture capitalism that invests in companies, organizations, and funds that have the intention to create a measurable social or environmental benefit in addition to a financial return. Impact investing is growing in popularity due to 1. financial investors seeking purpose and meaning in their own lives, and 2. recent studies showing that impact investments have tremendous returns, further encouraging other investors to consider social impact startups.

Worldwide, impact investment organizations manage over $502 billion of assets, which is nearly double the amount from the year before.

However, the venture capital side of social impact startups has some catching up to do, compared to what employees and customers are demanding. Reports share that only 25% of the money managed by professional investors overall are even considering sustainability principles.

The current doubling of social impact investing is promising, but researchers agree that it will take trillions of dollars to effectively address critical socio-environmental challenges we're facing today.

impact investing AUM

Business Trend #5: Charitable giving by individuals decreased in 2018 while charitable giving by corporations increased.

Individuals contributed $292.09 billion in charitable donations according to Giving USA, which is a decrease of 3.4% adjusted for inflation. However, altruistic donations from foundations and corporations increased.

Foundations donated $75.86 billion, an increase of 4.7% after inflation, and corporations gave $20.05 billion, which is an icrease of 2.9% after inflation.

Giving USA also shares that giving to religious groups, education, and public-society benefit organizations has decreased. Meanwhile, donations to international affairs and environmental organizations has increased. Charitable giving to arts or cultural causes and health organizations has stayed approximately the same.

GUSA-2019-Infographic

Business Trend #6: More operations managers and engineers are dedicated to creating and maintaining an ethical, sustainable supply chain.

When it comes to the top supply chain and logistics trends to look out for in 2020, we have to understand the potential of "Green Logistics." Green logistics is the process of measuring and lowering all environmental impacts in every step of creating and selling a product.

Companies are optimizing eco-friendly or reusable packaging, using warehouse space more efficiently, and lowering emissions in their supply chain. A convenient benefit of being more conscious of the environment is that companies are also finding lower costs as well. Not that we think that's the bigger benefit, of course.

NYU Stern found that 50% of the growth of consumer packaged goods came from sustainability-oriented products, and that these products grew 5.6 times faster than products that weren't marketed as "sustainable." This does further suggest that consumer demand is increasing for sustainable practices.

More and more citizens are conscious of the fact that they are indeed voting with their own dollars, putting their spending on products that are ethical, fair-trade, and sustainable. However, while in the past, they were willing to pay a premium for the extra "care," environmental activists such as Greta Thunberg are demanding that be the new norm because our planet is at risk.

Business Trend #7: The tech industry is re-evaluating its potential risks to society and is accepting more socio-environmental responsibility for the future it holds.

We can't go anywhere discussing business and economic statistics without considering the impact of technology. The discussion of technology has shifted from exciting opportunities for social mobilization and public welfare...to concerns of privacy, monopolization, security, human behavioral effects, bias in AI, and job loss.

Trust is a huge problem in the tech industry, with 65% of Americans believing that tech companies "often fail to anticipate how their products and services will impact society.” Only 25% of them agree that these companies can "be trusted to do the right thing."

Public opinion has led to tech employees having higher enthusiasm for "purpose." 67% of employees state that "their company’s purpose is stronger now than when they first joined," and 62% think "purpose drives management’s decision making more now than when they joined."

"If you create technology that changes the world, you have to step up to the responsibilities that the world wants you to assume." -- Brad Smith, President of Microsoft

Have any more environmental trends or sustainability news in the social impact sector? Send them to us below to be featured!

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Do Things Worth Doing.

The Good Startup is this ambiguous, awkward brand going through puberty right now. Rebellious, existential - but still a heart of gold - my mission is to still do the most I can to make your life better (and more badass) than it was before.