06 Jul 2021

Founder and family businesses – a sustainable future

Tangwena Nelson

Private Companies Group

Nurturing for the long-term is in the nature of founder and family businesses. So when it comes to sustainability, companies led by entrepreneurs and families have unique attributes and motivations that set them apart from other firms. In this article, we explore what sustainability means to them and the opportunity it presents.

Every founder and family company is building a business with an eye on the future.

With that intrinsic perspective and the need to measure success over a long time, it’s no surprise that the special strengths and advantages enjoyed by founder- and family-led companies lend themselves to the aim of sustainable business practices.

Sustainability has gained prominence in recent years. While most public attention focuses on environmental, social and governance (ESG) issues and "big business", the pressure to contribute toward a cleaner environment and a fairer society is increasing on all companies. Also, given the importance now attached to financial resilience following the pandemic, it’s no wonder that sustainability and ESG issues feature high on the list of priorities of businesses led by entrepreneurs and families.

Tangwena Nelson
Tangwena Nelson, Private Companies Group

The concepts of long-term vision and values feature heavily in many aspects of founder and family businesses. Indeed, founder and family businesses can be seen as an expression of the values of those who lead them.

So what is sustainability and what does it mean for founder and family businesses?

Sustainability can mean different things to different companies. Still, for many, it corresponds to sustainable growth, environmental protection, social inclusion, and good governance – the latter an area where family businesses have traditionally led from the front compared with others. For many founder and family companies, sustainability is a lens to think about their long-term viability and a way to manage risk.

And how do the particular characteristics and dynamics of founder and family businesses shape what these issues mean to them?

Firstly, whether it’s a founder-controlled or a family-controlled company, two of their defining features are often the personal attachment of the owners to the business and the organisation’s close connection to its surrounding community.

This means that while some bigger companies’ ESG efforts are dismissed as superficial and marketing-orientated “greenwashing”, founder and family businesses are generally more trusted and many have these concepts built into their DNA. They see it not as a “nice to have”, but as part of their purpose. They see sustainability as inherent to their business culture and their long-term continuity. They want to have a positive impact and ensure a legacy, not just influence consumers and investors.

Entrepreneurs and families who can define and articulate their goals, and the values and principles that back them, give their businesses a strong foundation for long-term competitive advantage and sustainability.

Secondly, founder and family businesses are less constrained by short-term commercial pressures, so their ability to implement sustainable practices for a long-term objective is enhanced. Also, due to their greater degree of control over the decision-making process and the company’s values, owners can act more quickly and decisively in what can sometimes be a nebulous area.

Thirdly, many young people place a high value on sustainability. That means founders and family business leaders wanting to involve the next generation may have to prioritise it to either help attract them or assist with succession planning.

Fourthly, many have a unique culture creating a sense of belonging and shared purpose among the workforce. Finally, given that entrepreneurial and family companies are the most common type of business, collectively they can have a big positive impact.

Overall, the concepts of long-term vision and values feature heavily in many aspects of founder and family businesses. Indeed, founder and family businesses can be seen as an expression of the values of those who lead them. Those values underpin the practices that build and support the business’s vision, purpose and decision-making processes.

Entrepreneurs and families who can define and articulate their goals, and the values and principles that back them, give their businesses a strong foundation for long-term competitive advantage and sustainability.

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