Redefining Profit

Patagonia was recently ranked the most respected brand in America. Even by conventional standards, it's also one of the most profitable. The company, however, does not measure its success by dollars alone. In fact, Patagonia borrows a principle from Nature to define its real profit. How does it do that? There's a clue in the company's mission statement:

We exist?to save our home planet. We aim to use the resources we have--our voice, our business, and our community--to do something about our climate crisis.?

In business, we have long relied on financial profit as the primary metric of an organization's health, as we'll soon see in the second quarter reports of our public corporations. However, when we observe Nature, we discover a different definition of profit—one that holds valuable lessons and implications for how we should lead today's organizations.

In Nature, profit is intricately tied to the evolution of the system. Ecosystems thrive as they become more diverse and interdependent, fostering the emergence of new possibilities and innovations.

Unlike the conventional understanding of profit as extracting value, Nature's profit revolves around increasing Ihe collective value within the system. And when organizations adopt this philosophy, as Patagonia has, it pays off not only for our companies but our society and our planet as well.

Nature's Economy

In our current industrial economy, the difference between cost and revenue determines profit. This definition often involves resource extraction, where minerals, trees, land, and labor are used to generate profit that is then privatized through sales. But this approach diverges from Nature's principles.

Nature does not extract resources. Instead, it employs resources to enhance the capacity of the system. In Nature's economy, waste never remains just waste. It becomes a building block for future life within the ecosystem.

As I mentioned last month, Nature's generosity is deeply rooted in diversity and relies on the expanding interdependence of the evolving ecosystem. By fostering relationships between species and plant life, for example, nutrients are shared to benefit the entire system.

Using Nature's Principles to Redefine Profit

Instead of placing financial profit at the core of our organizations and society, leaders should emphasize the interdependent relationship between the environment, our community, and economics.

If organizations adopt this redefined notion of profit (or even expand on it!), their success will be measured not only by net profit but also by their ability to evolve. Such a shift would compel organizations to value their contributions to society and the environment. Embracing the Triple Bottom Line of society, environment, and economy creates a profit metric that aligns much more closely with Nature's perspective.

Implications for Leaders and Organizations

Three key implications emerge when we define profit as the evolution of our organizational system:

1. Leadership is measured by the development of individuals within the organization. Conventional leadership emphasizes goal achievement and productivity. Instead, Nature suggests that a leader's legacy should be linked to the evolution of the human beings who work within the organization.
2. The profit generation process is measured by how much it adds to the organization's ecosystem. Rather than focusing only on extraction, leaders must use an approach that creates a greater capacity for renewal as well as expansion.
3. Profit reflects purpose. In this new definition of profit, leaders invest significant time articulating and sharing the organization's higher purpose, grounding it in the context of profit as evolution of the ecosystem.

If we redefine profit as evolution, we become deeply invested in the business of reconstructing organizational value, a value that is no longer just the difference between cost and revenue. Once adopted, this new definition of profit immediately begins producing tremendous benefits for our communities, our planet, and future generations.

Want to read more of Dr. Kathy Allen's work? Check out her blog here.