By Fernanda Arreola and Gregory Unruh
Corporate sustainability efforts often fall short because the real challenge lies not in intentions, but in the way businesses are fundamentally designed.
For all the talk of sustainability, responsibility, climate change, biodiversity, and ethics, most companies today still operate according to a much older logic. It is not a logic built around societal impact. While the business press regularly reports positive signs of change, including exemplary companies, civil activism, and promising corporate social responsibility reports, these actions remain unevenly distributed across the economy. Large portions of GDP are still generated by sectors whose core activities raise difficult social or environmental questions, from aviation, bottled beverages, servers, gambling platforms, fast fashion, and fast food to many others.
CSR reports are filled with commitments, and executives increasingly speak the language of purpose. Yet the gap between what firms say and what they do remains persistent. The reason is not simply a lack of goodwill. It is more structural than that. Most organizations were never designed to be impact-centered in the first place.
Most Firms Were Never Designed for Impact
For all the talk of sustainability, responsibility, climate change, biodiversity, and ethics, most companies today still operate according to a much older logic.
To understand why, it helps to revisit a foundational idea in entrepreneurship research. In their influential formulation, Scott Shane and S. Venkataraman define entrepreneurship as the discovery and exploitation of profitable opportunities. This framing has shaped decades of research and practice. It places economic value creation at the heart of the firm, while social and environmental consequences are treated, at best, as secondary considerations. In economic terms, they are “externalities,” effects that fall outside the boundaries of the market transaction.
This distinction matters. When impact is external to the business model, it is also external to decision-making. It can be managed, reported, or mitigated, but it is rarely decisive. As a result, many firms find themselves in one of three broad situations.
Three Ways Companies Relate to Societal Impact
In some cases, harm is not incidental but intrinsic. Industries such as tobacco or fossil fuels illustrate this dynamic starkly. Companies like Philip Morris International or ExxonMobil generate profits through products whose negative consequences are well-documented. Here, the tension between profit and impact is not a side effect; it is structural. The business model depends on continued consumption, even when that consumption produces societal costs. Scholars of institutional theory have long noted how such models persist over time, even as regulations, expectations, and norms evolve. Once established, they become remarkably resistant to change.
More commonly, however, companies do not depend on harm but produce it as a byproduct of scale and efficiency. Fast fashion, ultra-processed food, and low-cost aviation fall into this category. Firms such as Shein, Nestlé, Temu, or Ryanair optimize for speed, cost, convenience, and market reach. The resulting environmental or social impacts are real, but they are not central to how these firms create value. Corporate social responsibility initiatives may address these issues, yet they are often decoupled from core operations. As DiMaggio and Powell argue, organizations frequently adopt formal structures to gain legitimacy without fundamentally altering their underlying practices.
A third category has become increasingly visible in recent years: firms that actively seek to address societal challenges but struggle to align their business models with those ambitions. Technology companies offer a revealing example. Organizations like OpenAI or Meta Platforms invest heavily in ethics, safety, and governance. At the same time, their economic logic remains tied to scale, engagement, data accumulation, and rapid innovation. The result is a persistent tension between what these firms aspire to do and what their incentives push them to prioritize. From the perspective of the dynamic capabilities’ framework, this reflects an incomplete transformation. As David Teece suggests, firms must not only sense and seize new opportunities but also reconfigure their underlying structures. When impact remains misaligned with revenue generation, that transformation remains partial.
When Impact and Value Creation Become Misaligned
These different configurations point to a deeper insight: the central issue is not whether firms care about impact, but whether impact is embedded in how they create value. Social entrepreneurship research has long emphasized the importance of mission, with scholars like J. Gregory Dees arguing that social enterprises exist to address societal problems through innovative approaches. Similarly, Jed Emerson has proposed that economic, social, and environmental value are inherently intertwined. Yet even these perspectives sometimes underestimate the difficulty of achieving true alignment. When revenue depends on activities that undermine impact, mission alone is not enough.
Rethinking the Firm as a Governance Structure
What emerges, then, is a shift in how we should think about firms. Rather than viewing them simply as vehicles for value creation, we can understand them as governance structures that determine which forms of value are internalized and which are externalized. Impact-centered organizations are those in which societal outcomes are not treated as side effects but as integral to the business model itself. In such cases, creating value for the firm and creating value for society become mutually reinforcing rather than mutually constraining.
This distinction has important implications. It suggests that the persistence of unsustainable or socially problematic outcomes is not merely the result of poor choices or weak commitments. It is rooted in the way organizations are designed and in the institutional environments that sustain them. As Julie Battilana and colleagues have shown, transforming these systems requires not only firm-level innovation but also broader changes in norms, regulations, and expectations.
Diagnosing the Source of the Problem
For companies that were not built around impact, this does not mean that meaningful action is impossible. It does mean, however, that impact cannot remain confined to reporting, philanthropy, or isolated sustainability initiatives. The first task is diagnostic. Firms need to understand where impact sits in relation to their current business model. Is harm intrinsic to the product or service? Is it a byproduct of scale, efficiency, and cost reduction? Or is the company pursuing a positive societal ambition while operating under incentives that pull it in another direction? These are very different situations, and they require different responses.
Three Strategic Paths Toward Greater Impact
Where harm is intrinsic, the challenge is the most difficult. Incremental mitigation may reduce damage, but it does not resolve the structural tension. Such firms face a more fundamental question about transition: what alternative products, markets, or capabilities could eventually reduce dependence on the harmful activity itself? In these cases, impact requires more than better communication or stronger CSR programs. It requires a credible pathway toward a different source of value creation.
Where harm is a byproduct of scale and efficiency, firms have more room to act within the existing model. They can redesign supply chains, alter sourcing practices, improve labor standards, reduce waste, change packaging, or shift toward less damaging modes of production and distribution. But the key is whether these actions remain peripheral or become part of how the company competes. If sustainability improvements are treated only as compliance costs, they will be vulnerable when margins tighten. If they become connected to resilience, quality, customer trust, innovation, or long-term efficiency, they are more likely to endure.
If sustainability improvements are treated only as compliance costs, they will be vulnerable when margins tighten.
Where impact ambition exists, but incentives remain misaligned, the task is internal reconfiguration. Firms need to examine the systems that determine what gets prioritized: capital allocation, executive compensation, product development metrics, risk management, board oversight, and investor communication. A company can speak the language of impact while still rewarding growth, speed, engagement, or margin in ways that undermine that ambition. In such cases, the issue is not the absence of purpose but the weakness of the organizational architecture supporting it.
Conclusion: Companies Don’t Need More Purpose—They Need Different Architectures
The growing interest in impact entrepreneurship reflects an awareness of this challenge. But the path forward is not simply to encourage more firms to “do good.” It is time to rethink the relationship between profit and impact at a more fundamental level. As long as impact remains external to value creation, it will remain secondary, something to be balanced, traded off, or postponed. Only when it becomes endogenous, built into the logic of the business itself, can it become durable.
In that sense, the question is not whether companies care about impact. It is whether they are structured in a way that allows them to.
Fernanda Arreola
Gregory C. Unruh
