How can a company solve societal problems while remaining economically viable? Does it need to constantly navigate between idealism and pragmatism? In fact, these two forces are often perceived as opposing, but they are also complementary. They thus form a paradox. To offer answers to this issue, professors from NEOMA, the EDHEC and the University of Tampa studied the coffee industry, which is an example of the successful combination of idealism and pragmatism.

In fact, the coffee industry has encountered many obstacles, whether it was a decrease in demand (particularly when it was considered to simply be a low-quality psychoactive product) or more recent various environmental and social challenges (fair wages for producers, unsustainable farming, etc.). And yet the industry is flourishing. This can be seen in its presence throughout the world and its omnipresence in different environments, whether in households, companies or businesses focused on it. This is not the case for tea, for example, which does not have the same presence in offices, or soda. These two do not have businesses or locations devoted to them like cafés.

Our researchers took away three lessons that can be applied today to all sectors, but particularly the current sector of social entrepreneurship.

1. Idealism as a compass, pragmatism for survival

The coffee industry has managed to both remain pragmatic, meaning generating sales volume, focusing on the profits and marketing coffee as a simple psychoactive stimulant while still be idealist, meaning producing quality products, marketing coffee as a noble product and more generally taking into account ethical, social and environmental ideals.

For social enterprises to endure – and have a real impact – they also need to balance these two forces. They are often created out of a strong ideal, a commitment to transform a social or environmental situation. This ideal is their compass that guides their long-term vision and gives meaning to their actions. Pragmatism is used for taking into account immediate constraints, be they economic, operational or regulatory.

In practical terms, it may be a matter of making compromises on the methods used or funding or partnership choices that allow the company to stay afloat. For example, a social company specialised in professional integration of persons outside the job market (idealism) can, to remain viable, set high productivity objectives, which may limit the time devoted to training its employees (pragmatism).

Similarly, a social farm that hires people re-entering the job market to grow organic products (idealism) can be obligated to set higher prices (pragmatism), which limits it to a market of consumers who are less economically restricted, thus reducing its social impact. The important thing is to not lose sight of the ultimate objective while making realistic decisions to move forward, even in imperfect conditions.

2. Adapting to the spirit of the times

The coffee industry was able to adapt to the social-cultural constraints of its time. For example, it was able to develop fair trade coffee when the anti-globalist movement emerged. Because from the start, small coffee producers, often based in poor regions, were exploited by middlemen and were paid an insufficient share of the final price. The creation of fair trade labels aimed at guaranteeing a fair price and decent working conditions, while offering financial stability while facing the volatility of global prices.

Companies in the social sector should also adapt to the spirit of the times. If they don’t want to quickly become obsolete, they have to adjust their strategies depending on the changes to the context, whether that be societal trends, consumer expectations, governmental regulations or new technologies.

Here the paradox resides in the need to respond to immediate demands while remaining faithful to a transformation goal that goes beyond passing trends. If a social enterprise lets itself be too influenced by the demands of the moment, it can end up losing sight of its main objective. For example, a social enterprise that provides affordable housing to financially insecure families could, due to the pressure to generate quick revenue, choose to sell some of its property to private investors instead of saving it for its intended beneficiaries. This decision could result in the loss of housing accessible to families in need, thus steering the company away from its initial mission of social inclusiveness and supporting the most vulnerable.

The balance resides in flexibility: adjusting actions and priorities to respond to current needs while keeping in a clear view of the systemic transformation that they want to see accomplished.

3. Yesterday’s good ideas are the basis for tomorrow’s good ideas: historic sedimentation

Our study of the coffee industry suggests that past decisions strongly influence future decisions and particularly that past ideas lay the groundwork to support future choices. For example, during World War Two, coffee was viewed from a primarily pragmatic angle because it was a strategic resource for troops, where it was used as a stimulant. This reputation persisted for a long time in the post-war years with coffee often seen mainly as a functional energy drink. Inversely, the idealist vision of coffee as a noble product already existed in the 1910s. This idea was then unearthed to be reused much later, particularly in the 1970s where coffee’s value was increased and it became to be seen as a prestigious product.

Our study

Our study of the coffee industry showed that passed ideas lay the groundwork for future choices, decisions made that are pragmatic or idealistic become a reserve of positive ideas for the future. This is what is called historic sedimentation.

Let’s take the case of pragmatic choices. When a company adopts a technology or an efficient production method to reduce its costs, it creates a solid base for its present operations. This economic model, while initially centred on profitability, can also facilitate the future integration of more innovative solutions. For example, increased efficiency can free up financial resources that will be reinvested in more advanced technologies or in sustainable practices once the company is ready to develop.

Likewise, ideological choices can be transformed into valuable assets over time. A company that integrated ecological or social practices before they become commonplace often created a precedent that enriched its strategic assets. This reserve of ideas, initially viewed as avant-gardist, can be seen as crucial when market demands shift towards greater sustainability and social responsibility. These rooted ideas become standard bearers and offer a competitive advantage when the sector’s standards change.

Consequently, for managers of social enterprises, it is essential to carefully document the experiences and lessons learned from past decisions, thus creating a reserve of valuable resources that will support innovation and future adaptation.