A man holding a mask

Masked troubles: Staying true to their social purpose becomes increasingly difficult for entrepreneurs as their business grows

“As a general rule, I would not touch a corporate… I would just sell my soul.”

So said the founder of a communications agency specialising in the charity sector and built on his ethical, environmental and social justice agenda.

Staying authentic to their values is often important for entrepreneurs. Indeed, our comms entrepreneur had even turned down business from two charities that didn’t fit his values.

Being authentic can be as important as making a profit. The inability to develop a coherent, positive sense of self as a founder can adversely affect entrepreneurs' motivation and wellbeing and, eventually, could contribute to the demise of their venture.

But as a business grows it becomes increasingly difficult to hold onto such values and for the company to remain authentic to the founder's ideals.

We followed 12 sustainable entrepreneurs over three years, interviewing them, their employees, investors and other stakeholders to see how their authenticity held up under the stresses and strains of running a profitable business. In addition, by studying six green entrepreneurs over four years, we were able to piece together the four phases that founders go through in building a start-up that aligns with the authentic values and beliefs of the owner.

Our research found that authenticity is not just a simple exercise of projecting the founder’s beliefs through the company’s actions and strategy, but is an ongoing, reflective process.

Investors, customers, employees and other stakeholders become increasingly important in the building of an authentic company that aligns with the founder’s own view of its values. Keeping that consistent and conforming to outsiders’ views is a constant challenge for the founder, with opinions and perceptions shaping and reshaping the authenticity of the emerging company.

Feeling inauthentic is such a fundamental struggle for some founders that it can’t be allowed to continue. Some are able to compartmentalise the dissonance to keep the food on their family’s table, but many founders are forced into drastic measures, which might include having to leave or close their own company.

Being aware of and prepared for the four phases of founder authenticity can prevent such catastrophic events from unfolding.

1 Identity nascence

The first phase is characterised by uncertainty. Creating a new business involves lots of unknowns and unknowables but founders can look to build on their own set of beliefs and values to guide their business through uncertainty.

This is about setting out your personal identity that will shape the firm. Looking to other entrepreneurs and emulating them is unlikely to work.

Indeed, most of the founders we interviewed in the first year of their start-up did not see themselves as entrepreneurs. The popular image of an entrepreneur as an extrovert daredevil, as personified by Elon Musk and Richard Branson, did not sit comfortably with our subjects. They were much more likely to reject such stereotypes and most did not really have a sense of what role models to follow.

The owner of a green hosting and website design business said: “It was never about ‘we want to be business owners, we want to be entrepreneurs’. No, it was more about we want to do things our own way and the only way you can do that is to do it on your own.”

While the founder of an eco-packaging firm said: “I am not an entrepreneur… The whole entrepreneur thing is a bit loaded… [it] sounds sort of arrogant.”

This stage is not about learning to be an entrepreneur but finding the passion and drive to start a business. Most of those we studied set up their businesses because they were deeply frustrated with their previous role as it meant not living up to their true values; the start-up was an escape route to do what they believed in. Their unhappiness in their job and that it didn’t align with their beliefs was the catalyst to start out on their own.

It showed that their personal identity – the values and beliefs they care about – were most important. What guided them was not aspiring to any role models or following tried and tested formulas from books but drawing from their own personal beliefs and values.

As the founder of a company designing energy-saving products said: “We were disillusioned with the concept of design as it was. For me personally, it was the idea that it was just making landfill.”

This identity nascence phase is about setting out the values you believe in to mark your start-up out as different to what has gone before, giving you and others a new hope for the future.

2 Authenticity work

Enacting your values and beliefs is the next phase. Founders will try to reflect in the business the principles they believe in. This is authenticity in action as they look to feel and be seen true to their values while engaging in entrepreneurial activity.

Although this is driven by your own personal identity it is important that this is displayed to employees and others, so you are seen as authentic.

This is how identity is built, it is a two-way process where others’ reactions reinforce the values and firm up the founder’s beliefs. This might involve writing the guiding principles down in a manifesto or policy document, building posters and artefacts that reinforce those values to employees and outsiders.

Rules on how the company interacts with suppliers and customers need to be transparent and communicated. In many ways it doesn’t matter if nobody reads them, this is a way for the founder to set in concrete their vision for the company and the values it will be built upon, so it is crystal clear in their mind and a document they can refer to to guide their start-up.

It is also important to build contacts with like-minded people and organisations, which will help reassure new founders that they can enact their values in their business and therefore reinforce the company’s agenda. These connections also help to build an authentic external image to customers and other stakeholders.

The owners of a branding consultancy specialising in sustainability-focused businesses became very active on social media, connecting with other green businesses and joining a network of sustainable entrepreneurs to exchange tips.

Entering competitions and taking on speaking engagements also helps to cement this authenticity.

Embedding practices that align with the company’s values have to spread to every facet and person. For example, the founder of a recycled gift wrapping business showed her warehouse manager how to reuse cardboard packaging instead of shrink-wrap, while another green owner commuted to work by bike. These small acts all contribute to feeling authentic and being seen by others as authentic.

3 Identity realisation

With the founder’s values embedded in practices and the emerging culture in the business, the third phase is about realising that the entrepreneurial goal of building a profitable and sustainable business can be achieved with authenticity.

This builds confidence and an acceptance that the founder is an entrepreneur but is also building a company with a difference, one devised in their own image.

Once the values and beliefs of the founder have been established with employees and stakeholders in phase two, the third phase is also about protecting that carefully built reputation and sense of authenticity.

This involves a constant iterative process of checking the company reflects and stays true to the founder’s values in order to ward off criticism of ‘greenwashing’ and being tainted by competitors that are not truly sustainable despite portraying green credentials. The realisation of an authentic reputation comes with a huge responsibility to protect it and not let that image slip.

“The company is built around my personal approach and transparency,” said the recycled gift packaging owner. “[People] need to know that ethics are central and they know that we are not just another company that is using the trend of green to generate sales… and I think that needs to come from them seeing, from every move I make, that it's integral to the business.”

Also, with authenticity realised it is now important to make sure the service or product is good value for customers, especially as other firms jump on the green bandwagon, with the emphasis on building a sustainable long-term business.

The owner of a green transport firm added: “There are copycat companies that have come in doing exactly what we're doing … Actually it's not a problem for us… we are very service-led as well, it's not just about being green, we have to support that with ‘we have a really good product’ as well.”

4 Gaining legitimacy

As the business grows it starts to reach potential clients and customers that don’t hold the same values and stringent attitude to sustainability or ethical issues.

The founder may well reach the limits of their business' specific niche and it may receive criticism from stakeholders that don’t hold such values and see them as a hindrance to business.

This is where the founder faces a dilemma – should the founder tone down the communication about their beliefs and need to be authentic with their values and instead focus on their customer’s core needs to reach a wider audience?

The founder of an ethically-sourced jewellery business clearly expressed his shift towards broader legitimacy by accommodating various audiences' preferences as many were, in fact, more interested in their bespoke jewellery than their environmental credentials.

He said: “If we develop the business as we would like to…we'll push beyond [ethical consumers] into people who are just looking for high quality, bespoke jewellery. Sometimes we didn't really get the response we were looking for so we gradually changed…because we don't want to drive people away – we don't want to be preachy.”

Investors may also push the founder to attract a more mainstream audience and not be so purist about their environmental or ethical values.

Founders need to find a balance between these competing demands, weighing up ‘what matters to me’ with ‘what matters to them’. This process can take some time but our analysis of six sustainable entrepreneurs suggests that all founders eventually find an approach to legitimation capable, to varying degrees, of balancing their own values and beliefs with those of others.

The founder of a recycled packaging supplier said: “Gaining acceptance is about being passionate about your beliefs but not forcing them on other people or pushing people away by your passion or what you believe in.”

These four phases are not the end of the journey, rather the final phase is a continually evolving process. Founders need to be sensitive to shifts in environmental conditions as well as any resultant change in audiences' perceptions.

At the same time, if the changes required to the business to survive and remain competitive involve compromising the founder's values and beliefs, they run to risk of ending up back at square one; where their sense of inauthenticity can be so overwhelming that it drives them to some kind of radical change.

By being aware of and reflecting on the four phases, founders can hold on to their authentic selves and build a business they can be proud of.

Further reading: 

O'Neil, I., Ucbasaran, D. and York, J. G. (2020) "The evolution of founder identity as an authenticity work process", Journal of Business Venturing, 106031.

O'Neil, I. and Ucbasaran, D. (2016) "Balancing “what matters to me” with “what matters to them” : exploring the legitimation process of environmental entrepreneurs ", Journal of Business Venturing, 31, 2, 133-152.

Deniz Ucbasaran is Professor of Entrepreneurship and teaches Entrepreneurship and New Venture Creation on the Executive MBA and Executive MBA (London).

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