Less than a year ago a group of 181 chief executives from the largest companies in the world released a statement basically tearing up the rule book when it comes to capitalism. They argued that it’s time for companies to care about more than just shareholder returns, and that they had a larger responsibility to deliver value (in both the short and long term) to all of society.
The statement, by the Business Roundtable in New York and featuring CEOs of companies like JP Morgan Chase, Johnson & Johnson and Ford, is the latest in a string of high-profile call-outs from business leaders that signal a shift in how business thinks about its relationship to society.
And as Australia chokes under a smog of bushfire smoke and we wake even this morning to news of a mass bleaching event on the Great Barrier Reef, a shift in thinking about how institutions like business relate to society at large could not come at a more appropriate time.
The concept of ‘purpose’ has emerged to be front and centre in these conversations. Purpose answers the question: “over and above making money, why does your business exist?”. It calls on businesses (and the leaders within them) to develop a sense of the impact they want to have on the world – and consider it more broadly than simply the profit they want to make for shareholders.
The truth is, of course, that this is in no way merely an act of altruistic selflessness. It makes fantastic business sense for organisations to identify, articulate and prioritise their purpose; consumers, employees and capital markets are thirsty for the more sustainable and conscious approach to capitalism that it engenders:
- Companies with a clear sense of purpose outperformed the S&P by a factor of 14 between 1998 and 2013
- 74% of staff place a high value on finding work that delivers on a sense of purpose
- 66% of consumers are willing to pay more for sustainable goods, and 84% of emerging market consumers make at least one cause-driven purchase per year
- 63% of executives believe having a sense of purpose and aspiration beyond their day-to-day commercial activities made their company more innovative
- The highest scoring companies on CR Reptrak have a 70% higher customer purchasing intent than the lowest scoring company.
There’s gold in them there hills! We don’t have to choose between doing well and doing good; one can follow the other.
Unilever is often cited as the archetypal example of this. Since the launch of their new purpose (‘to make sustainable living commonplace’) and their subsequent doubling-down on a sustainability focus, their results have been market-leading. Unilever’s purpose-led “sustainable living brands” grew 69% faster than the rest of the business. They make up only 29 (less than 10%) of their 400+ brands but accounted for a whopping 75% of their top-line growth!
These figures are astounding, but they are just one example of the power of purpose to drive profit.
But here’s the really hard truth: most companies talking about purpose today are not serious. They are using purpose as a marketing punchline. They are trying, in essence, to ‘PR their way out of problems they behaved themselves into’, as we say in our latest paper on purpose-driven organisations.
Purpose is not a slogan or a punchline; purpose must be a framework to guide decision-making. It must be specific and actionable enough for an organisation to hold itself to account for whether it is delivering on it, or not.
In short – bringing purpose to life is not an act of articulation, it is an act of alignment.
My challenge to leaders is to ask themselves the hard questions that come after the articulation of their purpose. Questions like “how aligned are the decisions we make to our purpose?”. “Where are the areas we are not living up to our own purpose?”. “How can we make this an organisation where delivering on our purpose is the organisations principle around which our operating model is built?”.
These are the questions that will bridge the gap between purpose as a punchline, and purpose as real value-driver.
It’s not an easy journey, but when it’s done well it can be as transformative as it is profitable.
Dominic Thurbon is a Partner in the Climate Change and Sustainability team at EY. He specialises in transformation, behaviour change and community investment. Find out more about Dom here.