Discussion around corporate purpose is living renaissance among international business leaders. Since the financial crisis, many global corporations have started to re-evaluate whether they have any other purpose than making money for their owners.
There are two main drivers which have pondered the question of corporate purpose into limelight. Financial crisis initiated corporate purpose discussion mainly in the USA for well-known reasons. Leaders like Indra Nyooi of PepsiCo and Jeffrey Immelt of GE have been elaborating how a company’s purpose influences its financial success: how to make business more sustainable, motivate talent and at the same time satisfy hungry investors.
Another impetus for the question of purpose can be located from the corporate responsibility debate. Many companies have been criticized for ‘greenwashing’ and ‘bluewashing’ their corporate responsibility without any real strategic desire, simply to build their brand or public image.
Authentic and audacious corporate purpose is a performance driven business strategy, like a lens through which all business decisions should be taken. By re-defining purpose companies benefit from talent retention, reduce business risks, secure reputation and assist reputational recover after a crisis.
Unilever as an example
Geoff McDonald, a Senior Advisor at Burson-Marsteller and a former VP Human Resources of Unilever said that we are living interesting times, where the form of capitalism focusing on short-term shareholder return is no longer sustainable. According to him for the past 10–15 years, the business world has ignored its other stakeholders and the value add to them. This has led to greater inequality and a widening gap between rich and poor; businesses have behaved in unethical ways, McDonald argues. Consumers now have the power, through the advent of social media, and they expect more from businesses.
Unilever is one of the pioneering global companies which made a huge transformation by rediscovering purpose. In Unilever, a trigger point for rediscovering the purpose in 2009 was unsatisfying performance of the business and difficulty to hire employees. By rediscovering and implementing the purpose throughout the organization, the company gained growth, reduced costs and attracted employees again. Unilever Sustainable Living Plan (USLP) strategy was launched in 2010 and its core was redefined purpose: To Make Sustainable Living Commonplace.
New, distructive companies are very often purpose-driven.
The purpose of a company cannot be to make money. Growth and profitability are the consequences of good business. By defining its purpose a company can bring value to all stakeholders. Unilever responded to the environmental water challenge by reducing water consumption with their products, for example. Thus, mitigating its risk on water dependency.
Performance with purpose
IMD Business School and Burson-Marsteller have studied for several years how purpose should be defined and communicated, and most importantly how it is reflected in business results.
Power of Purpose research from 2013 showed that a strong and well communicated purpose can impact financial performance by up to 17 percent. Another research from 2015 demonstrated that purpose must be real and authentic. Otherwise it won’t work. Many other research support the conclusion that purpose is a business case. EY survey in 2014 revealed that 87 percent of business leaders believe that companies perform better over time if their purpose goes beyond profit. Deloitte’s Culture of Purpose survey showed that a clear purpose creates a longer horizon for positive returns and breeds confidence on brand’s ability to thrive in a shifting landscape. And as Jim Stengel, ex-Global Marketing Officer at Procter & Gamble, demonstrated in his book Grow, a study of 50,000 brands, purpose-driven brands simply outperform old-fashioned brands.
It is fascinating that new, disruptive companies are very often purpose-driven. Good examples are TOMS, a US-based company selling shoes and accessories, and online store Zappos.com. TOMS business model ‘One for One’ is based on strong ethical responsibility: when you buy shoes, TOMS donates other pair for the people, who need them. Zappos is well-known for its unique culture, mainly how well they treat their personnel. Zappos business model is founded on a simple philosophy: happy employees equals happy customers.
Both companies are ‘walking the talk’ with the purpose and the same time they are good investments for their shareholders. TOMS founder sold 50 percent of the company to Bain Capital with a good price tag and Amazon bought Zappos.
No marketing ‘mumbo-jumbo’
Companies are often good at describing what they do and how they do it, but rarely do they describe their corporate purpose – the ‘why’ – the rationale for their company and guiding principles of their work.
According to McDonald the purpose differs from vision and mission in a rather simple way. While the purpose answers the question why this company does what it does; the vision answers what would the future of the company look like; and, the mission then tells how the company is going to achieve that.
There are too many cases, where boards just stamp mission or purpose statement without thinking it any further. The exercise will continue by CEO’s boring presentation to personnel and that’s it. No wonder many boards have been quite skeptical about the benefits of the corporate purpose. It is important to remember that sustainable purpose is not a marketing ‘mumbo-jumbo’ or a project which could be delegated to corporate communications. Purpose journey is continuous.
8 requirements for building sustainable corporate purpose
- Being authentic and audacious
- Making it measurable
- Leaders living and inspiring it
- Building partnerships
- Engaging communications
- Adapting culture
- Adapting business systems
- Having the capacity & capabilities to deliver
Pohjoisranta Bursom-Marsteller is DIF partner.