Corporate Purpose. These two words have arguably upended the world of business in only the past two years. But for many leadership teams and boards, agreeing on the meaning and knowing how to execute it pose existential risks. The first response to the idea of deploying Corporate Purpose was predictable – corporate leaders quickly asked how a purpose-driven agenda might impact profit.
When you consider that shareholder primacy has dictated corporate decision-making for the last half century, the question holds some validity. Many CEOs have won their vaunted titles by pursuing profits at all costs, and understandably so. The renowned economist Milton Friedman famously declared in a 1970 New York Times op-ed that “the social responsibility of business is to increase its profits.” It became the rallying cry of the neo-liberal movement and, true to the spirit, unleashed nearly 50 years of unbridled economic growth and wealth creation. Unfortunately, it came at a cost. All the more reason why today’s leaders need to use their organisation’s purpose as a platform to create impact across and beyond the enterprise and the ecosystem within which they operate.
The price of profit
At no other time in history has so much harm been done to the social and environmental fabric of the planet and its people. It’s true that over four billion people were lifted out of poverty on the back of free-market enterprise, globalisation and technological advance. But that left behind an indelible carbon footprint perpetrated by the fossil fuel industry, coal-fired power plants, large-scale manufacturing and global transportation. Feeding the economic beast meant exploiting the world’s natural resources, eradicating forests to grow more food for an expanding population and eliminating refuge for entire categories of living creatures. Biodiversity, a cornerstone for the survival of all species, is in rapid retreat.
Feeding the economic beast meant exploiting the world’s natural resources, eradicating forests to grow more food for an expanding population and eliminating refuge for entire categories of living creatures. Click To Tweet
Climate change is the poster child for this conflagration of events. And now the question remains: Who will fix it? For better or for worse, the world still trusts in free-market enterprise and the role of the corporation in creating jobs, opportunities and innovation. According to the most recent Edelman Trust Barometer, business remains the only institution that is still viewed as “competent”.
On average, and throughout the world, governments, NGOs and media have all lost a large degree of public confidence. While this drop is due in part to the outbreak of COVID-19 and the generally poor public sector response to the crisis, it also suggests the private sector has maintained some credibility and is still seen as a potential force for good. Which brings us back to Corporate Purpose.
The corporate onus
In some ways, the public has hoisted responsibility upon the corporation. In other ways, there is silent recognition that many of the world’s current challenges are the result of 50 years of corporate profit making. There will always be those organisations that shun the call to make repairs. But fortunately, the lion’s share of corporations – public and private – are taking it upon themselves to drive change and broaden their operational remit to address the environmental, social and governance (ESG) problems of the day.
The good news is that purpose and profit can co-exist. According to McKinsey & Company, “…more than 2,000 academic studies have examined the impact of environmental, social, and governance propositions on equity returns, and 63 percent of them found positive results (versus only 8 percent that were negative).”
That being said, how an organisation brings purpose to life requires planning and careful consideration. For most, it begins with a declaration to “do well by doing good.” That’s followed by examining the “materiality” of the business to align profit with purpose. Often this requires participation from all members of the organisation to arrive at a set of commitments that motivate and mobilise. Change starts at the top. Most importantly, it requires a shift in the leadership mindset and a move away from traditional management to a mode of leadership facilitation, where the focus is on guiding vs. controlling the enterprise. Enterprise Leaders have a responsibility and opportunity to go beyond their own self-interests to initiate an enterprise-wide culture that addresses the broader needs of people and planet. We published an article on the four key distinctions of Enterprise Leadership last month.
Change starts at the top. Enterprise Leaders have a responsibility and opportunity to go beyond their own self-interests to initiate an enterprise-wide culture that addresses the broader needs of people and planet. Click To Tweet
Your people safeguard your purpose
For a handful of particularly dedicated multinationals, words have been put into action. Companies like Patagonia, Unilever, Hewlett Packard, Danone and hundreds of others are 100% committed to making Corporate Purpose “the arbiter of all business decisions.” That means embedding skills and shaping behaviors and mindsets so every decision reflects a stated commitment to people and planet.
It is therefore essential for an organisation to agree – top-down and bottom-up – to the meaning of Corporate Purpose and how it shows up in the organisation as part and parcel of every process and business decision. For any organisation looking for a simple solution, or content with tweaking its mission statement to align with its communications strategy, be warned: Stakeholders – including customers, partners, employees and shareholders – are bent on making the modern corporation accountable.
Taking time to create the right Corporate Purpose framework and supporting culture will reap the rewards. At the end of the day, it is an organisation’s employees that will carry the torch, protect its integrity, and advocate as to the authentic nature of the Corporate Purpose agenda. The onus is on their leaders to enable and encourage them to do so. Enterprise Leaders make Corporate Purpose the basis from which the entire organisation can create impact that transcends the boundaries of their own enterprise to impact the wider ecosystem and society they serve.
Download our paper on Enterprise Leadership here, or talk to us about your company’s journey to become a purpose-driven organisation.
 Purpose: Shifting from why to how, McKinsey & Company, 22 April 2020
 Bob Quinn and Anjan Thakor