Corporate purpose today is the buzz of the business community. From board rooms and C-suites to Davos and magazine covers, it’s clear something fundamental and profound has changed in the way business leaders now approach their jobs.
CEOs at leading companies have realized the mounting societal pressures their organizations face no longer are only about issues management. They are existential threats. Consumer and employee triggers — especially with younger generations — have shifted to the point where some of the most admired companies and their products are barely in the consideration set. Today, the top reason Gen Z believes a company is out of touch is a lack of diversity and inclusion, versus the more traditional reason of not providing jobs with adequate pay.
With this in mind, many companies have responded swiftly with solutions to address wider expectations of corporate responsibility. Financial leaders BlackRock and Charles Schwab have introduced specific funds and portfolios that bundle socially or environmentally responsible investment opportunities for customers. Dozens of companies have announced divestments from gun manufacturers and the fossil fuel industry. Tech leaders in Silicon Valley are churning out hefty capital on community building and social justice initiatives. In fact, some estimate that ESG-mandated assets could comprise half the total managed assets in the U.S. by 2025.
This growing interest in developing purpose is why, last August, nearly 200 chief executives from the Business Roundtable committed their companies to a greater corporate purpose. They pledged to move from a focus solely on shareholders to an equal emphasis on five stakeholders: customers, employees, suppliers, communities and shareholders. The statement garnered widespread attention, yet many questions remain – evident by one headline proclaiming “The Business Roundtable needs actions to match its words.”
Purpose at an Inflection Point
Companies of all sizes, from a range of sectors, have long been aware of their purpose — their “why” and their acknowledgement of the impact they have on the community and society at large. Today, however, social awareness of corporate purpose is no longer confined to the boardroom. Rather, it is ubiquitous and powerful among the general public. Indeed, purpose is at an inflection point for defining the role of business in society.
This enhanced corporate emphasis on purpose has resulted in the convergence of brand and reputation. This is especially evident among younger generations. For instance, research of millennials indicates 63 percent buy more from brands vocal on the social issues that they care about. Moreover, 72 percent claim they would take less money to work at a company if they believed in its culture and values.
Today, 87 percent of the public believe companies should be responsible to more than just shareholders. Moreover, 75 percent of professionals contend purpose supports recruitment, 80 percent feel purpose protects their company’s reputation, and 64 percent believe purpose is critical to everything they do.
Beware of the New “Greenwashing”
Yet, despite good intentions, some corporate efforts to show purpose are raising the alarm. Cynicism of purpose is on the rise. Consumers remain hesitant to trust the intentions of executive leadership and are quick to identify hollow corporate citizenship, or “greenwashing.”
In fact, despite all the buzz about purpose today, only 43 percent of the public believe companies are becoming more committed to operating their businesses in a socially responsible manner. That compares with 65 percent of corporate leaders. Many consumers say purpose feels more like a PR exercise than an authentic commitment, with three-quarters of consumers believing leadership at large companies to be self-serving.
So, what should business leaders do? One clear-cut answer is to turn to employees. Consumers are increasingly aware of how leadership treats employees, with 39 percent saying they would switch brands they routinely use if they “aren’t treating their employees well.”
When considering purpose, companies must think well beyond employee communications and engagement. They must consider employee activism. This is where purpose cuts both ways – and where hollow words haunt.
Employees today expect more when it comes to purpose – for themselves and from their CEOs. Forty percent of millennials say they chose a job because of a company’s sustainability performance. That compares with 17 percent of baby boomers. They expect their company to take stands on issues relating to purpose and to demonstrate real progress. And, if not, these same employees become activists themselves. Last September, more than 1,800 Amazon employees pledged to walk out of work in support of the Global Climate March – and in protest of their company’s perceived inaction on climate change.
Importantly, employees can serve as the catalyst to move a company’s purpose from a “soft” social contract and messaging strategy to a firm business asset. Harris Poll research shows employees now see purpose as a fully embedded north star – truly driving innovation and strategy. And these same employees will continue to hold their organizations accountable for purpose in action, not window dressing.
Leading with and Measuring Purpose for Business 4.0
The importance of purpose is well documented and recognized. Still, too many companies fail to properly prioritize it. Companies overwhelmingly say purpose is key to business, but a mere 24 percent have embedded it in their organizations.
Reputation managers, in particular, need to heed the call and lead the way in their companies. During the past decade, drivers of corporate reputation have increasingly centered on shared values and purpose. While other elements – leadership strength, vision and product quality – still matter, a company’s character and the role it plays in broader society today are today the dominant drivers of reputation. In fact, it is increasingly difficult for a company to have a strong reputation without a clear and activated purpose.
So, where do corporate leaders start? Like all things in business, it all starts with a plan. In our view, the best purpose plan has three key elements:
- Define, redefine or recommit to your purpose. Go back to your company’s mission, values or “why.” Purpose cannot be a sign on the wall. Stakeholders – all stakeholders – needs to see you live your purpose each day, inside the company and out.
- Communicate, communicate, communicate. Similar to building reputation – where growth is the sum of Performance + Behavior + Communication – purpose progress only can be achieved by constant communications with all stakeholders. They need to understand your compelling and concise purpose vision. They need to see relentless execution of it. And they need to feel empowered and encouraged to participate in two-way engagement on it.
- Measure what you do, not what you say. For purpose to matter, we have to start measuring it. One of the criticisms of the Business Roundtable’s Purpose Statement is its lack of metrics to hold companies accountable. Today, 28 percent of companies say they do not have a way to measure the impact of purpose, and half of leaders indicate their biggest challenge is “knowing what we should measure.”
That is why it is so encouraging to see the leadership role Ethisphere is taking by proposing a Purpose Index to measure real progress versus simply commitment. Best would be a standardized, cross-company measure of:
- Purpose Performance – how a company performs in relation to each of the five key stakeholders: customers, employees, suppliers, communities and shareholders
- Purpose Impact – how a company serves society and makes a positive difference, including on the environment
- Purpose Momentum – how a company is changing for the better with the right leadership in place
- Purpose Support – how a company is viewed as a good place to work, a good neighbor and a good partner
“(We affirm) the essential role corporations can play in improving our society when CEOs are truly committed to meeting the needs of all stakeholders,” states the Business Roundtable pledge signed by nearly 200 chief executives last August. “CEOs work to generate profits and return value to shareholders, but the best-run companies do more,” added one of the signatories. “By taking a broader, more complete view of corporate purpose, (we) can focus on creating long-term value, better serving everyone – investors, employees, communities, suppliers and customers,” explained another.
All are outstanding thoughts and words. Yet, now, if we are to make purpose enduring and transformative, we need to go far beyond thoughts and words: “Carefully watch your thoughts, for they become your words. Manage and watch your words, for they will become your actions. Consider and judge your actions, for they have become your habits. Acknowledge and watch your habits, for they shall become your values. Understand and embrace your values, for they become your destiny.” – Mahatma Gandhi
Wise words. When it comes to purpose, now it’s time for action.
About the Author:
Ray Day is vice chair of Stagwell’s marketing and communications agencies and the former chief communications officer at IBM and Ford. He is well-known for expertise in reputation building, content creation, data and analytics, crisis readiness and recovery, and communications team development.