Purpose, and purpose-driven business, remain much misunderstood... or at least, differently understood 🙂
Unless you've had the chance to experience purpose-driven business in practice, it's not surprising that it remains a rather floaty concept... and open to critique when companies just misuse it as a reputational tool.
Thought bubbles include: Is it a kind of ESG thing? How does it relate to sustainability and CSR? And... why - if I lead a business - should I bother with it?
I've been helping businesses, big and small across sectors, become purpose-driven for the last decade. I've seen first hand the transformational impact it can bring to businesses, to their employees and other stakeholders.
This article is intended as a high level Q&A, for business people who haven't yet dived in. Relevant links for further reading in the comments. To my purpose-expert friends and colleagues: please forgive the shorthands and simplifications (and feedback welcomed).
1. Why purpose? What problem are we solving here?
There are many answers to this question! Let's start with these two:
Firstly, many business leaders are feeling challenged by massive complexity and huge amounts of change.
Cluttered markets, cost inflation, supply chain stresses, difficulties of hiring and retaining the best people, digital transformation and AI, remote working... the list goes on. For these leaders, a powerful organisational purpose can play a vital role in helping them navigate the storms and mobilise employees.
Secondly, growing numbers of business leaders are realising that our economy is unsustainable. Environmental regulations and reporting requirements are piling up on leaders' desks, and fears for their children's futures are itching their consciences as they travel to work. Purpose is a powerful catalyst for change, helping leaders make their businesses future-fit. It moves sustainability from a compliance thing to an inspirational workforce-mobilisation thing.
2. What is an organisational/corporate purpose?
Most people will agree that purpose captures the WHY of the business. Why do we exist? What are we FOR, aside from making money? These are critical questions, and a company's answer should both drive decision making and give meaning and fulfilment to everyone's work.
However, that's where the consensus ends. After that, I'd suggest there are broadly two types of purpose: the sustainable purpose and the business-as-usual purpose.
The sustainable purpose is other-serving. It describes how the business wants to contribute to long term human wellbeing. According to Kellard et al (link in comments), a sustainable purpose is 'a meaningful, enduring reason for an organization to exist that provides solutions to global challenges, or benefits society, in a way that sustains the social and environmental systems we rely upon.' Fair and healthy profits are both fuel for such a purpose, and a natural consequence of delivering it well to the benefit of stakeholders. Such a purpose is stretching, since it drives the business to work out how it can achieve a meaningful societal impact, profitably. An example is Decathlon: 'To sustainably make the pleasure and benefits of practising sport accessible to as many people as possible'.
The business-as-usual purpose is more of a ladder-up from what the company currently delivers, in terms of its products and services. 'If X is our WHAT, let's define our inspiring WHY'. Such a purpose is usually intended to align and motivate employees and/or contribute to external reputation, but without requiring the need for a lot of change (eg aligning business model to a sustainable economy). See South West Airlines: 'Connect people to what’s important in their lives through friendly, reliable, and low-cost air travel'.
3. Is a purpose the same as a mission? How does vision fit in?
Different companies tend to use all of these terminologies in different ways.
Many companies - including many B Corps - use the word 'mission' to articulate their company's other-serving contribution to the world, i.e. 100% consistent with the definition of sustainable purpose above. Others use mission to express a more commercial long-term ambition for the company, e.g. to become the leading play in their sector.
Personally I prefer to use the word 'purpose' (vs mission). I think it better communicates an enduring idea of 'why we're here' and 'the role we play' in the wider system. A company's 'vision' is then an articulation of a desired future state (where to?), consistent with their purpose.
4. How does purpose relate to sustainability and ESG?
If purpose expresses a company's 'ultimate ends', i.e. the societal outcome to which the business is contributing;
Sustainability is all about protecting the 'ultimate means' on which the company - and everyone else - depends... for example, the natural living systems of our planet, and the health and wellbeing of human societies. You'll find a great articulation of ends and means in BSI's PAS808 Standard for Purpose-driven Organisations, authored by the wonderful Prof Victoria Hurth.
ESG (Environmental, Societal, Governance) is a a set of standards measuring a business's impact on society, the environment, and how transparent and accountable it is. The goal is to evaluate financial risk (more than it is to protect people and planet over the long term - see sustainability above).
Some companies reflect their commitment to a sustainable world in the wording of their purpose. Others capture the commitment elsewhere. For example, IKEA's 50-year old purpose (they call it their Vision) is to 'create a better every day for the many people'. They have chosen to leave that unchanged, as the world has changed. However, they have publicly stated a 2030 Ambition to 'inspire and enable more than one billion people to live a better everyday life within the boundaries of the planet'. That's a very stretching ambition that's driving them to work hard on circular economy innovation, Net Zero and more.
It very much helps for a company to develop an integrated, joined-up 'Compass' which brings together Purpose, Vision, Values and the key features of their business model (including how it will deliver the purpose and evolve towards sustainability).
5. What is 'purpose-driven business'? What are its key characteristics?
There's a huge difference between a company having a purpose vs being a purpose-driven company. Many companies don't put their purpose into action in any meaningful way; it remains a statement in the annual report, maybe on the wall in office receptions, sometimes alluded to in CEO speeches.
A purpose-driven business has three core characteristics:
Purpose as the North Star - it drives decision making, redefines the field of play, and acts as the animating force for employees and other stakeholders. The purpose has one foot in current reality of the business and its capabilities, the other foot in the sustainable economy of tomorrow.
Towards sustainability - taking responsibility for the whole value chain. Identifying material impacts, minimizing the negatives towards zero and maximizing positive influence in the system.
Employees and other stakeholders are partners in the purpose. Employees feel an individual and collective connection to, and co-ownership of, the purpose. They are intrinsically-motivated activists and advocates for the purpose. They engage and collaborate with other stakeholders (customers, partners, suppliers, imvestors) on the achievement of the purpose.
Easier said than done, of course!.. in fact the work to achieve this is never 'done', but companies which commit to the path and pursue it authentically quickly start to reap the benefits.
6. How does purpose relate to profit?
In his book 'Prosperity' Professor Colin Mayer suggests the role of business is “to produce profitable solutions to the problems of people and planet, and not profit from producing problems for people or planet.” Purpose-led businesses dedicate themselves to serving others and solving important problems, and of course they need to do so profitably.
In his book 'Growing the Pie' Alex Edmans shows that when a company dedicates itself to creating value for society, new revenue opportunities frequently emerge. Rather than defining the company through its products (the what), purpose-driven companies focus intensely on the achievement of outcomes, in line with the purpose. This unleashes creativity and innovation.
Finally, Purpose-led businesses focus on long-term financial value creation, and therefore extends its field of concern to the health of the 'ultimate means' referred to earlier. There's not much money to be made on a broken planet, so companies investing in healthy societies and ecosystems are not just doing some 'woke business' thing - an increasingly prevalent view in the USA - they are helping make sure they have viable business models 20 years from now.
7. What are the benefits of becoming a purpose-driven business?
There's an ever-growing body of research that shows that purpose-driven businesses simply work better across many core indicators.
- Involve your employees as partners in a meaningful purpose, and they will work harder, be more innovative, and stay longer.
- Treat your customers ethically and offer them another reason to buy, and they will reward you with their loyalty.
- Turn your value chain towards sustainability, and it will be more resilient and - over time - more cost efficient.
All of the above is proven in multiple studies (I'll write a separate article on this). Demos recently found that reorienting business away from shareholder primacy towards a purpose-led model could have striking benefits for the UK economy, generating a £149bn (or 7%) boost to the UK GDP per year.
8. What does it take, to become purpose-driven?
Of course, it's a big commitment because you're rewiring the whole business through the lens of purpose and values. This starts with an exciting but challenging exploration of fundamental mindsets and worldviews, as leaders open themselves up to the idea of optimising the business around purpose, rather than optimising for short-term profit maximisation.
Changes will need to unfold across multiple areas, for example:
STORY: narrative, meaning making, internal comms, customer & employer brand
STRATEGY: sustainable business model, priorities, decision-making, investments
PARTICIPATION: stakeholder participation and collaboration, experimentation/innovation, learning
CULTURE: becoming a purpose-led, listening, involving organisation
SYSTEMS: eg changing how you recruit, onboard, appraise and reward people
GOVERNANCE: board composition, engagement, revisiting directors' fiduciary duties, measurement, tracking, and accountability
Of course this sounds daunting. But it's also incredibly energising and exciting. Set the bus in motion and watch your employees jump on it and start helping make the change happen.
9. What are some examples of Purpose-driven businesses?
I don't think there's a single well-known company that's got this all sorted. But many are 'on the way'. Big multinationals include Unilever, IKEA, Natura, Decathlon, Mars Inc, Triodos, ING, Orsted, Nike, VF Corp and Salesforce. Many of these are listed companies, in which case their commitments to purpose and sustainability are often dampened by the demands of the quarterly results cycle. Not-quite-so-big purpose leaders include Patagonia, Tony's, and other wonderful B Corps. None are 'perfect' but many are pioneering exciting practices which can act as inspiration food for others.
10. How can I learn more? Who should I be following on LinkedIn?
There are loads of fabulous resources....make sure you follow Dr Victoria Hurth, Ben Kellard , Sarah Gillard , Soulla Kyriacou , James Payne , Alex Edmans , Chris Turner, Jonathan Wise , Douglas Lamont , David Grayson , Giles Gibbons , Becky Willan , Charlotte Sewell ⚡🔶🌿 , Mike Barry.
All are leaders in this field, and I'm indebted to their expertise (and in many cases, grateful for their friendship).
This article was first published on LinkedIn Jan 2024.
About the Author
Will Gardner helps leaders to achieve positive change in their organisations and in the world, by unlocking the full potential of their people through Strategy, Team Coaching and Change Leadership.
Will is based near London, but supports organisations worldwide.