“How can companies and investors collaborate to embed purpose authentically into business?”

As part of our Challenge on Purpose supported by GSK, VISA and Unilever, Business Fights Poverty convened a meeting of around 30 representatives from companies, financial institutions, NGOs and development institutions to discuss this pertinent topic.

The benefits of business purpose – for business and the wider world.

The SDGs are “the world’s shared plan to end extreme poverty, reduce inequality, and protect the planet by 2030.” The ambitious aims of the 17 goals require all sectors of society to work in partnership to achieve a better and more sustainable future for all. Businesses that embrace a social purpose are contributing towards the global plan for a better world.

Purpose also benefits businesses themselves through happier, more engaged employees and increased market share. Purpose is an important driver of Unilever’s success, alongside innovation and continuous response to consumer demand. The results speak for themselves: Unilever’s 28 purpose-led brands are experiencing 69% faster growth than the other brands in their portfolio.

So how can companies embed purpose?

Purpose is authentically embedded when it becomes the main measure of success for the core business. The rhetoric of “doing well by doing good” exemplifies this approach. For example, GSK’s purpose “to help people do more, feel better, live longer” is delivered through their core activity, using scientific innovation to deliver products that are accessible and which improve the quality of peoples’ lives. GSK has consolidated CSR into their annual financial reporting, in recognition of the central importance of purpose in GSK’s operations and objectives. Additionally, aligning incentive schemes with purpose-related goals – as opposed to purely financial ones – clearly demonstrates the importance ascribed to purpose into everyday delivery.

In order to remain authentic, companies must ensure that what they “say” about their purpose is reinforced by an impactful “do”. Having a clear roadmap, detailing what actions the company is taking towards its purpose, is a crucial step for maintaining trust and planning the company’s delivery against set objectives. Initiatives such as the Edelman Trust Barometer can help companies to measure and manage their trust relationships with their employees, customers and shareholders.

Our participants agreed that authentic purpose cannot be imposed from above but must be defined democratically, through engagement with a wide variety of stakeholders across the company, its customers, supply chain and the communities it touches. In fact, one participant made the interesting point that the definition of company purpose should not be entirely at the discretion of individual companies, such is the powerful potential of business to help tackle global crises. There could be an argument for different commercial sectors to engage with international and governmental institutions, to ensure that the specific skills and resources of each sector are deployed where they are most needed by the global community.

How can collaborations with investors embed purpose?

Importantly, there is now recognition of the long-term value of purpose in creating business models that support sustainable success both for the business and society at large. Purpose is also being linked to financial materiality, as investors make connections between social and environmental threats – for example, climate change, social instability and inequality – and the financial performance of companies. Consequently, leading investors, such as Larry Fink, Chairman and CEO of Blackrock, are urging companies to fulfil a social purpose and live up to their responsibilities to stakeholders. Purpose-driven investment also presents an opportunity for the investment industry to rebuild the trust lost in the wake of the 2008 financial crisis, and perhaps to help investment companies compete for talent with the tech sector.

Discussion of the role of investors in embedding purpose often focuses on how to improve the measurement and reporting purpose-related KPIs, and how to develop new models of company valuation that factor in community well-being or other social gains. This is essential, but investors can also be engaged earlier in the process, in the conversations which define company purpose at the outset. For example, Visa’s investors have suggested income inequality, workplace diversity and cyber-security as key elements of Visa’s purpose.

Investors are essential partners in shifting the corporate model away from one which values short-term financial gain and puts the interests of shareholders before all others. This crucial shift has started: in a recent Business Roundtable Statement, 181 CEOs in the USA acknowledged their responsibilities to customers, employees, supply chains and local communities, and undertook to create long-term value for their investors. In order to bring about systems-level change, this approach could be expanded to include wider social responsibilities beyond the company ecosystem. Investors and companies could also partner with policy-makers and the not-for-profit sector to reform the legislative and institutional drivers of the short term, shareholder-primacy model which has prevailed for decades.

Conclusion

Companies can embed purpose by making it the first priority throughout their core operations, establishing a clear road map for delivery so that words are reinforced by tangible action towards purpose-oriented goals. Purpose needs to be defined through consultation with a wide variety of stakeholders, including investors, and potentially through higher-level conversations with governments and international institutions. Investor attitude has shifted to recognise the long-term benefits of business purpose. Investor partnerships are key to developing sustainable business models that respond to the new demands on business to work as a force for social good. As part of our challenge on Purpose, Business Fights Poverty is putting together practical guidance and insights on how companies and financial institutions can collaborate to embed purpose into business.

Interested in learning more?

If you’d like to get involved with this Challenge, please contact us to find out more. We’d also love for you to share insights about your experiences of purpose and business in this 5-minute survey here.

The post How can companies and investors collaborate to embed purpose authentically into business? appeared first on Business Fights Poverty.

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