How can companies and investors embed purpose authentically into business?
From research by Business Fights Poverty
As part of Business Fights Poverty's Challenge on Purpose supported by GSK, VISA and Unilever, they convened a meeting of around 30 representatives from companies, financial institutions, NGOs and development institutions to discuss, 'How can companies and investors embed purpose authentically into business?'.
What were the observations? Here's an abridged extract:
Purpose 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.
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 is authentically embedded when it becomes the main measure of success for the core business. 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 aligned incentive schemes with purpose-related goals - as opposed to purely financial ones - clearly demonstrating 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.
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.
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, are urging companies to fulfil a social purpose and live up to their responsibilities to stakeholders.
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. 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.
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.
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