Long term business health is about profit with purpose
Last month, the US Business Roundtable, whose membership numbers over 180 top CEOs from businesses including General Motors, Apple, Coca Cola, Exxon, JPMorgan and Goldman Sachs, issued a joint statement on nothing less than The Purpose of Business.
For decades, their view was simple: the primary purpose of business was to generate profit for shareholders. But that’s no longer the official position. Now it is to generate value for all stakeholders, specifically: investors, customers, suppliers, employees, and the wider communities in which the business operates. And the Financial Times, no less, has recently gone further, stating in its New Agenda: “The long-term health of free enterprise capitalism will depend on delivering profit with purpose”.
Of course, these ideas are nothing new, neither the Roundtable or FT are setting the agenda here, they’re simply playing belated catchup to the general direction of travel in the business world, but it’s a sign of the times that the profit-with-purpose debate has not only entered the highest echelons of capitalism, it has effectively taken its own seat at the Boardroom table. And it has been driven there by the growing desire, across an increasing number of businesses, to find some higher form of mission; to engage with society in a more meaningful and sustainable way.
Make no mistake, this is not a fad, it is an important, long-term and ongoing shift. The trend towards “purpose beyond profit” is often attributed to socially conscious millennials swelling the managerial and executive ranks of companies, but there are equally pragmatic, commercial reasons driving the change in priority.
For some it’s about customer and employee engagement. Mission-led charities and non-profits have an unparalleled ability to engage: their employees are extraordinarily passionate and loyal, and the public freely and voluntarily gives them vast amounts of their time, money and attention. But it would be cynical and misguided to suggest that’s the only reason at work here.
Business leaders are people, just like anyone else, and for each one that’s in it purely for the money, there are many more who want to use the positions and wealth that they have, to benefit their employees, the communities they serve, and society at large – to build a legacy that reaches far beyond a healthy balance sheet. Were that not the case, there would be no such thing as philanthropy, nor would any charity maintain a fundraising team dedicated to major donors.
Unilever, under the leadership of Paul Polman and Keith Weed, has probably done more than any other organisation to put the ethical business model on the global map, but the growing cadre of B Corporations, self-identified profit-with-purpose businesses and thriving “triple-bottom-line” organisations, collectively illustrate one important fact. Commercially, these approaches work.
Ethical consumers are on the rise and they are more engaged by ethical brands, because they care about what happens to their money once it goes into the till. Employees care as well, as do potential recruits, and corporate ethics is an increasingly important element in distinguishing an employer of choice. And shareholders in many quarters are starting to get it too; there is a growing perception that corporate social responsibility, particularly around environment, climate, and income inequality, is essential to the long-term sustainability of any business.
But making the shift from shareholder-driven to genuinely purpose-driven is not straightforward. It’s not simply about branding and campaigns, as Gillette’s “The Best Men Can Be” misfire shows. Nor is it simply about charity partnerships, as the backlash from Britvic’s deal with Diabetes UK, or Age UK’s tie-up with eON demonstrates. Nor is it about merely adding a Corporate Social Responsibility team: Weed’s first act when taking over sustainability at Unilever was to disband their CSR team in order to “mainstream” sustainability – to make it everyone’s job.
If Unilever’s experience and success, tells us one thing, it’s that purpose is not an add-on; it’s not a quick-fix or an initiative. It’s a strategic choice and a deep, long-term commitment, but one that seems increasingly inevitable that businesses with long-term ambitions will need to make.
The question is: is your business ready to make that leap?