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Insights paper
The State of
Purpose
Insights on
navigating profit
and purpose
2020 edition
2 Chapter titles
We were once told that
“there is one and only one The idea of businesses having ‘purpose’ has of
social responsibility of late gained traction – to the point where it seems
to be the buzzword of the day, adopted, adapted,
business – to use its by all and sundry. This may be a good thing, or it
resources and engage may just facilitate ‘purpose-wash’, something filed
by sceptical consumers under green-wash and
in activities designed to lame CSR.
increase its profits.” Pulse takes a different view. Having established
the ‘Mutual Benefit’ initiative at Burston Marsteller
in his PR days, Simon Milton founded Pulse in
This thinking belongs 2002 with the view of putting purpose at the
to a different era. heart of how a business operates. Eighteen years
on, purpose remains at the heart of Pulse’s way of
operating: it is in our DNA and always will be.
Because of this heritage, Pulse is publishing
this report to bring together leading thinkers
and thinking on the role of purpose in ensuring
organisations both thrive and do good in the 21st
century. And we are publishing this report at this
important moment to ensure that purpose is not
lost in a swamp of meaningless corporate jargon.
Contributors
Professor Colin Mayer Lord Stone of Karl Havers
CBE Blackheath
EY Partner,
Professor of Management Former MD of Long Term
Studies at the Saïd Marks and Spencer Value Leader
Business School, Oxford
University
Prince Max of Cheryl Potter Kevin Murphy
Liechtenstein
Former Permira Openreach
CEO of LGT Co-Head of MD for Fibre
Consumer Team and Network
Delivery
Chapters:
1. Why purpose? 2. A pathway to sustained
A focus on the changing landscape, profit and a supported
a contemporary redefinition of the society
purpose of business and the need for a
An analysis of how purpose is a driver
new perspective on value creation
for profit and how it can help business
make a greater societal contribution
Page 5
Page 12
Our hope is that this
report helps dispel the
old-school thinking that
businesses have no
3. A new mindset 4. Application
responsibility towards
Why profit and purpose are natural Models on how purpose can be applied
societies and the
bedfellows
Page 20 environment. In the same
Page 16 vein, we reject any notion
that purpose is the latest
fad. It is here to stay.
The debate is current
and ever evolving.
5. Insight and perspectives 6. In action We hope this report
from industry leaders Profiles of purposeful organisations
offers both relevant
Leading industry figures from different
insight and inspirational
sectors share their stories on the real Page 40 thinking to you.
challenges of navigating profit and
purpose
Page 26
1 Pulse 2020 Report: The ‘State of Purpose’ 5
Why purpose?
This chapter introduces the
importance of purpose as a
response to a changing landscape,
with insight and opinion from
Pulse CEO Simon Milton; Fellow
of the British Academy and Oxford
University’s Saïd Business School,
Professor Colin Mayer; and Prince
Max of Liechtenstein, CEO of asset
management group LGT.
Only a crisis — actual or
perceived — produces
real change. When
that crisis occurs, the
actions that are taken
depend on the ideas that
are lying around.”
Milton Friedman
6 Why purpose?
A changing
landscape
In 2006, 63 investment companies
with $6.5 trillion in assets under
management (AUM) signed
a commitment to incorporate
environmental, social and governance
(ESG) issues into their investment
decisions. Twelve years later, this
figure had risen to 1,715 investment
companies with $81.7 trillion in AUM
signed up to the same commitment.1
On 20 August 2018, 15-year old Greta
Thunberg chose not to go to school
that day; instead she sat on her own
outside the Swedish parliament calling
for a Skolstrejk för klimatet, a school
strike for the climate. By 20 September
2019, an estimated 4 million students
in 150 countries around the world
joined her call to strike and protest.2
On 31 October 2018, 1,500 people
Simon Milton assembled on Parliament Square in
Pulse CEO London to demand the UK government
to “tell the truth” about the need for
urgent recognition of the scale of the
About Pulse climate crisis. Eight months later, with
hundreds of thousands on the streets,
Pulse helps its clients to build MPs approved a motion to declare an
purposeful organisations. It does environment and climate emergency.3
this by working with business
leaders to connect more
On 11 June 2019, Unilever announced
effectively with their workforces,
its Sustainable Living Brands had
customers, investors and the
grown 69% faster than the rest of
wider society through its work in
the business and now delivered
‘purposeful leadership’, strategic
communications and employee 75% of the company’s growth.4
engagement. It has produced
award-winning work for internal On 8 October 2019, the governor of
communication and employee the Bank of England warned major
engagement and is a B Corp corporations that they had two years to
company. agree rules for reporting climate risks
before global regulators devised their
own and made them compulsory.5
Pulse 2020 Report: The ‘State of Purpose’ 7
What connects these seemingly disparate I set up Pulse in 2002, because I felt that the
events? Each, in its own way, is an example immense societal issues we then faced could not
of the way society is shifting. And each be addressed by government and charities alone
matter to the future of business and the (governments in the West seem incapable of
planet on which we live and depend. genuine long-term planning, and charities provide 1. The Investor Revolution,
HBR, May–June 2019
a necessary but inadequate plaster to the injustice Issue, Robert G.
Why now? we see in the world), and that the capacity of EcclesSvetlana Klimenko
https://hbr.org/2019/05/
business to innovate and scale at pace had a huge the-investor-revolution
Every time I pick up a report on the importance role to play. I also believed that every business had 2. Greta Thunberg:
teenager on a global
of purpose and the future of business, it seems a purpose, and that the best businesses used their mission to ‘make
a difference, The
they almost always open purpose to not only drive their Guardian, Sept 2019
with dispiriting statistics of performance – but also deliver https://www.theguardian.
com/environment/2019/
the enormous challenges a positive impact on the world. sep/26/greta-thunberg-
teenager-on-a-global-
that we face – of social mission-to-make-a-
difference
inequalities, environmental I believe this now, more than
3. UK Parliament declares
degradation and its impact
on the global economy.
“Being in sole service ever. Purpose – the why you
exist – matters for two reasons.
climate change
emergency, BBC
of shareholders is no It is a tool to harness the
2019, https://www.
bbc.co.uk/news/uk-
longer good enough.”
politics-48126677
Being an optimist by nature, potential of the workforce and
4. Unilever’s purpose-led
I wanted to open this report to meaningfully engage with brands outperform,
Unilever press release
with these five examples that customers and stakeholders. 2019, https://www.
I find to be utterly inspiring: It is also a pathway to a unilever.com/news/
press-releases/2019/
they speak of the changing broader understanding of unilevers-purpose-led-
brands-outperform.html
landscape that I believe is happening all around the corporation’s role within society, to give
5. Corporations told to
us, certainly in developed countries. Citizens it a continued licence to operate. Businesses draw up climate rules
or have them imposed,
and consumers now demand more from the exist to serve people and the planet. And The Guardian, Oct
2019, https://www.
powers that be. And in the commercial world, because of this, I believe business has a theguardian.com/
the examples of Unilever and the widespread huge role to play in addressing some of the business/2019/oct/08/
corporations-told-to-
adoption of ESG practice begin to illustrate that greatest challenges the world has ever faced. draw-up-climate-rules-
or-have-them-imposed
business is far from deaf to this shift. Indeed,
6. Business Roundtable
in August 2019, 181 US CEOs committed A tipping point where the majority of citizens and Redefines the Purpose
of a Corporation to
to lead their companies for the benefit of all consumers realise that governments, businesses, Promote ‘An Economy
stakeholders – customers, employees, suppliers, investment communities and we the consumer That Serves All
Americans’ https://www.
communities and shareholders.6 However, have failed to address our most pressing social and businessroundtable.org/
business-roundtable-
this is not a time for complacency. We need environmental problems is, to my mind, inevitable. redefines-the-purpose-
of-a-corporation-to-
urgency. We need action. The time for rhetoric Are we there yet? Undoubtedly. Businesses have promote-an-economy-
and working out if we have a problem is over. realised their role is changing and many aspects that-serves-all-americans
8 Why purpose?
Profits are in no way inconsistent
with purpose – in fact, profits and
purpose are inextricably linked.
business in a world that currently judges
Profits are essential if a company
performance purely on financial terms
is to effectively serve all of its is hugely challenging – and remaining
stakeholders over time. Similarly, profitable is hard enough at the best of
when a company truly understands times. (And to be clear, purpose done
in isolation won’t work – management
and expresses its purpose, it
can become too fixated, instead of
functions with the focus and being focused on how to build and
strategic discipline that drive long- scale an operation that brings genuine
term profitability. Purpose unifies value to different stakeholders). So,
I absolutely believe profit is a good
management, employees, and
thing: without profit, businesses
communities.” stagnate in their own rhetoric.
Larry Fink. BlackRock CEO
However, profit is not just about growth
and decimating our natural resources.
Profit comes from doing things
better. Customers will increasingly
reward those who do good.
of how they have to operate has to
radically change. Those businesses Our changing society is demanding
that fail to prepare are, to coin a very more. Every business is facing an
old corporate adage, preparing to fail. increasingly and acutely discerning
workforce, customer, investor,
Let’s be clear: being in sole service supplier and local community.
of shareholders is no longer good This report aims to look at ways of
enough. At the same time, navigating meeting their demands by placing
profit and purpose is extraordinarily purpose at the heart of business –
challenging. As a small business and doing so in a way that supports
owner, I know from bitter experience! long-term profit generation.
The more people feel like they have
less of a say over their lives, the farther
removed a business will become. And
that’s when a business’s licence to
operate can wither away. I do believe
capitalism can adapt and help to
meet society’s shifting demands,
but only if business can change for
the better – and do so quickly.
Getting this right is not easy. I am
mindful that being a purpose-led
Pulse 2020 Report: The ‘State of Purpose’ 9
The In 1962, Milton Friedman said that there is
one, and only one, social purpose of business:
profit from causing problems. In recent
years, we have seen a growing recognition of
purpose to increase profit, so long as it stays within
the rules of the game. That doctrine has been
the importance of why business is created.
Why it exists. What it’s there to do. What it
of the basis of business practice, business
policy and business education ever since.
aspires to become. Namely, the purpose of
business. And how everything should follow
business But it wasn’t always so. Indeed, business
from that in terms of business practice,
business policy and business education.
has its origins in Roman law, 2,000
years ago, and that was to perform public Successful businesses commit to a
functions, including minting coins, collecting corporate purpose; they commit to the
taxes and looking after people who help to
public buildings. And create that corporate
for nearly all of its purpose, their
2,000-year history, “The purpose of business workforce, who in
business combined is to produce profitable turn commit to the
commercial activities corporate purpose. This
with a public function.
solutions to the problems gives rise to reciprocal
It is only over the last of people and planet.” relations of trust with
60 years that the mutual benefits for
idea has emerged that the only purpose of both. It creates more loyal customers,
business is to make money. more engaged employees, more reliable
suppliers and more supportive shareholders
Today, we recognise business as the driving and societies. Which gives rise to greater
source for economic prosperity and the growth revenues, lower cost and more profits.
of nations around the world; but it is also a
cause of growing inequality, environmental However, there is a growing disaffection
Professor Colin
degradation and societal mistrust. with business, and its failure to meet
Mayer CBE environmental, social and political problems.
Fellow of the British Consequently, the British Academy launched This erosion of trust will intensify in the
Academy the largest programme of research that coming years by technological advances that
has ever been undertaken on the subject risk further exacerbating social detriments.
of the future of the corporation in January
2018. We brought together 30 academics Our work at the British Academy therefore
The British Academy is from across the world, from across the proposes a reimagining of the role of
the UK’s national body social sciences and humanities, together business for the 21st century, one that
for the humanities and with 25 business leaders, to address the requires a new framework that combines
social sciences – the
question: how should business correct the and connects defined corporate purposes,
study of peoples, cultures
environmental, social and political challenges a commitment to trustworthiness and an
and societies, past,
it faces? enabling corporate culture.
present and future. Colin
is an expert on the role
Redefining the definition Our recent paper, ‘Principles for Purposeful
of the corporation in
contemporary society; he is Business: How to deliver the framework
the Peter Moores Professor Among the findings of our research, for the Future of the Corporation’, further
of Management Studies at published in our paper ‘Reforming Business expands on initial conclusions and provides
the Saïd Business School, for the 21st Century’, was a recognition to a set of principles to guide lawmakers and
University of Oxford. This redefine corporate purpose, distinct from business leaders in any jurisdiction towards
byline is an abridged talk shareholder returns. Because the purpose the policies and practices that can release
given at the June 2019 of business is not to produce profit. The the potential of business to profitably solve
Pulse Masterclass. purpose of business is to solve the problems the problems of people and planet, and to
of people and planet profitably, and not prevent business from profiting from harm.
10 Why purpose?
How purpose
delivers true
value creation
We all leave a footprint on this world. Some humans
leave a big and beautiful footprint – Michelangelo,
Mozart, Mandela – while others leave marginal,
mixed or ugly footprints. The same applies to
organisations, be that through a company’s products
and services, education to employees, salaries,
supplier and stakeholder initiatives, operational
emissions or sponsoring engagements – a footprint
is always left behind.
But we are not used to thinking about a business’s
footprint in its broadest sense. Over the past
40 years we have reduced the complexity of
this footprint to an assessment based purely on
financial achievements: short-term profits.
This traditional value system and its short-
term take on value creation has of course
seen its winners: shareholders who’ve seen
their shares increase. It’s also seen plenty of
Prince Max of Liechtenstein losers: our planet’s biological assets are more
CEO of LGT drastically diminished than ever before in human
history; forests and agricultural land have been
substantially eroded; our oceans, rivers and
ground water massively polluted. Blue collar
LGT is the world’s largest family-
workers in developed markets have seen only
owned private banking and asset
limited gains, while the picture in emerging
management group. With over
$210 billion in client assets, its markets is even more complex.
approach to value creation has
helped the company to double its This short-term approach has led us to an asset
outline assets under management allocation, a value creation and a value distribution
in six years. Its stated purpose in our global economy that, overall, is poor. We
is to create value for clients, face rapidly growing environmental problems, rising
shareholders, employees, other social inequality, ever-increasing record levels of
stakeholders and society. debt in our systems and depleting social security
systems. This is no longer sustainable. Something
has got to give.Pulse 2020 Report: The ‘State of Purpose’ 11
37% $9.2tr 40%
PURPOSE IN
NUMBERS
37% of working British 1,076 institutions and Companies with the highest
adults say their job is over 58,000 individuals ESG ratings outperform the
not making a meaningful representing $9.2 trillion lowest-rated firms by 40%
contribution to the world in assets worldwide have (2017 Nordea Equity Research)
divested from fossil fuels
(YouGov)
(June 2019 Gofossilfree.org)
How do we change?
I propose that we need a more inclusive to provide better, broader long term. All client work is subject
integrated definition of value creation. and more equal opportunities to to ongoing economic social and
One that incorporates the broader succeed. And third, we need to find our governance (ESG) evaluation.
impact of businesses’ activities into environmental selves. We align our investment-linked
their purpose, their objective, their business strategies with political,
strategy, their operations and the way Historically, we rarely hear about the economic and social ‘mega-trends’
they measure their systems. broader social and environmental that run over decades rather than
impact of businesses, because these years. This makes our work more
And to prevent further economic, social aspects were not measured. And what sustainable – commercially and in
and environmental damage and the is not being measured is typically not terms of our broader footprint.
inevitable future repercussions, I am being managed.
convinced that integrating a stronger We do this because we believe this
sense of purpose and values into the A shift to a fully integrated value- way of thinking and operating is
daily management of a business is the creation approach that encompasses urgently required.
right thing to do to maximise value- societal and environmental outputs
creation opportunities. alongside the financial outputs, coupled It is also our belief, based on our
with newly defined measurable outputs, own experiences, that the adoption
I see three key areas for improvement. offers a new path. of the mindset and practices
First, we need to become a lot more advocated above will ultimately
long-term oriented. We cannot accept What does this mean in practice? At result in companies across the world
miserable trade-offs where we pursue LGT, our purpose is to create value for becoming financially stronger. And it
short-term benefits that come with our clients, shareholders, employees, is a pathway to the development of a
much larger longer-term costs. Second, other stakeholders and society. But we much more sustainable world.
we need to become socially more have eschewed the short term for the2
12 Chapter titles
Purpose:
A pathway
to sustained
profit and a
supported
society
This chapter aims to break the myth that
having a strong purpose (and making
a greater contribution more broadly to
society) is somehow incompatible with
making a profit.
On the contrary, they are natural
bedfellows.
There is an increasing
awareness that the purpose
of a company has to be
beyond shareholder
value, and that this is
not something that will
cost your business but
something that will enhance
your business.” 1
Harvard Professor Michael BeerPulse 2020 Report: The ‘State of Purpose’ 13
Purpose: the driver of profit the latest product. Sinek suggests the best
Purpose is the reason why a business exists – businesses don’t just sell their wares to people
its raison d’etre. One of the main reasons that who need what they have, but rather they seek to
purpose has gained traction of late is partly due inspire change: “The goal is not to do business
to organisations waking up to the realisation that with everybody who needs what you have. The goal
their purpose is not widely recognised by their is to do business with people who believe what
stakeholders – by customers, suppliers, investors, you believe.” 4 His TedTalk has now been viewed
their workforce – or indeed the boardroom. 45 million times.
Why does this matter? Because Other examples of companies
in an increasingly discerning who place purpose at the heart
world with disparate competing “Purpose is not the sole of what they do are Dove, who
forces and internal corporate
pursuit of profits but aligned its purpose closely with
decision-making dilemmas, its target audience with its
having a clearly understood the animating force for Campaign for Real Beauty (and
purpose can help drive achieving them” drove profits from $200m in the
alignment and performance. 1990s to $4bn by 2015), 5 and
Not having a meaningful purpose can result in Patagonia, who famously purchased a full-page
drift and ultimately obsolescence. advert in The New York Times, urging customers 1
The Business Case for
Purpose, Harvard Business
“Don’t Buy This Jacket” and to repair and reuse Review Analytics Services,
Above all, in the words of BlackRock CEO Larry as much of their clothing as possible (its sales Harvard Business Review,
2015,
Fink, purpose is not about the sole pursuit of increased 30% the next year). 6 hbr.org/resources/
pdfs/comm/
profits; rather it is “the animating force for ey/19392HBRReportEY.pdf
pp. 8-10.
achieving them”. 2 Purpose drives profit. And while Unilever’s Keith Weed argues that
purpose can drive sales: “We know that consumers 2
Larry Fink’s 2019 Letter to
CEOs: Purpose & Profit
Almost 10 years earlier, Simon Sinek argued that want brands with purpose. Global spending on https://www.blackrock.com/
“people don’t buy what you do, they buy why you ‘responsible consumption’ products is $400bn”. corporate/investor-relations/
larry-fink-ceo-letter
do it.” 3 Citing examples of the most successful 7
On a deeper level, companies across the world
3
Simon Sinek, How great
companies that communicate their purpose in that placed purpose at the heart of their business leaders inspire
order to appeal directly to people’s values, Sinek strategy have been shown to outperform the https://www.ted.com/talks/
simon_sinek_how_great_
gives the example of Apple, a company that has average S&P 500 company by 10 times ,8 (1998 leaders_inspire_action/
transcript?language=en
no material advantage over any other computer - 2013), according to research conducted by
company, and yet has devoted customers who’ll Professor Raj Sisodia. 4
ibid
queue overnight to be the first in line to get 5
How Dove Empowered
Real Women And Achieved
Success in 80+ Countries
https://www.referralcandy.
com/blog/dove-marketing-
How can purpose reveal a path through disruption? strategy/
EY survey of 1,470 business leaders: 6
How Patagonia grows
every-time it-amplifies its
social mission
https://www.fastcompany.
73% 52% 51% 42%
com/40525452/how-
INDUSTRY INSIGHT
patagonia-grows-every-
time-it-amplifies-its-social-
mission
of executives believe having believe purpose see purpose 7
Marketing Week, The top
100 companies for ‘brand
believe that having a purpose helps helps to preserve as important purpose’, 13 Oct 2015
https://www.marketingweek.
a well-integrated to build greater brand value and in attracting com/the-top-100-
EY Beacon Institute
purpose helps their customer loyalty reputation and retaining companies-for-brand-
purpose/
company navigate top talent
8
“Performance of firms of
today’s turbulent endearment”
environment https://www.
firmsofendearment.com/14 A pathway to sustained profit and a supported society
EY has conducted extensive research into the trust in business. According to Deloitte research,
perceived importance, role and impact of purpose only “37% of millennials believe business leaders
in businesses, as Karl Havers (EY Partner, Long make a positive impact on the world”,11 with over a
Term Value and Technology) explains: “We’ve quarter saying they don’t trust business leaders as
found that employees are three times more likely sources of reliable and accurate information.
to stay if they relate to their company’s purpose;
while less than 10% say that they would like to The 2019 Edelman Trust Barometer 12 found that
work for a company that focuses solely on bringing more than half of Britons believe that the way
value to shareholders. One company that prides business is working today is not good for society
itself on its purposefulness outperformed the (52%). Globally only 20% felt that “the system is
market by 14 times. While 73% of customers working for them”. The same research highlighted
would switch products if that company had a people’s high expectations of CEOs and that a
clear purpose that they valued. The evidence is
mounting. Everything points towards the need
for businesses to embrace and integrate a multi- 2019 Edelman Trust
stakeholder orientated purpose to navigate today’s Barometer
volatile, uncertain economy if they are to continue
to navigate ever more discerning customers,
INDUSTRY INSIGHT
employees and investors.” 9 “The world is united on one
front – they all share an urgent
Purpose and the need for greater societal desire for change. Only one in
contribution five feels that the system is
working for them, with nearly
The idea of purpose as key to driving business half of the mass population
performance is therefore not new. Where things believing that the system is
have become especially interesting of late is failing them.”
the more explicit extension of an organisation’s 79% of UK citizens believe
purpose to help meet society’s increasingly CEOs should take the lead on
pressing challenges. change, rather than waiting for
government to impose it.
As the leader of the world’s largest asset
manager, with $6.84 trillion in assets under 60% of Britons agreed with
management, Larry Fink caused more than the statement that “a good
a few ripples when he made the unequivocal reputation may get me to try
link between an organisation’s reason for a product, but unless I come
existing, with a commitment to doing good in to trust the company behind
9
In conversation, Pulse
the world. He said that “to prosper over time, the product, I will soon stop
Masterclass, “Navigating
the twin pillars of Purpose
every company must not only deliver financial buying it.”
and Profit” held Thursday 6
June 2019 performance, but also show how it makes a 52% of Britons feel that the
10
Larry Fink’s Annual Letter positive contribution to society.” 10 way business works today is
to CEOs (2017) A Sense of
Purpose not good for British society.
https://www.blackrock.com/
hk/en/insights/larry-fink-
Why?
ceo-letter 67% of these people believed
11
The Deloitte Global For context, let’s pause for a moment and look that companies considered
Millennial Survey 2019
https://www2.deloitte. at the other driving factor for purpose: society’s profit to be more important
com/global/en/pages/ shifting expectations. than looking after people.
about-deloitte/articles/
millennialsurvey.html
12
2019 Edelman Trust Alongside the plethora of statistics of the benefits
Barometer
www.edelman.com/trust-
of purpose to a company’s bottom line is the
barometer increasing and startling evidence of the decline ofPulse 2020 Report: The ‘State of Purpose’ 15
“Companies could bring
business and society back
together if they redefined
their purpose as creating
‘shared value’ – generating
economic value in a way
that also produces value for
society by addressing its
challenges.”
trusting relationship with an organisation was vital the purpose of business is to “provide profitable
for consumers to continue to buy from them. solutions to people and planet”.
Simply put, people are saying: things aren’t Adoption of purpose in this way can begin to
working great for me as an individual; we expect address the serious issue of declining trust
more of our CEOs to take a lead in the way we live, between people and business, something that
and we prefer to buy products that we have some haunts both commercial leaders, such as Fink,
form of relationship with. and academics such as Dr Michael E. Porter, who
in 2011 wrote: “Companies could bring business
Purpose, when it is authentic and meaningful, and society back together if they redefined their
guides the way an organisation functions; it purpose as creating ‘shared value’ – generating
also entails a multi-stakeholder approach that economic value in a way that also produces value
can address each of the above aspirations and for society by addressing its challenges.” 13
expectations. And when companies embrace a
framework for greater value creation (based on So, how can we make the shift away from the
meeting the needs of multiple stakeholders), Friedman ‘shareholder-value’ mentality to one
businesses make a greater contribution to society. based on shared value? 13
Michael E. Porter &
And the more ambitious the purpose, the greater Mark Kramer, Creating
Shared Value: Redefining
the contribution to all stakeholders, to society and Capitalism and the Role of
the Corporation in Society,
to our planet. Harvard Business Review,
2011.
https://www.hbs.edu/
We have already read how Prince Max of faculty/Publication%20
Files/2011-0609_
Liechtenstein subscribes to this perspective. FSG_Creating_Shared_
Value_20859152-c051-
In the same vein, Fink is asking for companies 44dd-a2c0-761abf6bc2d1.
to do more and Professor Mayer declares that pdf3
Purpose:
A new
mindset Investors no longer
Exploring the intrinsic believe that short-term
importance of long- earnings results are
term thinking and the
indicative of long-
mindset shift required
term success and
to deliver both profit and
are highly aware of
purpose.
the imprecision of its
reporting metrics.” 1
FCLTGlobal,
CEO Sarah WilliamsonPulse 2020 Report: The ‘State of Purpose’ 17
Moving from short-termism to sustainability of its reporting metrics.” 5 FCLTGlobal makes the
case that providing a long-term strategic roadmap
At the heart of successfully deploying purpose is for investors and that selecting key metrics and
making the shift from short-term, profit-focused setting benchmarks against three to five-year
thinking to a long-term sustainable approach. outlooks are more effective for establishing
The latter places value on maintaining strong a sustained investor base, something which
relationships with multiple stakeholders, in tandem has proved beneficial to the likes of Unilever,
with the purpose of the organisation. Facebook, GlaxoSmithKline and BP.
As President of the Ford Foundation, Darren Walker But what happens when short-termism rules? In
said: “It is more critical than ever that businesses his book, ‘The Infinite Game’, Simon Sinek argues
in the 21st century are focused on generating long- that too many companies are too preoccupied
term value for all stakeholders and addressing the with protecting existing models instead of being
challenges we face, which will result in shared flexible and true to their purpose. Kodak invented
prosperity and sustainability for both business and the digital camera in 1975 but couldn’t bear the
society.” 2 thought of moving away from film; Blockbusters
made 20% of their
But long-term revenues from late
thinking is easier said fees and so turned
than done. Not least
“Just 28% of S&P 500 companies down the opportunity
1
Where boards fall short
https://www.fcltglobal.org/
when only 34% of and less than 1% of EURO STOXX 300 to work with Netflix research/reports/article/
where-boards-fall-short-
directors believe that companies currently issue and its monthly harvard-business-review
the boards on which subscription model… 2
Business Roundtable
they serve on actually quarterly guidance. “And now they’re
Redefines the Purpose
of a Corporation to
Promote ‘An Economy That
fully comprehended both bankrupt. That’s
the company’s Whereas quarterly reporting finite thinking – when
Serves All Americans’
https://www.
businessroundtable.org/
strategy (McKinsey provides transparency, guidance is they are so obsessed business-roundtable-
redefines-the-purpose-of-
2013 survey). 3 with the status quo
counterproductive and increasingly that they literally will
a-corporation-to-promote-
an-economy-that-serves-all-
americans
The first step is to a thing of the past.” not take the flexibility 3
Where boards fall short
refute the established to stay in business.” 7 https://www.fcltglobal.org/
perspective, asserted FCLTGlobal, CEO Sarah Williamson 6 research/reports/article/
where-boards-fall-short-
harvard-business-review
by Milton Friedman, Sinek argues
that the very idea of businesses contributing that ‘finite’ companies measure themselves by 4
The Social Responsibility
of Business is to Increase its
to society is “incredibly short-sighted and arbitrary targets that take precedence over building Profits. Milton Friedman
The New York Times
muddleheaded”. His belief that “The discussions of meaningful sustainable relationships. However, Magazine, September 13,
1970.
the ‘social responsibilities of business’ are notable “In an infinitely-led company, you will find people
for their analytical looseness and lack of rigor” 4 working for a cause – prepared to sacrifice because 5
FLCTGlobal, New Evidence
Supports Transition
needs to be answered with clarity. it gives you meaning.” 8 By working towards a ‘just From Quarterly Guidance
cause’ that is at the centre of an infinitely-led https://www.fcltglobal.
org/news/blog/
Encouragingly, the merits of placing long-term company (purpose), he argues that: “You’ll find a article/2017/10/24/
new-evidence-supports-
thinking above short-termism is beginning to more trusting team with people more willing to say transition-from-quarterly-
guidance
resonate with investors. Not-for-profit organisation, I made a mistake, or I need help. Without trusting
Focusing Capital on the Long Term, FCLTGlobal, teams, you have too many people coming to work 6
ibid
was established to encourage a longer-term focus lying, hiding and faking every day and eventually 7
Simon Sinek Explains What
Almost Every Leader Gets
in business and investment decision-making things break.” 9 Wrong
and in October 2017, CEO Sarah Williamson https://www.youtube.com/
watch?v=Ar20m23XY_c
declared: “Investors no longer believe that short- And it’s not just companies that are failing within
8
ibid
term earnings results are indicative of long-term their respective sectors. Sinek points to the fact
success, and are highly aware of the imprecision that the publishing industry didn’t invent Amazon; 9
ibid18 A new mindset
or the film industry invent Netflix, or car companies in a higher purpose – which helps employees and
invent Tesla. Each industry sector was too focused executives alike to embrace the interdependence of
on the short term. Had they focused more on opposing strategies.” 10
their core purpose, instead of what the market
demanded, they would have been less vulnerable One such example they highlight is NASA, whose
to external disrupters. managers’ attempts to push for more open cross-
firm and cross-disciplinary work saw resistance 10
“Both/And” Leadership
In this light, we can see the from scientists, who feared Wendy K. Smith, Marianne
W. Lewis, and Michael L.
value of purpose in keeping that such a collaborative Tushman.
HBR May 2016
companies grounded in doing approach to research would
what they are best at, while “Without trusting teams, compromise recognition of 11
ibid
having the flexibility to respond you have too many people their individual achievements. 12
“Both/And” Leadership
Wendy K. Smith, Marianne
and plan to meet changing
future markets. Decisions that
coming to work lying, hiding Connection was achieved by
placing a higher purpose at
W. Lewis, and Michael L.
Tushman.
may look profitable today may and faking every day… the heart of their objectives:
HBR May 2016
well make your company less and eventually things break.” “We aspire to keep astronauts Conversation with Lord
13
Andrew Stone 5 August 2019
relevant to your customers, safe in space.” 11 A purpose
workforce and supply chain. that both sides could buy into.
And yet there are always competing priorities to In the 1980s, trading on a Sunday in the UK was
meet today’s challenges and to be sustainable for illegal – but several retail companies ignored the
the long term. Which begs the question: how do we ruling as the fine for doing so was considerably less
decide which to choose when the two conflict? than the value of sales taken on that day. When
A new mindset: profit and purpose as natural
bedfellows “The goal of leadership is to maintain
a dynamic equilibrium in the
In the May 2016 edition of the Harvard Business
organization. Executives with
Review, three professors made the case for
this goal do not focus on being
“Both/And” Leadership, offering a new way of
consistent; instead they purposefully
thinking to overcome competing strains within a
and confidently embrace the
company: to shift away from ‘either/or’ thinking
to a ‘both/and’ mindset.
paradoxes they confront. Senior
teams build dynamic equilibrium
At the centre of their proposed ‘Paradoxical by separating the imperatives that
Leadership’ is the need to recognise that the role are in conflict with one another
of management is to cope with, rather than fight, in order to recognize and respect
change. And because conflicts often arise between each one, while at the same time
senior team members who deeply identify with one actively managing connections
goal or another (e.g. annual profit over purpose), between them in order to leverage
there is a need to recognise multiple truths. They interdependencies and benefit from
argue that this can be achieved by separating and their synergies.”
connecting opposing forces. This, they propose,
Wendy K. Smith, Marianne W. Lewis, and
involves accepting and accentuating the different
Michael L. Tushman 12
forces within an organisation, developing metrics
for each, so that each feels valued; equally,
disparate forces need to be connected, which
involves finding linkages and synergies across
goals. This can be achieved by building “an
overarching organizational identity and unite peoplePulse 2020 Report: The ‘State of Purpose’ 19
the idea of adopting this approach was broached profit and purpose; however, doing what feels right
to M&S’s then Managing Director Andrew Stone, according to an organisation’s values is a good
he rejected out of hand the idea of the retailer starting point.
following suit. Despite the clear financial benefits,
breaking the law wasn’t the kind of thing that M&S
as a company did. It didn’t sit right. Making profit
while going against the grain of the company’s
recognised values didn’t support the purpose. 13
So, to answer the question of how a company can
attain both purpose and profit, the solution lies not
in asking how does one prioritise one over the other
– but to always ask the question, “How do these
two goals support each other?” In truth, there is
no definitive answer to the question to navigating
“We aspire to keep astronauts safe in space.” A purpose
that all the NASA scientists could buy into.4
20 Chapter titles
Purpose:
Application
Enough of the theory, what initial first
steps can be taken to apply purpose
and what practical frameworks exist
for making your organisation more
purposeful?
You can’t just adopt
it... It has to be driven,
operationally and in depth,
by the CEO and the top
leadership team.”
Harvard Professor Michael BeerPulse 2020 Report: The ‘State of Purpose’ 21
Applying purpose: first steps Articulating a purpose, once identified, isn’t
always easy. The main thing to keep in mind is
So far, we’ve looked at the ways in which that every purpose starts with the ‘why’. It may
purpose can drive profit and respond to society’s help for you to put aside your mission (what you do
expectations; we’ve also looked at the mindset and how you do it) and focus on what difference
shift required towards taking a longer-term your business has on the lives of your customers
approach, and ways to navigate paths towards and other people. What do they see you do? For
reconciling the demands for short-term profit and example, Tesla’s purpose is not to create attractive
the desire to contribute to society. electric cars, but to “accelerate the world’s
transition to sustainable energy”. 1
But how can this actually be delivered in the real
world? And what guiding frameworks exist to And once it’s articulated, as Michael Beer
help shape and guide our own strategies around contends, “You can’t just adopt it... It has to be
purposefulness? driven, operationally and in depth, by the CEO and
the top leadership team. That takes a lot of skill
First of all, there is no cookie-cutter approach to and understanding to do well, which is why so few
becoming a purpose-led organisation. Nor should companies really can pull it off.” 2 1
https://www.tesla.com/
there be. However, the one thing that does hold en_GB/about
true, across all organisations, is that purpose has Driving purpose throughout the organisation 2
The Business Case
for Purpose, Harvard
to be at the heart of who we are and what we do. It requires authenticity, consistency and leadership Business Review Analytics
is not an add-on; not a badge that can be applied being exercised at every level. Because to build an Services, Harvard
Business Review, 2015
when required to try to show a warmer or more inspired, committed workforce, “you need middle hbr.org/resources/
pdfs/comm/
ethical side of a corporate entity. The often cynical managers who not only know the organization’s ey/19392HBRReportEY.pdf
deployment of corporate social responsibility in purpose but also deeply connect with it and lead 3
Creating a Purpose-Driven
this way over the last decade has shown what can with moral power”. 3 Organization, Robert E.
Quinn and Anjan V. Thakor
happen when good intentions become the latest HBR July–August 2018
fashion accessory. 4
ibid
It requires a heartfelt and honest examination
of why our businesses exist. What are we truly
bringing to our communities, customers and the
world at large beyond just our principal products
and services? What is our higher purpose?
A top-down mandate does not work. Employees
need to help drive this process, because then the
How do we do this? The answer nearly always lies
purpose is more likely to permeate the culture,
in the reality that the individual purpose of each
shaping behaviour even when managers aren’t
of our organisations already exists. Sometimes
this can get lost over time and just needs to
right there to watch how people are handling
be uncovered. It certainly does not need to be
things.
invented. The key is to delve deep into what People who find meaning in their work don’t
really matters to us in our jobs and the services hoard their energy and dedication. They give
we bring to the world. Why we do what we do. them freely, defying conventional economic
This also involves extending the exercise to our assumptions about self-interest. They grow
workforces, to listen and discover what really rather than stagnate. They do more — and they
matters to them in their jobs. Why they do their do it better. By tapping into that power, you can
work, at a deeper level. By empathising with our transform an entire organization.4
fellow workers, we can uncover what lies at the
Robert E. Quinn & Anjan V. Thakor
heart of each of our organisations.22 Application
Getting the supporting 5 questions for companies to
culture in place test whether purpose is really
at the core of the strategy 5
Each organisation needs to find its own, A ‘no’ to any of the above requires a rethink!
culturally aligned ways to elevate and drive
purpose through everything it does. These need 1. Does purpose contribute to increasing
to work with the grain of how each business your organisation’s growth and profitability
operates. Trying to impose set approaches is a today?
sure-fire way to alienate people and waste the
opportunity that your new-found purpose presents. 2. Does purpose significantly influence your
strategic decisions and investment choices?
However, a range of processes and practices can
be considered by any organisation which wants 3. Does purpose shape your core value
its purpose to be more deeply embedded in the proposition?
workplace’s culture:
4. Does purpose affect how you build and
• The identification of explicit values that manage your organisational capabilities?
support the purpose and inspire the
workforce 5. Is purpose on the agenda of your leadership
team every time you meet?
• Incentivising living of the values and
hence purpose
• Engaging champions to create positive
peer pressure
• Continual communication and sharing
of employee stories around the purpose
and the impact of their work
• Driving the purposeful way of thinking
through functional corporate areas such
as hiring, appraisals and compensation.
The above practices are but a suggested starting
place. How and how well they are executed and
sustained is down to the individual business.
5
Put Purpose at the Core of
Your Strategy, by Thomas
W. Malnight, Ivy Buche, and
Charles Dhanaraj
HBR September–October
2019Pulse 2020 Report: The ‘State of Purpose’ 23
Applying purpose: frameworks for making a shift EPIC addresses the “Today, it is not uncommon that
fundamental problem
At Pulse, we have always believed that that 21st-century businesses
as little as 20% of a company’s
purpose helps to drive performance, especially continue to provide reports value is captured on its balance
because it helps to shape the behaviours
required to make your business successful.
to financial markets that
are based on accounting
sheet – a staggering decline
principles and concepts from about 83% in 1975.”
On page 25 is a tool that we use in different that were first codified in
ways with business leaders who want to explore the 1970s. It makes the
more deeply ways to engage and drive change. case that this is unhelpful, when “today, it is not
Developed by Pulse from working with different uncommon that as little as 20% of a company’s
organisations over several years, we call these value is captured on its balance sheet – a
the 12 Purposeful Leadership Principles. staggering decline from about 83% in 1975.” 7 The
report goes on to state, “the majority of a typical
But Pulse is far from alone in developing company’s real value is now reflected in intangible
management tools and thinking on making aspects of its business model – relating to things
purpose more easily applied, and we appreciate such as innovation, culture, trust, and corporate
purpose is still an intangible and possibly nebulous governance – that are difficult to measure.” 8
concept. And as Prince Max alluded to earlier,
what isn’t measured is rarely very well managed. The initial result of the EPIC report is its Long-
Fortunately, this is something the Coalition for Term Value Framework, which provides a guide
Inclusive Capitalism is working on achieving, for developing specific insights into reassessing
not least when it launched the Embankment ‘intangible value’ for the consumer, industrial and
Project for Inclusive Capitalism (EPIC). 6 healthcare sectors. The framework is intended to
provide a guide for companies “to determine and
Working with EY and 31 companies, asset assess the metrics that are relevant to articulate 6
Embankment Project for
Inclusive Capitalism
managers and asset owners (with around $30 sustainable value creation for their business”, 9 and, https://www.epic-value.com/
trillion of assets under management), EPIC at 122 pages, its comprehensive nature is a starting 7
ibid
sought to identify and create new metrics for point for all companies wishing to re-evaluate the
8
ibid
measuring ‘intangibles’ which would demonstrate way they assess and measure their performance.
long-term value to financial markets. 9
ibid
10
ibid
The EPIC Long-Term Value Framework 9
CONTEXT
This is a tool for companies to identify and develop metrics to
better articulate their long-term equity narrative to investors, while STAKEHOLDERS
ST
simultaneously helping other stakeholders understand how they STAKEHOLDER
E
OS
RA
create value. OUTCOMES
RP
TE
PU
GY
The model involves analysing the context within which a company
operates, as well as its purpose, strategy and governance, to
METRICS
determine what outcomes it needs to deliver to its most material
stakeholders. It then asks the company to think through which
capabilities and resources are required to deliver the outcomes
stakeholders may desire, while at the same time protecting the VALUE VALUE
longevity of its business model. Metrics are recommended to CREATION PROTECTION
measure both the achievement of stakeholder outcomes and the STRATEGIC
status of strategic capabilities – their existence and relative ‘health’ CAPABILITIES
– are required in order for management and investors to make GOVERNANCE
informed decisions about the company’s long-term performance.24 Application
Getting the supporting
culture in place
Finally, the British Academy, the UK’s national Clearly, there is much food for thought as
body for the humanities and social sciences, we consider the practicalities of embedding
argues the need for urgent systematic reform. purposefulness into the way we run our 11
Reforming business
for the 21st century:
In its initial paper, ‘Reforming Business for the businesses. The tools and framework identified are a framework for the
21st Century – a Framework for the Future of the but three examples of ways different companies, future of the corporation
https://www.
corporation’, the institution partnerships and institutions thebritishacademy.
ac.uk/sites/default/files/
recognises that companies are tackling the challenge Reforming-Business-for-
21st-Century-British-
“cannot on their own of practical applications Academy.pdf
insure their stakeholders
against the systemic risks
“Leaders will need to take of purpose. And while the
business community is
12
Principles for Purposeful
Business: How to deliver the
of technological changes difficult decisions and still at an early stage of framework for the Future of
the Corporation
and globalisation to which manage trade-offs to deliver developing thinking, the https://www.
thebritishacademy.ac.uk/
they are being increasingly need is pressing. The more
purpose and set ethical
sites/default/files/future-of-
the-corporation-principles-
subject”. 11 we can learn and share, the purposeful-business.pdf
cultures” better our world – and the 13
ibid
Rather than offering a businesses within it – will
ibid
blueprint for companies become.
14
wanting to be purposeful, its follow up paper,
‘How to deliver the framework for the Future of the
Corporation’, describes the necessary environment
for purposeful business to thrive, including factors
that reside within the parameters of governments:
regulation, taxation and investment – aspects that
are outside the control of CEOs (and the remit of What does a purposeful
this chapter). business look like? 13
That is not to say that a gauntlet has not be thrown
to business leaders. The Academy does describe • Law: Adopts and commits to a purpose by law
what it sees as eight principles that companies
can review and help guide their behaviours (see • Regulation: Adopts a social licence to operate (if regulated)
box out). The paper argues that in order for a • Ownership: Seeks shareholders committed to the purpose
more enlightened shareholder capitalism to thrive,
“leaders will need to take difficult decisions and • Governance: Has inclusive governance and values
manage trade-offs to deliver purpose and set ethical that support delivery of purpose
cultures”, 12 in terms of the way they align long-term
value creation with the interests of stakeholders; • Measurement: Measures delivery of the purpose
establish appropriate governance arrangements;
• Performance: States profits net of failures to fulfil purpose
and balance the interests of different stakeholders
with new structures, systems, processes, financing, • Finance: Raises risk capital aligned with purpose
measurement and incentives. from shareholders
This body of work is still a work in progress, • Investment: Establishes partners to make investments
but companies looking to understand prevalent for purpose
thinking in the future of the corporation would do
well to keep abreast of the Academy’s work.Pulse 2020 Report: The ‘State of Purpose’ 25
Pulse’s 12 Purposeful Leadership Principles Then, select two or three principles that you feel are not so
prominent or not being lived in your organisation. Consider
The 12 principles are deployed by Pulse in our consultancy what their absence means for you and your colleagues. How
work with multiple clients. They are used in different ways to could you address them in different ways?
spark new conversations, considerations and thinking.
Ask others to do the same exercise
As an example of how they can be used you could try this And then have the conversation. Have it with your peers, your
simple exercise. Select two or three of the principles that you boss, your team. We often find different people within the
feel resonate with your organisation – where you feel these same organisation identify different principles – which is
principles are already being lived. Take a moment to think where things often get interesting! Gaining alignment can only
of real-life examples and consider the positive impact they come through a process of exploration. And achieving purpose
had. Ask yourself why was it so successful? How could you can only truly be achieved when your organisation is aligned.
replicate such positivity in the future?
Serve others Fun Ownership
The founding purpose of a business When we are at our best, we feel light, A purposeful organisation requires
can get lost over time or the needs of playful and open to new thinking. When employees to take ownership of
the world change but all businesses we have fun, we feel a sense of hope their actions. Their 1,000s of
exist to serve. To remain competitive, and a willingness to trust. Meaningful actions (small and big) can help a
they need to bring value to their work needs to touch our deepest business to be more competitive.
employees, customers, suppliers, human need to have fun and be happy.
community and not just shareholders.
Humility
Work iteratively The willingness to share and be honest
Building coalitions Purposeful organisations require a about the challenge of doing good and
Driving change starts with identifying sensitivity to the existing culture and making money, both at an individual and
the key people who are best placed to ways of operating. Going with the grain of organisational level builds deeper and
initiate and build momentum. Change how an organisation thinks and operates more authentic relationships. You, your
happens naturally by connecting is a far easier way to drive change. It is employees, customers and investors
people to something they care about also mindful of people’s willingness to will be far more supportive, if the
and feel they can contribute towards. change old and unhelpful behaviours. organisation is open about its struggles.
Authenticity Courage Small things make a difference
Being purposeful is about getting to the Purposeful organisations require the It is often the small, everyday actions
truth of what you and your organisation courage to make difficult decisions and rather than the big things that people
are good at and the material value to challenge the status quo whereby you notice. Culture is created through the
you bring to the world. Authenticity stand for something and not just do what unspoken messages people receive about
gives life to the things that make others are doing. what is valued. The way we respond to
you and your organisation perform. somebody in a lift or to an email, is critical
to building trust. Small things can also
It starts with the individual lead to become big significant action.
Journey towards a unifying vision To change or improve an organisation,
To motivate your workforce, customers and you have to start with thinking about
investors, you need to give them a vision people as individuals and celebrating their Openness
for what the business is capable of doing differences. A purposeful organisation Purposeful leaders spend time listening
and becoming. Attention needs to be given recognises the potential in everybody. A and understanding. Start by being
to ensure everybody is involved at the start diversified workforce is better qualified open to the idea that everything you
of the journey and clearer of their roles. to serve a more diversified world. thought you knew before a meeting or
conversation might be wrong. Deep and
meaningful insight comes from keeping
an open mind and not being held back by
fixed thinking. In this way you also build
more authentic relationships.You can also read
