BUSINESSES WHICH care about more than just profit could be in a stronger position to survive the coming social and environmental shocks, writes Nick Hughes.
Ella's Kitchen is one of the great food and drink success stories of the past decade and its founder, Paul Lindley, has forged a reputation as one of the industry’s most enlightened thinkers. So when Lindley starts talking about the need for businesses to have a purpose beyond a purely profit-driven motivation it’s time to sit up and take notice.
Lindley used a speech at the Summit 2015: The Future of Growth event to put the case for businesses standing for something more than just making money. “Too often what we do in business is explain what and how – but not so much the why,” Lindley said. “Profit is key, but so is heart. It’s what keeps the business running.”
Lindley explained that he set up Ella’s Kitchen with the purpose of improving children’s lives, based on the idea that businesses should serve society as well as their shareholders. This notion of business with a conscience is reflected in the growing popularity of the term “purpose” in the business lexicon – IBM, for instance, now talks about “purpose-driven transformation” as being part of its DNA.
But why is the business community talking about purpose now?
Partly it’s a pragmatic response to social and environmental factors that are a direct threat to conventional profit-centred business models. A recent KPMG report on building business value in a changing world identified 10 sustainability “megaforces” that will affect all businesses over the next 20 years. These included climate change, resource scarcity, ecosystem decline and deforestation. The report noted that more and more corporations are recognising that there is value and opportunity in a broader sense of responsibility beyond the next quarter’s results and that what is good for people and the planet can also be good for the long-term bottom line and shareholder value.
The focus on purpose is also a response to changing consumer expectations of private enterprises and what they stand for. Trust in institutions to do the right thing is at an all time low, partly as a consequence of open data in the digital age that means business practices are subject to more scrutiny than ever before. The 2015 Edelman Trust Barometer showed an evaporation of trust across all institutions including NGOs, the media and businesses, in whose case more than half of respondents believed they were driven purely by greed. However, 81% of respondents said they believed that businesses could both make a profit and at the same time improve society.
The most progressive businesses are already taking heed of public opinion and embedding purpose-led activities across the entire organisation rather than isolating them within the corporate social responsibility department. Speaking at the launch of the EY Beacon Institute – a new collaboration between the professional services firm EY and Oxford University’s Saïd business school dedicated to the science of purpose in business – Unilever’s chief executive, Paul Polman, said businesses that aim to maximise both profit and purpose will be more successful over time. Unilever has publicly committed to making a positive contribution to society through its brightFuture platform that it says “helps unite and amplify the efforts of a growing community of people who believe it is possible to build a world where everyone lives well and lives sustainably”.
Unilever is considered a trailblazer in “purpose-driven transformation”, and food businesses talking explicitly about purpose remain the exception rather than the rule. However, the idea of having a broader purpose beyond profit maximisation is increasingly becoming implicit in company mission statements from Sodexo’s maxim of providing “Quality of life services” to Nestlé’s reshaping of its corporate identity in recent years to focus on “Nutrition, health and wellness”.
To what extent purpose-driven transformation is genuinely transformative and representative of an entirely new business model is open to debate.
The EY Beacon Institute notes that for many businesses there is still a gap between recognising the need for business purpose and instituting policy and practice. It will be up to consumers, with the help of NGOs, to challenge businesses to prove they are as purposeful in their actions as they are in their words.