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The Business Case for Purpose
Purpose

The Business Case for Purpose

We spoke to Professor Alex Edmans about why all businesses need to start thinking about purpose.

“What I want to do is present a new revolutionary approach to business, which I call the pie growing mentality. By actually investing in your stakeholders, you’re also going to become more profitable as a company.”

9th Dec 2021

How do we pursue profit and purpose at the same time? In our new film, Alex Edmans, Professor of Finance at London Business School and Academic Director of the Centre for Corporate Governance, argues that there is a business case for purpose – not just a moral one.

In his book, Grow the Pie: How Great Companies Deliver Purpose and Profit, Edmans suggests that we don’t live in a zero-sum game. Reality is more complex than that: “It’s not a winner and a loser – you can both be winners.”

“What I want to do is present a new revolutionary approach to business, which I call the pie growing mentality. By actually investing in your stakeholders, you’re also going to become more profitable as a company.”

Edmans believes there is a need for nuance when it comes to the conversation around purpose, business, society and climate. Amidst a rise in the concept of purposeful business within the zeitgeist, it’s easy to make sweeping statements that simplify the relationship between our companies and the rest of the world. But, in real life things are rarely that clean cut, Edmans argues: “Typically most issues in reality are not black and white. The stronger and the more one-sided an argument is, the less likely it is to be supported by data and evidence.” 

In order to change society for the better, we must focus our attention on thinking about the long term narratives that we want to guide our progress: “If we want to repurpose society, it’s not sufficient for CEOs just to know that purpose leads to profit, we need to change the evaluation schemes and horizons so that people have long term perspectives.” Shifting to a mindset that incorporates the long-term needs of our planet and people with innovation, growth and profit is essential for our future. 

“Typically most issues in reality are not black and white. The stronger and the more one-sided an argument is, the less likely it is to be supported by data and evidence.” 

Alex Edmans

“The people that we need to change are the more hard-headed business men and women – the people who historically focus on profit,” Edmans points out. Forging a better future for our planet and everyone on it is not about dividing ourselves up into winners and losers; we can pursue a world in which everyone wins.