The Evolution of Corporate Purpose Over The Last Ten Years
Charles Wookey is Co-founder and former CEO of A Blueprint For Better Business, a charity that aims to create a better society with better business. He was Blueprint’s CEO from 2012 – 2022 and under his leadership the organisation went from being a small initiative to an independent charity that is engaged with a growing number of major global companies. Find out more about Charles and Blueprint here.
The German philosopher Arthur Schopenhauer proposed that there are three stages in the reception of an idea. First, it is greeted with ridicule. Then it is violently opposed. Finally, it is embraced and there is a general consensus that the idea was, in fact, obvious all along.
The idea of corporate purpose has had just such a reception. In the UK over the last decade I have seen ‘purpose’ ridiculed before progressing to the opposition stage and then increasingly gaining credibility and traction. There is still much to be done, however, if the axiom that business must be purpose-led is to become ‘obvious’ – which it must be for the future of humanity and our planet.
The word ‘purpose’ has undeniably entered mainstream business discourse, but in several different ways. Some businesses use it in a serious way to signal – and provoke – a genuine shift of thinking and practice. Others seem content to adopt the mantle of corporate purpose to burnish their credentials without changing anything except the wallpaper, which generates its own sceptical counter-reaction. Others still, more cynical and opposed, throw names such as ‘woke capitalism’, decrying any efforts to move away from the dominant paradigm of profit maximisation as wrong headed and doomed to fail.
But change is underway and at this point opposition is healthy and a sign that something real is at stake. We should also expect this to take time as we are dealing with deeply entrenched ideas which continue to shape business practice, and where lasting change requires collective action at multiple levels.
So what is a purpose-led business? Why is it any better? And what are the real drivers of change at firm and system level? What gives me hope that businesses being ‘purpose-led’ could become ‘obvious’ over time?
The charity I co-founded over a decade ago, A Blueprint for Better Business, has a very clear view of what a purpose-led business is. It has two fundamental features. One is a purpose – a reason for being – which lives within the business and guides its strategic direction towards the better world arising from its success. Put simply, such a business sets out to address a problem or meet a need, and offers goods that are truly good and services that truly serve, thereby creating value for society. This includes delivering a financial return to investors. Profit is one vital outcome, but not itself the purpose.
Second, a purpose-led business sees itself as a social organisation that seeks to respect the dignity of people and have a positive impact on the lives of all those it touches, and on the planet. Such a business accepts that people have an intrinsic value, and are not mere instruments of business success. This fundamentally changes everything in how it acts, and the broader impact it has.
A purpose-led business sees itself as a social organisation that seeks to respect the dignity of people and have a positive impact on the lives of all those it touches, and on the planet.
For a company which has successfully performed within the dominant thinking of the US and UK in recent decades this is a double challenge. First it means moving away from the simple goal of maximising profit. The task now is not to maximise anything, but to take balanced decisions which enable the business to optimise for its purpose. Second, becoming purpose-led challenges the dominant view of people as atomised individuals motivated only by money, status and power.
Becoming a thriving social organisation instead depends on adopting a more realistic view of people – seeing that our relationships matter and that as human beings we seek meaning, have a deep desire to belong and to care for others as well as ourselves, and seek to grow through our work, achieving mastery and autonomy.
The power of a purpose led business is only realised when both these ideas about purpose and people are adopted. The strategy is then directed by the purpose, and the business becomes human centred, so switching on the latent potential of people to commit to a shared worthwhile endeavour. What is done and how it is done become equally important – as you can have a good purpose but still have a bullying culture, as apparently illustrated by the reported problems at the former B Corp Brewdog.
When done well a purpose led organisation delivers for business, society and people. It creates a better company (shared clarity and commitment, engaged people, stronger alliances as others with overlapping purposes); a better society (as the business has a fundamentally pro-social focus through its purpose and how it behaves) and better outcomes for people (who are valued and respected and find more fulfilment through their work). But it’s not easy to achieve these.
Becoming a thriving social organisation depends on adopting a more realistic view of people – seeing that our relationships matter and that as human beings we seek meaning, have a deep desire to belong and to care for others as well as ourselves, and seek to grow through our work, achieving mastery and autonomy.
The Bottom Line
When we started Blueprint ten years ago, the first question was usually, “What is the business case? How will this make more money?” There was a strong presumption that this was the only argument that would work to persuade more businesses to become purposeful, and a fear that a purpose-led business, having objectives different from maximising profit, was bound to make less money.
It is an interesting phenomenon – wonderfully explored by John Kay in his book Obliquity – that we often fail to achieve things when we aim for them directly. If you want to be happy, don’t aim at happiness – but rather at finding what you love doing and putting your heart into it. Well-run purpose-led businesses achieve financial success as one outcome, but are not obsessed with maximising profit.
As time has gone on a growing number of business leaders have stepped beyond this narrow focus on profit and become curious about having a different fundamental aim. They have recognised how this might unlock unrealised human potential in their business and its external relationships. This, I believe, is a far better starting point than ‘the business case’.
More leaders are encouraged to explore purpose when they see other businesses doing the same, as well as the growing body of academic studies on the success of purpose-led approaches. Books like Alex Edmans’ Grow the Pie can inspire confidence even in diehard economists.
Another development is that there is now more understanding that becoming purpose led is an adaptive rather than a technical challenge. There is no set of tools that can readily be applied to move from one state to the other, because the crucial change takes place in heads and hearts. It’s all about the frame of mind of people in a business, especially its leaders.
As time has gone on a growing number of business leaders have stepped beyond this narrow focus on profit and become curious about having a different fundamental aim.
Decentering A Business
When done seriously, becoming purpose led is a kind of de-centering at two levels. The business looks out at its stakeholder relationships within its sector, to explore what meaningful challenges can it help solve profitably. The mindset change here is that the business is no longer at the centre of its own thinking: it is orientated to the better outcomes it can create for others, where to collaborate and use its agency for change, how to mitigate environmental externalities and of course then how to capture some of that value creation and prosper itself.
And there is a second more profound level of de-centering. Leaders of purpose-led businesses have to create the conditions for others to thrive and do their best work. Seeing the business as a human system they are focused on both clarity of aim and on the quality of relationships needed to get there. It’s no longer just about the leaders.
These twin levels of de-centering require deep shifts in mindset, and neither can be imposed. They need to be invited and chosen at each level in the business.
This is where changes in the prevailing social and cultural context makes such a difference; shaping expectations of life and of the role business can play. It is no accident that a number of external factors are playing a significant role in helping drive the adoption of purpose led approaches.
One is the growing awareness of the necessity for action on both climate change and social inequality. Businesses cannot succeed in divided societies on an overheating planet, and by becoming truly purpose led businesses can contribute to rather than obstruct the system shift the world so urgently needs.
I’m struck by how often in conversation business leaders talk about their own children giving them a hard time for not doing more. More people want to work for (and buy from) organisations that are genuinely having a positive impact on people and the planet – and Covid has accelerated that. Becoming purpose led is an increasing differentiator in attracting and retaining the best people.
Changemakers: Investors And Regulators
More investors are recognising the alignment of purpose, long term value creation and risk mitigation. The further development of this movement among investors is crucial. But recently a huge amount of confusion has been created by the explosion of Environmental, Social & Governance (ESG) factors – and many now see ESG as a synonym for or replacement for purpose. It isn’t.
ESG considerations are useful ways to understand a company’s dependence on social and environmental factors and the quality of its governance. But they typically measure the impact of the world on the company – rather than the impact the company has on the world.
When done seriously, becoming purpose led is a kind of de-centering.
One analogy for the relationship between purpose and ESG is that between a car and its dashboard. The purpose sets the destination for the car, and being purpose-led shapes how it is driven. ESG indicators are like the dashboard, offering useful but partial information about progress and impact. But they don’t set the goals or the destination. ESG indicators are no substitute for having from the inside out a clear purpose and mindset about people and planet. These are what creates and drives a purpose-led company.
In the UK the 2018 Corporate Governance Code and the Stewardship Code that followed sent a useful signal by solidifying a commitment to purpose. This is a remarkable change from ten years ago and puts the regulator in an encouraging position. Although stronger mandates around purpose and better standardised reporting of non-financial information all help the system, there are still limits to what can be achieved by regulation.
To me, the hardest part of becoming more purposeful is the courage to adopt a human-centred view and to raise our expectations of ourselves and others. Moving away from the somewhat pessimistic Schopenhauer, we might take our cue from the optimistic young Dutch thinker Rutger Bregman who says in his brilliant book Humankind: “If we believe most people can’t be trusted, that’s how we’ll treat each other, to everyone’s detriment. Few ideas have as much power to shape the world as our view of other people. Because ultimately you get what you expect to get. If we want to tackle the greatest challenges of our time – from the climate crisis to our growing distrust of one another – then I think the place we need to start is our view of human nature.”
“If we believe most people can’t be trusted, that’s how we’ll treat each other, to everyone’s detriment. Few ideas have as much power to shape the world as our view of other people.”Rutger Bregman
The evolution of business is part of the evolution of society and there is everything to play for now. Taking a purpose-led approach is an option that can’t be imposed but is increasingly being taken by businesses wanting a better future for all. It’s not inevitable, but I believe it is possible – and we are already on the way there.