“There is one and only one social responsibility of business — to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game.”
This quote from Milton Friedman in his New York Times Magazine article in 1970 hardly seems like something businesses can contemplate in the world of 2016.
The world of 2016 is one where people have a pernicious lack of trust in business and other institutions (GlobeScan Radar 2016); where there is a rejection of established norms and practices, a strong sense of being left behind in the economy, and where many believe that their children face an uncertain future (GlobeScan Radar 2015). We see this manifested in things like the rise of populist and anti-establishment political figures in many countries, including most recently the rejection of the European Union in the UK, followed by the fractioning of society in the aftermath of the vote.
Consumers in 2016 are concerned about issues such as stagnant wages, lack of savings, home ownership, and how to raise a family, as well as environmental issues, job creation and economic development; and at the same time many perceive that large companies (who on the whole they distrust) are chasing massive short-term profits that only ever end up in the pockets of the rich.
All this has led to an important discussion about the purpose of business. Historically, business has been the engine of prosperity for society at large, and continues to be one of the most important catalysts of change in the world. In this context, can we really say that business’ purpose is really only to maximize profits above all other considerations?
Not long ago leaders of businesses would say things like this:
“We try never to forget that medicine is for the people. It is not for the profits. The profits follow, and if we have remembered that, they have never failed to appear. The better we have remembered it, the larger they have been.”
– George Merck, speech to Medical College of Virginia, December 1, 1950
To some this might appear radical, but smart business leaders are increasingly beginning to understand the importance and benefits of clearly establishing, demonstrating and communicating the purpose that their business has in society, beyond just making profits.
These leaders are getting ahead of the curve by reading the tea-leaves (often in the form of insights from studies they are conducting with us) of consumers, employees and stakeholders who are demanding and rewarding companies with purpose. These leaders are seeing the significant business benefits of articulating and engaging stakeholders with an authentic purpose. Simply put, they realize that purpose is a competitive advantage.
GlobeScan and Sustainable Brands conducted a public opinion survey in early 2016 in over 20 countries to assess consumer support for purposeful companies. (The detailed findings of our Public on Purpose report can be accessed here. GlobeScan CEO Chris Coulter presented these findings at the 2016 Sustainable Brands San Diego conference. A recording of that is available here.) In summary what the report highlights are the compelling reasons for companies to take purpose seriously as an important strategic endeavor:
1. There is a strong market for purpose.
When asked, almost two-thirds of respondents said that they try to support companies that have a “Purpose of making a positive difference in society through their products, services and operations.”
2. Shareholders value purposeful companies.
Retail investors and those people who own shares through a mutual fund, pension plan or other retirement fund believe that companies whose purpose helps to make a positive difference in society are more profitable.
3. Purpose drives trust.
In an advanced analysis of perceptions of large companies’ performance in a range of areas, purpose was found to be one of the most important positive drivers of trust.
However, the study also highlighted that the trend of purposeful companies is still in its infancy.
4. Purposeful companies are not easy to find.
While most people recognize there are purposeful global companies in the market place, a majority believe that they are few and far between.
5. Purposeful leadership remains open.
When asked to name a purposeful company (whether global or national), a majority of people (55%) in our global sample were unable or unwilling to name one. And when companies are named, no single company is named by more than 6 percent of the respondents in any region of the world.
This leaves us with an imbalance between the supply and demand for purposeful companies. Consumers want to engage with companies they view as having a greater role in society, but find it hard to identify them.
In part because they recognize the advantage that purpose can give them, increasing numbers of our clients are asking us to help them navigate their purpose journey. Whether they are seeking to drive success by crafting a new purpose or refocusing attention on a core purpose that has been forgotten over time, these companies are committed to the authenticity of the journey.
For whatever a company’s purpose is, it has to be authentic. Purpose can and should be a way to recapture the public’s trust, not damage it further with inauthentic purpose-washing.
This is why our approach to purpose starts with a clear definition:
“An explicitly stated and authentic belief that defines how the business creates value for itself and society. By aligning everyone within the business toward a common goal, it directs business decisions that determine the way value is created and guides how the company engages its stakeholders.”
And it is also why our approach is evidence-based to ensure that the outcomes of a purpose journey deliver a purpose that is explicit, directive, differentiating and is integrated throughout the entire business. We use evidence-based research and engagement techniques to help:
- Identify, express and position the purpose internally and externally;
- Engage internal and external stakeholders to facilitate the understanding, approval, integration and advocacy of the purpose;
- Measure and monitor the impact of the purpose on trust and core business values — reputation equity, brand equity and talent equity.
An introduction to GlobeScan’s purpose practice from our CEO Chris Coulter:
