Embracing Purpose: The Heart of Strategy in the 21st Century
Blog post was written by Mike Rowlands, President & CEO of Junxion Strategy.
Sep 22, 2021
Among the major trends in business in 2018 was the call for companies to embrace social purpose. Starting with Larry Fink’s widely cited letter to CEOs, momentum built as educators, consultants and conveners leapt to position themselves as the thought leaders of ‘the purpose revolution.’
On January 4, 2019, just shy of a year after Fink published that letter, PhD candidate Maria Hengeveld, a Gates Scholar at the University of Cambridge, published a piece in The Nation: Big Business Has a New Scam: The ‘Purpose Paradigm.’ It was an unapologetic takedown of the theme that carried such momentum in 2018.
Hengeveld ridicules the hidden presumption in Fink’s letter that business is capable of solving for massive, complex, global social and environmental challenges. She rejects the very possibility that “a new and more humane kind of capitalism” is emerging, viewing it, instead, as a suite of “empty promises and self-serving slogans” designed to appeal to millennials and assuage their widely felt mistrust of business.
Notwithstanding her curious dismissal of millennials’ agency in their own lives, or the failure to contemplate that with right guidance and perseverance, right intent can be the start of right action and progress-making, Hengeveld’s piece is a worthy read. So too is Winners Take All: The Elite Charade of Changing the World, the much longer polemic by former New York Times columnist Anand Giridharadas. They’re but two of a long and growing list of writers that are at once advocating for social change and calling out against business taking the lead.
They’re not wrong to be cautious or to warn of potential conflicts of interest. But clearly business does have a role to play. And even the University of Chicago’s Booth Graduate School of Business—the academic home of the vaunted Milton Friedman, who 51years ago this month published his famous piece on shareholder primacy—agrees that social purpose is not only good for society, but also good for business, including shareholders.
Businesses are part of society, not separate from it.
Like all leaders, business decision-makers are being pressed to contribute to solutions—and many are willing to step up. It is complicated territory to navigate and can lead quickly to the completely reasonable and fair critiques of thinkers like Hengeveld and Giridharadas.
So what should the business sector do? What should the purpose revolution entail? How should leaders ‘show up?’
There is a role for regulatory policy to push business to do better. And there’s space for proactive work.
Wise business leaders look out beyond quarterly earnings (as Fink and others advocate) to consider the needs of their stakeholders—people dependent on or influenced by their businesses’ operations—and the planetary environment we all share. In the face of massive, global problems like climate change, this is a moral imperative. And yes, it’s also good business.
Three Imperatives All Leaders Should Consider
Businesses must assess and account for their material impacts and identify priority areas where they can improve. One framework for such an assessment is the B Impact Assessment—a holistic, comprehensive assessment of a company’s social and environmental performance. While many complete the Assessment in order to become a Certified B Corp (like Junxion), they don’t need to certify to get valuable insights from the Assessment.
We frequently see our clients identifying glaring gaps in their social or environmental performance when they complete the assessment. This gives them the roadmap to improve. By repeating the Assessment every year or two, businesses can assess their improvement and continue to make progress.
Collaborate. No complex problem was ever solved by a single actor.
Businesses must share what they learn. Transparency is an invitation to collaborate, and no complex problem is ever resolved by a single actor. Sharing progress towards clearly articulated goals—including talking about challenges—invites feedback, ideas for new approaches and opportunities to do better.
Communities of practice for socially responsible business have emerged around the world. Our client, Social Venture Circle, is one leading group, where entrepreneurs and business leaders connect with the specific intent to build relationships that bridge organizations and sectors, and to learn, together.
Businesses should issue reports on their impact and footprint. Standards and guidance for reporting on progress are published by the Global Reporting Initiative and the Sustainability Accounting Standards Board (SASB). With the news that we have twelve years left to take significant action on climate change, more and more leading-edge companies recognize they share accountability to the carrying capacity of the planet and genuinely commit to a transition that meets our planet’s needs. That context-based reporting and transformation agenda is being pioneered by Reporting 3.0, which Junxion supports.
Lead by Taking the Long View
For business decision-makers that wish to lead this shift toward the more purposeful enterprise, purpose can’t just be a marketing exercise or recruitment campaign. Those are precisely the mistakes that pique the growing mistrust of institutions. Instead, social purpose must be a fundamental element of strategy.
We all know real success isn’t measured on a quarterly schedule!
Larry Fink was right: one way to ensure a social contribution in business is to ensure we take the long view of success. When Unilever’s Paul Polman announced to the markets that the global conglomerate would no longer publish quarterly earnings reports, his shareholders were aghast… but they got over it and the business continued to thrive. That’s long view thinking, but as Hengeveld rightly points out, it’s hard to ensure this same courage and consistency is present everywhere.
Patagonia’s celebrated founder, Yvon Chouinard, conceded that “Living the examined life is a pain in the ass.” The outdoor clothing company has always been dedicated to using business to save the planet: its mission statement ends with the words “use business to inspire and implement solutions to the environmental crisis.” The company’s leaders know there’s always more to do, so they just keep going. And the company continues to grow, while enjoying a widely recognized, global reputation as a sustainability leader.
However, even Patagonia didn’t jump straight to glossy ads and clever promotions! First, they went through iterations of planning, innovation and hard work.
Plan on Purpose
In our work with clients keen ‘to build a business on purpose,’ we begin by working with them to define and articulate a purpose beyond profit—a grand vision for their work and their legacy. This isn’t some lofty aspiration disconnected from operations. Many organizations set goals at ‘head office’ that never get traction in their local operations. On the other hand, many of the best ideas emerge from local operations. So if you’re leading your company’s purpose initiative, be sure to include people throughout the organization to establish a cohesive purpose and vision for the whole.
Next, identify ways to measure your impact. As the old saying goes, ‘what gets measured gets done.’ Finding the gaps between aspirations and real performance is the first step to activating purpose; closing those gaps more often than not enhances social and environmental performance and financial returns. And if you’ve started by having a ‘conversation’ across the whole enterprise, it’s likely you’ve already found some of the solutions, hidden in plain sight.
Brand: The public face of strategy. Tell the story of your pursuit of purpose.
Only then should you begin to tell your purpose story. Hengeveld’s great service is her insistence that claims of ‘purpose’ not be taken at face value. Storytelling in this context must go deeper than catchy slogans and flashy campaigns; it must be anchored in real impact data. Often, these are impacts stakeholders already know. Smart communicators share the living story of progress, celebrating success while also inviting others to help solve for the inevitable challenges and setbacks they face along the way.
Are you ready to really have the conversation about ‘purpose?’ Are you starting to see your balance sheet as the platform on which you’ll build real meaning? Are you starting to imagine a better way of doing business? The leaders of the movement toward purpose-driven business and a purpose-driven economy are among countless peers and allies around the world who are redefining success and rebuilding economies to serve the common good.
Are you ready to do business better? Let’s Be Audacious, Together….
Mike Rowlands is President & CEO of Junxion Strategy, an international social impact consultancy that helps leaders build the success stories of the next economy—one set on foundations of environmental regeneration, social justice, and shared prosperity. Reach him via email@example.com.