In the blink of an eye, COVID-19 has turned the world on its head. With many aspects of our lives significantly altered, there has been much talk about taking advantage of this shake-up to “build back better”—towards a more caring society, one that is other-centred.
While playing a critical role in our economy, companies are a part of civil society, just as the people under their employment are.
We have come to believe that the primary objective of the firm is to maximise its profit, when in reality, the single most important output of enterprise should be creating value for all stakeholders—including the domains of the environment, society and governance (ESG). When companies seek sustainable value creation, they realise their true purpose.
In truth, the two are not mutually exclusive: companies that pursue purpose often see profit rolling in too. According to the Kantar Purpose 2020 study, brands recognised for high commitment to purpose have grown at more than twice the rate of others over a period of 12 years. They are also more resilient and adaptive to crises—critical qualities in an increasingly volatile world.
But what makes a business purposeful?
Firms must realise that it is their commitment to corporate purpose, and to those who contribute to creating the common purpose, that will shape their success.—Colin Mayer, Peter Moores Professor of Management Studies, Saïd Business School at the University of Oxford
Placing purpose alongside profit
Let’s not put up any pretence: profits are the lifeblood of business. Companies need to make money to sustain and grow. But myopic focus on profit maximisation is losing sight of the forest for the trees. Companies have to recentre themselves with purpose at the core.
Leading communications services company British Telecom (BT) recognised the interconnectedness of small businesses and larger ones, and stayed true to its purpose: “we connect for good”. In its corporate social responsibility (CSR) efforts, BT asked small firms to find out their biggest worries during COVID-19 and launched their Small Business Support Scheme in response, providing assistance in:
- connectivity—funding high-speed business lines and payments solutions,
- cash flow—offering flexibility in customer bill payments while accelerating its own to suppliers, and
- confidence—delivering digital skills training.
By leveraging your business’s unique expertise and resources, you can do well and do good at the same time, unlocking true value and creating social impact as part of your usual business operations.
Innovating to create solutions, not problems
As experts Colin Mayer and Bruno Roche puts forth in their book Putting Purpose into Practice: The Economics of Mutuality, “the purpose of business is to create profitable solutions to the problems of people and planet. It is not to profit by creating problems for people and planet.”
So far we have seen too many cases of the latter: manufacturers dumping toxic wastewater into rivers and oceans, factory workers clocking long hours in unsanitary and unsafe conditions. The list goes on. Planned obsolescence and hyper consumerism have also pushed us towards a “buy, buy, buy” throwaway lifestyle that is wasteful and unsustainable.
Unilever, a top proponent of corporate purpose, is challenging these practices. Guided by its purpose to “make sustainable living commonplace”, the consumer goods giant launched the Unilever Sustainable Living Plan ten years ago. It has since improved the health and well-being of 1.3 billion people, as well as significantly reduced the carbon emissions, water abstraction and waste through its products’ life cycles. It has also enhanced the livelihoods of women, smallholder farmers and retailers all around the world.
Driving inclusivity in the business ecosystem
Taking a step back, how did the misconception that businesses exist solely to make profit even begin? 50 years ago, economist Milton Friedman proclaimed that a firm’s sole responsibility is to serve the interests of its masters: maximising shareholder returns.
What the Friedman doctrine failed to account for is that shareholders are not the only stakeholders of the company. Companies are staffed by employees, procure resources from suppliers and the environment, provide goods and services to customers, establish ties with governments and other businesses, as well as operate within communities.
Similar to natural ecosystems, the actions of each member have an impact on the rest, which ultimately affects the health and value of the whole. And so, 181 CEOs declared in the 2019 Business Roundtable Statement that “the purpose of a company is to serve all its stakeholders”.
Ernst & Young (EY) has started to embrace this notion, through its CSR programme EY Ripples. From empowering marginalised youth to inviting the other Big Four firms to collaborate, the professional services company is driving social impact and delivering its promise of “building a better working world” to all its stakeholders. EY is also taking part in the Singapore Together Alliance for Action on Corporate Purpose, a people-public-private partnership led by the National Volunteer and Philanthropy Centre’s Company of Good, to design a national framework and blueprint that enables companies to effectively align purpose and profit to become a force for good in Singapore.
The road to recovery from COVID-19 may seem long and winding, but companies regardless of size and stature can take the first steps towards a better future and a better world. And as with any journey, heading in the right direction requires a well-defined purpose.
If your organisation would like to take the next step on its journey of pursuing purpose in business, write in to [email protected].