On the 6th June we gave our stage to two of the most purposeful leaders in business today, Sacha Romanovitch and Rick Ridgeway.
Rick Ridgeway is Patagonia’s VP of Public Engagement, an extraordinary climber, and is a force behind the Sustainable Apparel Coalition, Worn Wear and many other purpose driven campaigns. Patagonia embraces environmental activism to the extent of asking its customers to buy less and reflect before buying its products. A pioneer of the B Corp movement, Patagonia is growing quickly with revenues approaching $750m in 2015.
Sacha Romanovitch has attracted a lot of attention since becoming CEO of Grant Thornton UK last year. She has initiated a purpose-led change management programme, widened employee ownership and sought to bring society into core business decisions. Grant Thornton’s Vibrant Economy agenda is pioneering new ground in co-creating ideas with businesses, communities and the third sector.
Whilst on different sides of the Atlantic, Sacha and Rick share thinking on purposeful business. Through a conversation with Axel Threlfall, we heard their thoughts on issues such as;
This was a rare opportunity for leaders, entrepreneurs and sustainability experts alike.
As consumers and as employees how far are we willing to go and what are will willing to forego. Would next generation that are looking for careers with a purpose need to accept trade-offs (smaller salary or reduced benefits)? As consumers are we really willing to pay any extra for purpose?
· From a consumer standpoint one water company perspective is that its customers would be happy to pay if it invested in environmental issues as long as that’s part of core operations management, but not if it went above and beyond into philanthropy. One view is that most people would probably “not pay if there was no purpose, but will not pay specifically for purpose”
· Practically it may be that not everyone can afford to pay if purpose came at a higher price e.g. budget shoppers on minimum wages. In an efficient world lack of purpose would be more expensive as those most polluting would have to pay a high external cost for the damage of their activities
· Paying for purpose (or even purpose itself) may also be a generational thing, with most baby boomers and generation X not being used to considering environmental and social issues and preoccupying themselves with consumerism instead. This could be because the tangible environmental impact had not yet accumulated 40-50 years ago
· As employees, it is clear that many of us are purpose driven otherwise a lot more of us would be in pure profit-maximising sectors. This may mean some of us are willing to accept trade-offs including lower pay. However the race shouldn’t be to the bottom but to the top, as there is increasing evidence purpose and profitability can go hand in hand. For example, by increasing companies’ ability to attract “top” talent
· Paying for purpose is also a visionary thing and one part of the task is helping people see into the future. For example, Victorians didn’t necessarily see into the future so now we have a lot of infrastructural heritage we need to completely rebuild. Likewise, some companies may stop selling certain products if they go against their long term purpose: a health centre withdrawing its sunbeds because of their associated health risk
· Companies derive competitive advantages from engaging communities, running ahead of regulators, setting best practice to keep customers and investors on site. However the reality is that from those companies that have a purpose only a small number have a strategy to achieve it. Those that stand out are some companies with authentic leadership, well-organized and strong culture able to deliver purpose, and those with purpose that transcends through time and space (e.g. “Everyone is better off”)
· Investors themselves are also increasingly asking for purpose in ever greater numbers and asking ever tougher questions
How can a business ensure it has a true social impact as well as a strong brand purpose? Should a business have a strong social purpose, as well as a clear brand purpose, or should these be one and the same thing? Explore how to stimulate action led delivery and true social impact out of purpose.
• What is the material issue that is relevant and important to us – as a broadcaster it was about skill – e.g. about communicating to people and up-skilling young people especially in tech.
• In hotel industry talent and employees are the most important thing - can't have a beautiful hotel without a workforce
• How do you use “purpose” as a strategic tool to define what a company does and doesn’t take on?
• Defining one purpose is difficult – especially as a charity because we have a lot of social impact – but it differs massively depending on the project
• We have a broad purpose which means there’s a lot of manoeuvring which can be an issue as it's unclear what we really focus on
• It’s difficult to have a one size fits all way of measuring the way a brand creates change (behaviour or otherwise) furthermore having many different brands that serve different needs means there is no one thing we can measure which applies across all
• There are lots of links to make to purpose and it’s hard to decide what and how many programs to support
• Balancing what employees like to do versus material issues can be difficult and it often doesn’t align
• Wider business purpose versus many brand purposes can be confusing and difficult as some don’t match – unlike Patagonia we aren’t able to stop making them, we’re not ready to do that yet
• What is the purpose of measurement? Some stuff you can measure some stuff you can't and the stuff you can't is what you need to understand
Red Flags (warnings)
• It can be easy to get into a space where you just like your communicating rather than actually delivering change (i.e. purpose wash)
• Preaching to the converted – a lot of people don’t get the message
• Difficult when you purpose is being invisible
• Having a purpose is what attracts people to the business
• The purpose doesn’t need to hit all the categories you’re in
• Utilize employees and involve them in deciding what the purpose of the company is
o This helps Employee engagement and people love to get behind ideas
• Millennials and the changing purchaser are going to be the key drivers in the future
• Believe in better sky – helped us with sustainability – setting long term targets in terms of sourcing, sustainability, etc wasn’t described as a purpose was described as an Ethos
o It’s important to show the social impact, otherwise we can be accused of green wash, so we needed strong targets e.g. first carbon neutral, build the skills of 1 million people, etc
• Alara - most sustainable food manufacturer on earth – our first measure of which focuses on social impact is great parties we involve communities, customers, suppliers, local government and have a big party - everything is free and it generates social cohesion
• Hilton Worldwide - Ran a “Purpose console” at a global level – a brainstorming workshop to understand what employees felt the purpose of the business was
Is it only the companies that have a privilege of profits can afford having a purpose? Or is increased revenue a result of safeguarding reputational and supply chain risks by investing into natural social capital? The roundtable will explore interrelation between natural social capital performance and profitability.
1) What comes first is an unfair questions for those that work in sustainability.
The Chicken or Egg argument does not apply to any business decision: is it marketing that is driving profitability or is it the fact that a company has money to spend that can afford to spend on marketing?
2) There is a proven link between profitability and sustainability. 4.8% difference between high & low sustainably firms annually when looking at a portfolio that includes both over a 20 year period. There is causality between engagement and sustainability for profits to be driven both in the short and long term. Most business still believe in the separation fallacy whereby economic decisions are independent of ethics decisions. On the contrary, these are interlinked. It is common practice in finance to explain and justify numbers on a set of assumptions, then why not apply to same logic to sustainability decisions? Not only operationally but also in term of stock market performance combining both business decisions with the purpose of sustainability result into outperformance of the business.
3) Companies that are looking to drive sustainability and are founded on such purpose have a 4 pillars framework for driving decisions:
BOARD OF DIRECTORS Sustainability as a form of responsibility of the board and a sublevel of the board that oversees their work
Incentives that reward performance based on environmental and social governance goals changes the game. If people are only motivated on financials they will respond accordingly.
STAKEHOLDER ENGAGEMENT it needs structure rather than ad-hoc for sustainability decisions to work. There is a process in place on how to report and engage all party concerned into the purpose of decisions. The board is kept informed and managers are trained to ensure that information flows to the board. Joint targets are set.
DECISION MAKING HORIZON Ensuring that your investors are in for the long-term is key. There is no either or argument round short/long term goals: the long-term is nothing else but the sum of all short term goals.
TRANSPARENCY & ACCOUNTABILITY Mechanisms are in place to collect data on SDG do you have reporting in place that support the sustainability incentives. These elements are vital for people to buy into the purpose of the strategy and driving it. Equally, investors need evidence to believe that the company will deliver on its targets and goals which have been linked to performance forecasts. Credibility is fundamental.
Transparency, disclosure and implementation targets. It is not all about actually implementing the business decisions but also having reporting and measuring mechanisms in place that tells a company how if these are met and how far the company has gone in achieving them as well as how feasible it is to get to achieve them.
Which sectors – if any - should make climate change central to their purpose? We’ll pool thinking on the latest initiatives that take carbon into mainstream decision-making - shadow pricing, connection with talent retention, divestment risk, using peer pressure etc. Should regulation be increasingly seen as a side show?
Carbon needs to be aligned to wider business purpose:
o Making the subject feel “local” is essential to enthuse and involve parties and employees who might otherwise struggle to relate to the world of climate change and sustainability.
o In hospitals – making it about keeping the temperature and light conditions right for the patient (which aligns with a more sustainable practice)
o In essence - Avoid explicit carbon targets that aren’t aligned to core business drivers. Having a completely remote target.
o The purpose needs to feel REAL and not CONTRIVED.
Responsibility is on every level – CEO to consumer
o A drop down approach can help sustain and drive change
o But a support network of employees invested in the same values is crucial
o Real, substantial change, needs to come from the top.
o A grassroots approach isn’t enough.
o Top-level involvement is definitely needed in order to engage a whole supply chain in the sustainability drive
o Making sustainability a core value rather than a separate department is the end goal but is unlikely the starting point.
o Often, this is attained at the end of a journey from CR department, to the dissolving of that department and the CSR values becoming embedded in the company.
o Time is crucial – the process and values evolve steadily
o There is some responsibility with the consumer still however.
o The end goal is to build trust and expectation in brands – the consumer would no longer need to be told about that company’s policies, but would just KNOW they source/manufacture in a sustainable manner.
o Movement in the market and more wide spread support will make it easier for leaders to ACT.
o Long term and ambitious goals can outlive a leader, but can only be set by the leader
o Thinking ahead of legislation and anticipating regulation
o The drive to be a leader in the sector.
o Thinking in the long term
o How to eventually reach that quantitative data which turns the sustainable value into a revenue generator and is financially attractive.
o Tangible data and benefit in the long term.
o Creating an ambitious and positive long term target will encourage innovative and collaborative solutions, whilst changing sustained ways of working
The B Corp movement has shown that more and more businesses are willing to openly share and collaborate around their purpose driven objectives in order to amplify their efforts and show the world that business can be an incredible force for good. How easy is it for businesses to collaborate around a shared purpose?
Collaboration among peers
Collaboration with peers can face internal barriers. A lot of companies are reluctant to share too much information on existing practices or new innovations due to the fear of losing its intellectual property. Hence, collaboration is often viewed as a threat and internal legal teams can represent a barrier to effective collaboration, even on non-commercial topics.
The solution is that mind sets need to be changed to not only perceive the risks but to identify and embrace the opportunities. Strong business cases are required to demonstrate the benefits of collaboration to internal teams. Alongside the business leaders, team champions can help to “spread the message”. The HR team was mentioned as an important area to start to embrace sustainability and purpose during the recruitment process. Online platforms can be the enabler for collaboration and can potentially help with IP protection.
Essentially, collaboration needs to be viewed as a competitive advantage because at the end of the day the problems are too big to solve alone.
To encourage colleagues to execute job tasks with the company’s purpose in mind, to be more transparent and to seek collaboration can require a lot of effort. The aim is to make the purpose part of everyone’s job. A company should star with a mission or purpose statement. It is important that corporate values resonate with employees’ values and that sustainability initiatives are aligned with a company’s business operations – it has been shown that it helps to increase employee retention. Additionally, sustainability missions, values and purposes should be aligned with performance measurement. As this is currently not the norm, a change in performance KPIs is required to encourage change. This will help to communicate expectations and guidance principals can help to guide decision making.
Collaboration with suppliers
Collaboration across the supply chain is more common and advanced. Platforms such as SEDEX create more transparency and help foster better relationships. Such platforms help spread a common message to suppliers that environmental and social credentials are considered in the procurement process. The sustainable development goals were mentioned as a driver for better business conduct and collaboration across the supply chain. But it was also asked whether goals, whether set my individual organisations or larger bodies, are radical enough and will bring the necessary change within time.
Collaboration with customers
This may be the least advanced area for collaboration. It was acknowledged that a retailer or wholesaler is the intermediate between the manufacturer and the end consumer and hence should take responsibility to communicate expectations.
Employees are the main asset of any business. So why won’t you ask them what actions they are already taking that could contribute to business purpose? How to leverage your colleagues’ ideas and understanding to feed into a bigger corporate purpose. Understand what change you want by knowing how colleagues are acting.
Employees are the main asset of any business. So why won’t you ask them what actions they are already taking that could contribute to business purpose? How to leverage your colleagues’ ideas and understanding to feed into a bigger corporate purpose. Understand what change you want by knowing how colleagues are acting.
The consensus that emerged from the round table was that in the majority of companies represented at the table, “purpose” was not defined in a way that cultivated staff -buy in. If there were a greater engagement with employees around the core purpose to a business, the idea of working to create a meaningful legacy would be easier to articulate to employees. This, it was widely agreed would increase staff retention as well as allow companies to attract a more ethically aligned, and ultimately, candidates of a higher calibre.
Overwhelmingly, Rick Ridgeways paradigm and case study inspired table attendees to push for greater internal stakeholder engagement. The idea that if a mission statement and purpose was created by those in the organisation, there was a greater likelihood that a collective and conscious effort would be made to meet the expectations set out in the mission statement.
In many instances, employees were already active in charitable causes that aligned with the business’s purpose. But a lack of exposure to the businesses mission statement and wider strategic CR goals hindered collaboration and engagement.
Rick Ridgeway’s piece on flexibility in the contracts of employees to reflect the purpose of the company was particularly profound. Additionally, there was agreement that sustainability was far more likely to be embedded in the culture of the company if it were to be a function of the majority of roles. This “decentralisation” of sustainability, espoused by both Sacha and Rick proved to be well received by the table.
What is an effective tool to get energy into boardroom conversations? How effective are peer pressure initiatives such as the RE100? Connecting with the Global Goals? How about fear of missing out on innovations that could ultimately help companies sell more stuff? Which companies do you admire and why?
What is the tool or message to get energy into the boardroom?
• Comes down to cost and helping the board understand savings
• Opportunity of how you can get the business talking and innovating and get them working together
• There was a strong opinion that if it is not a material cost or risk, it would be a failure if it did actually go to the boardroom
• Suggestion that people should be using tools like The Curve because it save hiring people and proves the business case immediately
• Higher chance of energy related topics entering the boardroom if sustainability is high on the agenda. i.e. IKEA
• Don’t believe it will get to the boardroom because it is a cost that sits in facilities and procurement and will stop there
• You can break through to the boardroom by knowing the right people.
• Less of an operational concern, or cost reduction, more about slipping behind in the market place on energy related innovation
• Find a message that gets to the board; consumer confidence, reputational risk, cost savings
• At this time boards aren’t focused on sustainability
To what extent are companies influenced by externalities?
• Compliance is a driver bringing energy to the discussion
o Auditing can be a blessing in disguise
• Google and Apple have long term energy contracts
o When influential companies do something, people will follow because they don’t want to be left behind
• Company and market factors play a greater role than legislation
o Legislation does help sweep up the laggers
• Self-regulation is key
• SDGS have played a part in creating a baseline for progress
• Takes an outspoken leader to make change, put your money where your mouth is and just do it
• Not about following SGDs, it should be about having these things already embedded in your business case
• Question posed: “if it’s from the bottom up, rather than boardroom down, how are you supposed to get funding?”
Can “FOMO” or the fear of missing out actually help companies sell more?
• Competition makes a company more innovating and energy efficiency can help drive costs down
• From a consumer point of view, you would want to buy the most up to date product because you also don’t want to be left behind
Example of innovative ideas on how to help the consumer use less by an energy company
• A smart meter that only provides specific number of units of energy that month
o Incentivises to use less and can be rewarded with discounts if you come under the maximum
o Creates positive behaviour change and routine in using less energy
o Will evaluate what you actually prioritize when it comes to energy consumption
How can growing calls for businesses to explain their purpose increase ambition for environmental programmes? What do you think of Patagonia’s mission statement to "cause no unnecessary harm, use business to inspire and implement solutions to the environmental crisis”?
How many businesses have such purpose statements? Quite a rare thing to stay true on a daily operation to your corporate mission statement.
Transparency, governance and purpose should all work together.
Only 5-10% companies care about purpose, in the current economic system profits take over. The tension between those two makes your initiatives better. The tension is good and it creates innovation.
Purposeful companies get the best talent. How does it impact financial industry? Some say finance has issues with attracting the talent due to lack of sense of purpose. Although Fintech accelerators help to get people in and get a good balance of new and experienced people.
In fashion industry there are a lot of young buyers that come from the fashion schools that question purpose and sustainability commitments at your organisations. Execs start seeing different conversations they haven’t had 5 years ago. Sustainability people now speak with marketing and HR directors to discuss what strategy they are developing now. They haven’t done it 5 years ago.
Society’s expectations are now changing.
Big data drives that change too. Now there is more transparency. With social media anyone can just ask you a question.
People believe in their statements, but don’t always know how to make it happen. If we’ve earned all the money we’ve wanted, what would you do?
Grant Thornton started the conversation: “What business are we leaving to the next generation of partners?”
Purpose doesn’t need to be that qualitative. Big data might help to have more genuine KPIs. Examples: smart buildings that monitor CO2 levels and put more oxygen in when needed, so people feel more productive.
Data is still missing from many suppliers, which makes it harder for companies to make right decisions.
Collaboration helps to get the data and solutions for some major problems in supply chain and lobby governments.
When we talk about purpose it’s hard to get traction on purpose and environment, it’s usually around social. It’s harder to find connections with the environmental issues rather than with the social and emotional aspects.
Our current model of profit maximisation would suggest so. But what if the goal of a business wasn’t profit maximisation but purpose and we viewed profitability as a means of achieving a purpose? Could businesses be dissolved once the purpose is achieved and new ones established? Might audit change to examine both purpose and profits?
If we achieve our purpose as a business, should we dissolve that business and try something else?
• Sector by sector is going to have a different purpose, depending on the sector, what they make may or may not be purpose. If your sector defines it, you have to continue to make those products
• Open ended purposes, where you are never actually going to get there, might actually allow you to continue to drive forward; the very fact that purpose is hard to measure, is possibly what actually gets people up in the morning
• We have this idea that corporates are forever, but they aren’t really
• What is going in people’s lives? What are the new solutions that they need? Forget why the business exists, create purpose from what people need
• I care less about my company’s purpose, but what about the everyday brands that consumers care about (beer brands) I need a hero - Heineken
Different brands have different purposes
• Grocer values - ingrained in them, supposed to be what makes them unique, Loblaw’s has the same ones (strategic partnership with them - but our values still don’t make us different), they become so generic, they don’t matter anymore
• Purpose shouldn’t necessarily be about your business, it should be about larger business, growth, success, etc. - they are all obvious
• NFP - Charities tend to compete rather than collaborate and have really on-point messages, but what do they really mean?
• Business cannot just continue to carry on in the long term without tripping up - so we have to have purpose to try and fix these issues
• Purpose - It’s quite fashionable right now, but it’s always been around. We have to get better at storytelling.
• What actually is the public interest?
• If your company ceased to exist, what would the world miss? Demonstrate how you are meeting the needs to someone outside of the company
• Profit is the mechanism, but what do you do? How do you get there?
• Large retailer talks about making a “sufficient” profit, consistent with achieving our principles. We don’t employ people for the sake of making profit, we employ them to do purposeful work and need a profit to have a successful business
B-Corps - they don’t have to choose between the two - is this the road to innovation
• It’s about finding the right investors - we might not make as much in the short term because we are focused on the long term - if you don’t like what we are doing, take your money elsewhere
• For a B2B business, everything that we do is driven by customer requirements - change for them will have to be driven through those customer requirements
• Moral Compass tool - every lead has to go through this - is the brand making the world better? Is the project going to make the world a better place? Every person in the studio has to vote and agree (certain level). Are we measuring the number of people it reaches? The impact on the organization? What’s the level we need to hit? Very specific about what we want to work on.
o But aren’t you the best people to work with those “evil” companies and help to make them better? Is that where we need the most help? The moderate industries are already thinking about it
o “Passion Products” pick a bad area and just do a project - not accountable to their money - try and come up with a way to fix it, but what about Paddy Power?
• Purpose is a bit different to just sustainability management - sometimes have to forget about the business case and just run with the project
• Sometimes the ideas that get the most support are the ones that people are really emotionally attached to - pet project of the CEO - but purpose needs to come from the individual, and if someone just pushes it through without really backing up why they are doing it, it won’t succeed
• It’s not about ticking the reporting boxes. Numbers are really important, but they are not everything. Focus on why they exist and how can you change them?
• Reporting is not the endpoint - how do we change the way people think about their impact and their dependency on the environment - Coca Cola giving up their data to help other companies with their purpose
We discuss the symbiotic relationship between Purpose and Storytelling. What comes first? And can you have one without the other? Please come prepared to tell your purposeful story.
The aim of the roundtable was to show the symbiotic relationship of stories and purpose.
• Good stories about purpose help motivate people in their day-to-day lives at work.
• It’s also about the way the story is told. Sustainability tends to be at the bottom of organisations’ lists, as people often think it’s too serious. By injecting a bit of positivity or even comedy into the subject, people listen more.
• Simple messages and a clear story is the best way to engage people on purpose.
• To create that story you need to also listen to others and find the story together to make it even more meaningful.
• By finding ways to link personal purpose and business purpose, people are able to invest in an organisation. This can work across all levels of the organisation, as people’s fundamental values are mostly the same.
• A good story on purpose helps make your business well known. Just look at the founding myths surrounding Facebook and Google and how they have been retro-fitted to their stories of purpose.
• It gets harder when small companies with strong purpose get bought out by large companies who don’t share that purpose. But it’s clear that big organisations are learning that strong purpose is important to success.
• The question is whether customers care about purpose, do they choose products with this mind? Evidence suggests that younger people do but it’s less important to older generations.
• If organisations want to continue to be successful in the future they need to tell good stories about their purpose.
• It’s clearly becoming important. There are many businesses with similar purpose competing against each other. But it’s becoming increasingly challenging to make yourself heard in a noisy digital world. How can you tell your story of purpose louder than others?
• Every business can tell their story of purpose well. They can all be as purposeful as organisations like Patagonia or The Body Shop, it is just about telling their story well.
Whilst the value of being purpose-led is well documented, most businesses struggle to take what they see as a leap of faith. How can one building on existing vision and values to start the journey? What will inspire the C-suite to consider purpose into core decision-making? Where is the ROI?
Roundtable topic: Whilst the value of being purpose-led is well documented, most businesses struggle to take what they see as a leap of faith. How can one building on existing vision and values start the journey? What will inspire the C-suite to consider purpose in core decision-making? Where is the ROI?
How do you take vision forward?
- Many organisations make a vision statement and do not move forward from that point i.e. there is no mechanism for fulfilling the vision.
- The purpose has to be tangible setting out a vision of what the company can realistically achieve. The vision (or at least the values that support it) has to be SMART.
- Some companies spend a lot of time thinking about the strap line for the vision statement, but not so much time is given to implementing the vision statement. It should be more important for companies to get people to implement the vision, instead spending a lot of time on preparing the statement – the real benefit come from implementing the vision.
- The purpose is likely to be more successful if it has direction and is embedded into the culture of the company; everyone in the company needs to be aware of the purpose.
- Companies should "walk the walk" i.e. companies should do what they are supposed to do as described in their vision statement.
- How do you create that attitude and behavior amongst people so that when a vision is set then it gets done?
- There appears to be expectation for millennials to push things forward, but they should not be relised upon solely. People in senior positions should start taking actions and not delay this because they feel millennials will deliver it.
- Vision should not only be measured internally, but should be also be externally measured.
- Sometimes the company culture does not create an environment for achieving the vision. The company culture is fundamental for achieving the purpose; the company culture should enable people to achieve the purpose.
What inspires CEOs to have purpose and what is the ROI?
- "We want to get something and the only way of doing that is to change". CEOs want change for reasons that they can relate to.
- The challenge for most CEOs is having a long term vision as most CEOs want short term results.
- Purpose is challenging to financially measure, and hence why most CEOs address concerns on areas where it is easier to financially measure e.g. risk.
- Should CEOs get involved in achieving the purpose? For example should CEOs directly get involved in disaster relief project or should they just donate money to a charity?
- For a business to be sustainable it has be have some ROI.
- As an example, one alcohol bevarage company developed an education campaign on raising awareness about problems with drinking alcohol. This has most likely affected their bottom line, but that is not the reason why the company did this campaign. The company's managers felt it was the right thing to do.
- In the end what does the business get? Core of a business case is what's the financial gain? A real business case should refer back to the overall purpose of the business.
- As an example, one company signed up to be a living wage employer. From a financial view it made no sense for managers to sign up to this, and from a purpose view it probably didn’t affect the quality of product if living wage was increased. But one of the company’s values was to do the right thing and hence why it increased to living wage.
- Sometimes if senior managers disapprove with decisions then you just need to tell them that it's the right thing to do.
- On most cases the purpose and business strategy are not in line; it seems that the business strategy focuses on increasing revenue stream, where financial reward is more important than the purpose.
- A business case isn't a case for something, and sometimes the 'business' part gets priority. It shouldn't be about the business, but about the case.
- "A question, do you want to be in the world or be the best in the world", Richard Barnett.