The Value of Purpose

Monday, July 10, 2017

18:00 - 21:00

Brands are facing a new competitive landscape in which self-definition, core values and purpose will increasingly define their ability to reach customers…” Simon Mainwaring.

The desire for a life of purpose beyond the drudgery of work, mindless consumption and shallow self-interest, has long been considered the key to a happy and fulfilling life. Increasingly, “purpose” is also the key to business success with consumers demanding more from the companies and brands they support and the products they purchase. 

Smart businesses are tapping into this conscious consumption trend, looking to embed real, sustainable values and genuine purpose into their brands, vision and mission. 

But what is the bottom-line value of purpose for business? 

A recent research report from the UK’s Big Innovation Centre found that companies with a declared purpose perform better on key metrics over time than their less purposeful peers.

Consumer brand powerhouse, Unilever, are perhaps the most compelling demonstration of the truth at the heart of this finding. In 2016, the company’s Sustainable Living brands grew 50% faster than the rest of its business and accounted for more than 60% of its growth. The company’s own research also found that 50% of people now buy or want to buy brands that are more sustainable and this percentage is forecast to grow over the coming years.

For our July Crowd Forum, we looked at “The Value of Purpose”, and were thrilled to have Unilever’s esteemed CMO, Keith Weed, joining us on stage. Keith was joined by purposeful business leaders, Will Gardner (Co-Founder & ex-CEO of Collectively), Geraldine Matchett (CFO at DSM) and Justin Basini, (Co-Founder & CEO of ClearScore and author of “Why Should Anyone Buy From You?”).

We went beyond the “feels”, and delved into the real business value of purpose.

Speakers

Geraldine Matchett Royal DSM

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Justin Basini ClearScore

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Keith Weed Unilever

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Solitaire Townsend Futerra

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Will Gardner Collectively

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Round Tables

ARE PEOPLE PREPARED TO PAY A PREMIUM FOR PURPOSE?

There is a growing body of evidence that consumers are increasingly prepared to pay a premium for products and services that align with their values and make them feel good about their purchasing decisions. But what is the sweet spot between price and purpose? How can companies determine what will generate the best returns? Does purpose even need to attract premium pricing?

BUILDING PURPOSEFUL, PROFITABLE BRANDS

How can companies create authentic, lasting and genuinely purposeful brands? Is there a distinction for business between social purpose and brand purpose? Or are they intrinsically interrelated? In an age of declining trust in brands and institutions, when a mismatch between professed brand values and real-world actions can be devastating, what are the consequences and brand risk management considerations for businesses? How can companies avoid a catastrophic disconnect between marketing spin and customer perceptions? 

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TABLE 2B

Main ideas

1) Some brands’ are inherently ‘good’ and others are inherently ‘bad’ in terms of social responsibility and sustainability – e.g. healthy food company v.s. oil company.
- However, we shouldn’t be so quick to label brands in this black and white way.
- Sometimes it’s about thinking outside the box; if a company is inherently not environmentally friendly, perhaps there are other ways for it to have a social purpose, for example in its use of human capital.
- Idea that brand social purpose doesn’t have to be about completely changing the brand, but instead business as usual in an impactful way.
- It’s about having an open attitude and allowing for change of seemingly ‘bad’ brands to have more of a social purpose.
- Oil companies for example, aren’t going away anytime soon, so we should encourage work they are doing to mitigate negative impacts such as CCS, rather than shaming for the fact that their purpose is inherently unsustainable.
- Just looking at what a brand can do to become more socially responsible and putting the message out there is a good first step.


2) Brand transparency – risks of talking about social purpose publicly
- When we know there is still work to be done, can be risky to talk about brands social purpose. Example given of a bad advertising campaign which completely undermined the brands social purpose and was called out by consumers for this hypocrisy.
- Things like this can be very damaging for a brand so puts forward a case for not talking about sustainability initiatives when still seen as a ‘bad’ brand.
- But links back to first point – that we shouldn’t be so quick to label, and should encourage any kind of progress.

3) Should we have teams responsible for sustainability?
- Drawing on one of the points brought up in the panel – that perhaps brands should not have CSR departments, but instead focus on making sure CSR is intertwined with all accepts of the company and taken into account in all decisions.
- General consensus was that this is the end goal, but we are not at this point yet, so there is still a need for CSR teams.
- However, did seem to think that communication between CSR and other departments could be improved, as it is sometimes difficult to get CSR through all the layers of a large company.
- Also that a clear brand purpose is essential to make good decisions and avoid PR disasters such as the advertising campaign mentioned in 2).

4) Supply chains
- Use of eco-ratings for products can be really vital in improving sustainability along the supply chain – as even if customers don’t really tend to look at them, companies don’t want to run the risk of losing sales to a bad one – so encourages CSR competition.
This means companies talk to suppliers – in an example one B-corp caused one of their suppliers to become a B-corp too. Creation of a ripple effect.

BUILDING THE BUSINESS CASE FOR PURPOSE

Evidence is growing that purpose-led business is a key driver of value, but most businesses struggle to take what they see as a leap of faith. This is particularly true in the case of climate action, emissions reduction and resource management. How can sustainability leaders build the business case and inspire the Board and C-suite to take real action on climate, energy and resources? How do you determine ROI & costs vs benefits? How do you justify investment in long-term climate and carbon action, against demands for short term profits and stakeholder dividends?

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TABLE 3A

What are the problems and challenges?
• Reluctance of people to look to the future. Keith Weed said that a great business must anticipate the future and get there ahead of the competition but predicting long term global impacts is challenging and uncertain.
• Regions and geography can be problematic, particularly with differing local and national legislation and the challenge of measuring and monitoring the performance of suppliers.
• Companies that don’t have a purpose from the beginning can later struggle to define what their purpose and values actually are.
• Larger companies have a challenge to ensure that sustainability is truly integrated into the business. There was support for the concept of moving away from separate CSR business teams.
• There can sometimes be a gimmicky nature of purpose and value. Are some companies adopting a pseudo-purpose just to make money and enhance their brand?
• There are consumers who are focussed on price and ignore ethical considerations. The disposal of unethical brands by purpose-driven companies risks worse environmental outcomes if there continues to be a demand for those products.
• It is not always possible to keep the price of ethically produced goods competitive compared with mass unethical production.
• Some companies might not be able to exclusively select ‘good’ suppliers particularly in monopoly supplier environments.
What are the solutions?
• A business should focus its purpose on ‘doing less bad’ overall, not ‘doing good’ in one area while continuing to cause damage in another.
• Companies can engage their employees by using incentives and making jobs meaningful. They should give employees the opportunity to go home and tell their children something tangible e.g. ‘Today I saved xx amount of water which benefits xx people’.
• The purpose and values of the company should be communicated company wide. Everyone should know how they can contribute to the purpose and demonstrate the company’s values on a day-to-day basis.
• CSR/Sustainability metrics of the wider organisation should be filtered down to form part of each colleague’s objectives e.g. sales targets for sustainable brands or targets for fuel efficiency.
• Companies need to know and understand their supply chain. Then they can start to evaluate where the supply chain is unethical and make changes. L’Oréal has done this recently by going to the root of its supply chain to improve supplier working conditions, add security and ensure supply.
• Businesses and local communities should focus on lobbying governments to implement regulations and legislation that forces key changes in business and consumer behaviour. Global carbon pricing should have special attention and focus.
• There are examples of governments using carbon/environmental taxes to give back to citizens, for instance in Norway.

CREATING A CULTURE OF PURPOSE WITH YOUR PEOPLE

Multiple surveys have shown that employees want to work for companies that demonstrate that purpose is core to their business. The creation of a genuinely purpose-driven culture makes companies a magnet for attracting and retaining quality people. What is the ripple-effect of a purposeful corporate culture? Does this help create an employee-led competitive advantage? How can companies ensure that their culture is both purpose-led and profitable?

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TABLE 4A

What does purpose mean? Why are we here today?

Participants share a common language about integrating purpose, creating space for employees, creating change, and removing barriers. The table discussions define purpose as a reason for being, and a point of distinction. For others, purpose is to give back to all stakeholders, and links purpose fundamentally to the way of business.

Purpose as a living: One participant’s day-to-day role is help the company meet purpose. Another owns a sustainable data business, and wants to take away barriers between society, and companies and their employees to be more engaged socially. One participant works in real estate, which is a tangible asset that touches upon many social issues, from homelessness to social mobility.

Purpose of attending the event: one wants to share best practices. One is studying corporate cultures, and wants to understand the role of corporate culture at firms present at the event. One participant is here to check and make sure his company is on the right track. One person is here today to understand how other firms and individuals are embedded within the sustainability culture.

Purpose Hierarchy

Take on purpose is different at each level of employment. Staff members interpret purpose a little differently, from how the top management defines purpose. Yet, within the same organization, at an abstract level, purpose should be the same.

It is easier to come into work with a defined purpose of the organization. If a CEO can articulate the purpose, then employees feel engaged and motivated, and can go back to doing the small tasks, knowing where these little actions lead to and serve a common goal.

Alignment

Sometimes, it is necessary to take the harsh decision and let people go because values and purposes are fundamentally misaligned. Yet, flexibility within the organization to interpret purpose is critical to hone in on the purpose itself. Even within a small team, values evolve and colleagues may find themselves on different pages after a period of time. To let someone go, it has to be a fundamental clash in values, because giving someone space to be on a different page can refine the group’s purpose overall.

Alternately, some people do not come to office for purpose, but to collect money and go home. Not everyone will buy into the company purpose at the same level of intensity. People will like certain parts of the company culture but are not always completely sold on the purpose. When this happens, it is important for management to capture purpose via actionable goals. The entire workforce may not be aligned 100% but there are clear actions being delivered. There will be some people, who are the guardian of the company purpose, and the rest will follow. There will be employees whose job is to think about the long-term purpose, and those who are focused on day-to-day process-driven tasks. Yet those who have not completely bought into the company purpose cannot be running counter to the purpose at the same time.

Redundancy of CSR Section

At times, corporate values are mere buzzwords, created without a purpose. Some businesses define purpose only at the CSR section, not on a cover page, as central part of corporate communications. If purpose is clearly articulated, companies no longer need a CSR section because every part of the organization should serve the larger purpose. For big corporations, purpose has to be vague, just to manage the size.

Engagement

Employee engagement with the company purpose has to be embedded within the incentive system.

Mergers & Acquisitions

It is often the case to see those who are not aligned with the new corporate culture leave a recently merged firm. The buyers bought the firm because they have a purpose. In a recent M&A case at the table, much of the buying decision was driven by responsible investment. Discussing what the purpose is right now is critical for the newly-merged company, and the process may take months. Ownership structure (public vs. private), therefore, has a huge role in defining purpose and how quickly it needs done.

Purpose attracts and retains staff

If an employee feels passionate about making a product (e.g. beer) that is sustainable. The person will not feel as excited working for a regular company that makes the product. For her, the meaning of work will not be the same without the company’s purpose.

There is also a growing trend of consumers and millennials being attracted to sustainable consumer brands, but millennials are not very brand-loyal.

Helping employees define their purpose may improve clarity and increase retention. A participant, who is a business owner, remarks that employees leave because they thought they had bought into something but they didn’t, or because the employer could not provide something they wanted at a motivational level.

Creating a Sense of Purpose for Culture Change

Janek quotes an HBR article on how the top management is clear on purpose, but employees are in the position where they do not want to buy into the purpose because they don’t see their input there. To prevent this, the employee needs to feel the trust that information (feedback) will keep flowing and contribute to the larger organization. Employees need to feel they trust management

There is an immediate cost for management to seek such feedback (time, resources, dramas, emotions) but you will end up with a better buy-in.

Furthermore, organizations often do not need a critical mass. In the speaker’s case, the change happened with just four staff members. There is also research on how change management needs to target only 10% of the company, who are early adopters. Once this happens, theory suggests that the rest will follow.

IS IT PURPOSE VS. PROFITS? OR PURPOSE = PROFITS?

Our current model of profit maximisation and obsession with stakeholder returns, too often favours short-term benefits at the expense of long-term sustainability.  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? Do we need a new way of measuring profit that better incorporates purpose and broader outcomes? How do we change the stakeholder conversation and perceptions from “purpose vs profits” to “purpose = profits”? 

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TABLE 5A

We all want to believe that purpose will drive profit. Still, it is important to maintain a critical perspective. We must define both ‘profit’ and ‘purpose’, and consider short-term versus long-run timescales, as well as what a balance between profit and purpose might look like.

Many companies are purpose-driven.
• AT&T’s original purpose laid out by its chief executive was to enable anyone anywhere in the world to talk to anyone else.
• Nationwide was founded on the principle of providing access to a healthy and affordable home. Profits benefit those who have faith in this model: its members.
Is there a necessary tradeoff between purpose and profits—is it purpose vs. profits?
• LGT Impact Ventures was set up with a lower financial return requirement than other funds of their type—this would suggest there is some kind of tradeoff between purpose and profit.
• In sustainability recruitment, Acre works with companies that create social and environmental value whilst doing good business.
• Nord Anglia is a for-profit education company that educates children, teachers, and employees.

We need new ways of measuring both purpose and profit (e.g., metrics such as customer satisfaction, environmental PNLs, integrated reporting, natural capital). Are businesses really measuring success based on profit? Tech companies, for example, often have huge valuations despite a lack of profits. In this case, investors are more interested in long-term profitability. Still, value tends to be about value back to the investor rather than value to society.
• Dot-com boom: number of clicks to indicate consumer interest.
• Snapchat: purpose of connectivity. Snapchat lost a lot of money last year, while its user base expanded. Its value stems from the scalability of its tech, which can reach millions of users overnight. Tech investors are taking a longer-term view with regard to access to certain demographics, new markets, and data.

How, then, do we change the stakeholder conversation from a focus on value, to a focus on purpose? Kodak saw the digital trend before anyone else, but focused its business on making hard copies of photos. If Kodak had repositioned its purpose to be about capturing moments in people’s lives, perhaps the company would have been more profitable in the long-term.
1. The solution may revolve around consumer appetite. Consumers are more informed and more vocal today. Consumers, not supermarkets, started Fairtrade. We must listen to what consumers value. A company’s success depends on what consumers value. Amazon is successful because it delivers to a high standard on a regular basis. VW lied about the efficiencies of its engines and saw its market value deteriorate overnight.
o Nationwide is responsive to its members. Consumer wants and needs changes over time. Consumers originally wanted access to credit. Now they want security, long-term relationships, and flexibility.
o Metro Bank uses consumer return metrics. Every time an employee interacts with a customer, the customer is sent a survey.

2. We can also consider the stakeholder side of the equation.
• Why did investors invest in LGTIV? LGT pension funds target a deprived borough in Northeast London. By investing in companies that improve their public services, beneficiaries receive more than just a financial return. There is a shift taking place. Still, institutional investors are looking to diversify their portfolio. Impact investments correlate to the market at large and so offer diversity, though more data is needed.

3. What governments are doing also plays into company financials. Government can be a huge driver in dramatically changing the business landscape.

Summary: We believe long-term purpose should drive profit. We can nudge things in this direction by measuring and reporting more on impacts. The customer is king for many businesses; driving customer behavior requires a focus on customers and customer-related purpose. There is patient capital and investors who invest in conscious businesses, but more stewardship and new metrics are needed. We do not necessarily have to juxtapose profit and purpose; rather, we must nudge things forward.

PROFITING FROM LOW-CARBON ENERGY TRANSITIONS

While climate change is one of the greatest risks we face, tackling it is also one of our biggest economic opportunities. The low carbon revolution is already offering huge opportunities for business, the economy and society as a whole. Purposeful companies have the potential to unleash a wave of innovation in low carbon technologies, creating new products and services, generating employment, reducing energy consumption and increasing savings if the right policies are in place. But how can sustainability leaders help their companies make the move? What are effective tactics for getting energy into boardroom conversations? How about fear of missing out (FOMO) on innovations that could ultimately help companies sell more stuff? 

PURPOSE, INNOVATION AND COLLABORATION

The rapid growth of the social impact and innovation sector, peer-to-peer platforms, B-Corp movement, and collaborative sustainability coalitions across multiple industries are evidence of a cultural shift towards more conscious, impactful, entrepreneurial and positive models of business innovation and purposeful collaboration. How can established businesses tap into this entrepreneurial and impactful zeitgeist? Why should companies see purpose as a driver of innovation? How can purposeful collaboration create new revenue streams and opportunities for business? What are the business drivers of collaborating around shared purpose with partners and competitors alike?

THE BOTTOM-LINE VALUE OF VALUES

Is there a disconnect between “corporate value” and “corporate values”? Is it more lucrative for companies to be true to their values, or is that a luxury only afforded to already profitable companies? How can companies leverage their values as a competitive differentiator that generates bottom-line benefits? What is the impact on revenue from safeguarding reputational and supply chain risks? Does it profit a company to really commit to purpose across the full length of its value chain?

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TABLE 8

Is there a disconnect between “corporate value” and “corporate values”?
• Simply, yes there is a disconnect between the two.
• All companies have a list of values, the difficulty is in imbedding them within the company and its employees.
• Must have the left and right of the company, the creative and analytical sides, working together.
• Financial incentive will always be at the core, if the financial benefit can be clearly shown then the disconnect between value and values can close.

Is it more lucrative for companies to be true to their values, or is that a luxury only afforded to already profitable companies?
• It can be lucrative for all companies, however one which is profitable may be able to do so with less risk, while others may worry it'll affect their rate of growth.
• Consumers expect more and realize they have the power to influence companies, making it more necessary for companies to follow their values.
• Social impact is very hard to measure, it is hard to prove the financial benefit of following corporate values/purpose.

How can companies leverage their values as a competitive differentiator that generates bottom-line benefits? Does it profit a company to really commit to purpose across the full length of its value chain?
• Create value for employees, the John Lewis business model for example, where all employees are partners.
• Consumers makes irrational decisions based on cost and quality; convert their experience from a consumer/ interaction into a citizen/ societal choice.
• Utilise The “story” to connect with the element of emotion keeping in mind the Level of complexity of the “story” has an effect on the perceived value.
• Purpose driven companies seem to have an advantage in the current market with ethical and sustainable goods gaining popularity.
• Third party involvement can be beneficial in helping businesses realize gains from corporate values.
• Business to business relationships; sharing values and purpose in order to build long lasting and beneficial partnerships.
What is the impact on revenue from safeguarding reputation and supply chain risks?
• Companies may worry being open and transparent about one part of the business will open up more questions about other areas not up to the same level. For instance why have you chosen to focus on fixing A and not B, therefore they say nothing at all and perhaps not realize potential profits from being transparent.

THE BUSINESS IMPERATIVE FOR TAKING CLIMATE ACTION

Is one of the roles of responsible business, to de-risk the political process? When the Trump Administration recently announced it was pulling the US out of the Paris Climate Agreement, it was met with a chorus of disapproval from across the business sector, with many CEOs expressing their determined commitment to stay the course on climate action. In the absence of national government leadership, how can businesses step up their game? How can companies stop seeing climate action as a cost, and more as a business opportunity? How useful are collaborative, peer-influencing and benchmarking initiatives such as the RE100?

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TABLE 9

• Why should companies take action on climate?
o Engage employees
o Obtain/preserve licence to operate
o Maximize returns to shareholders
o Bolster credibility
o Reduce costs
o Demonstrate long term strategic competence
• Issues related to the business case for taking climate action:
o Developing and communicating a compelling business case for climate action seems to remain a challenge.
o Concept of ‘Return on Engagement’ or ‘Return on Involvement’ is an important, though difficult to quantity, element of the climate business case. Outcomes of these returns are longer-term revenue boosting benefits such as customer and employee loyalty and brand power.
o Stewards of corporate climate action seem to be successful at convincing people (e.g., executives, investors, customers) of the imperative to take action and also that that business case for taking action is favourable; however, they struggle to convince people that they have the ability to implement this business case and realize the predicted benefits.
• The role of business (vs government) in taking climate action:
o Business can contribute to addressing policy gaps that exist at national and sub-national levels.
o There appears to be a groundswell of corporates adopting science-based climate targets for themselves in response to the US decision to pull out of the Paris Agreement.
o There may be opportunity for business to be stewards of long-term strategy and planning since governments are incentivized to plan primarily for the duration of election cycles.
• Other drivers for corporate climate action:
o Future legislation, whether certain or uncertain (e.g., fuel economy standards, carbon pricing)
o Future customer values and needs (e.g., electric vehicles)
o Personal “purpose epiphanies” of senior executives

THE SDG’S AS STRATEGIC BUSINESS OPPORTUNITY

It has been estimated that the value to business of achieving the SDGs globally is a staggering £12 trillion. There is also little doubt that there is a much lower cost for business in fixing causes than outcomes. The Sustainable Development Goals are a great way of framing purpose for business and unifying around objectives and outcomes. How can companies deeply ingrain the SDGs and wield them as an opportunity to drive bottom-line benefits? How can companies quantify projected returns from actively working towards achievement of the SDGs? This table will explore the strategic business opportunities presented by the SDGs.

WHERE DOES SUSTAINABILITY LEAVE PURPOSE?

Is the era of big name sustainability strategies that try to own the agenda and feed into purpose over? Does a separate sustainability brand, strategy, set of actions and targets create more barriers from fully integrating sustainability into business? Is it all about marrying the commercial with purpose?

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TABLE 11

Where Does Sustainability Leave Purpose?
Sustainability team’s job is to make themselves redundant, but still have quite a while to go
• Innovation
• Incubation
• And implementation
What is the definition of better living?
• It has changed drastically over the years
• Used to be not having an open sewer
• Now much more about impact and purpose
Net positive for carbon, social economic impacts, and resources – how do we get there and what does it mean?
Does purpose end at the factory gate – this is one of the biggest criticisms of CSR
Hard to marry purpose at a company that is driven by its shareholders’ demands
‘Spend it well’
• Every life is special and deserves to be lived well
• Makes the sustainability conversation much easier
• A life spent well is also a life spent sustainably
Being able to measure impact is really important
• Allows you to create and hit goals
• Makes the impact more meaningful to outsiders
• Could help to unlock systemic change
To be sustainable is to sustain our existence
Telling the truth and telling the stories about and around sustainability – this is becoming more commonplace and more companies are taking this route – would have been unheard of ten years ago
• Environmental
• Social (creating jobs, communities)
• Economic
• Governance
Sustainability is being moved from a separate, standalone parallel, to being included in the key areas of the business – much more integrated and part of the general business plan
• Is there a risk associated with this change?
• Will sustainability be lost in the shuffle if this happens?
• Where does it fit exactly?
• You need to have someone or something that hangs onto sustainability and is responsible for constant internal challenge
Very important to have someone on the board who represents sustainability – board level accountability
CEO must be supportive of sustainability to make progress
Sustainability is a lens or a pair of goggles – it encompasses everything but it’s just looked at in a different light
• To be successful, everyone must make it part of their day job
• Constantly think about the sustainability of your overall job and responsibilities
• There is often a gap between interest and being able to influence
* Sustainability is now talked about as synonymous with purpose this has to be a win!

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Chartered Insurance Institute

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