We Need to Stop Talking About There Being a Trade-off Between Purpose and Profit, By Becky Willan, CEO and Co-Founder of Given

When it comes to purpose, you might think that conversations about its value versus its cost, and the extent to which it can support business growth, would be a thing of the past in today’s boardrooms. Purpose trailblazers such as Unilever are proving that a more responsible approach to capitalism is what stakeholders, talent and consumers want and, at the same time, the context of a world reeling from the pandemic and facing a climate emergency demands that business plays its part. But the concept of there being a trade-off between purpose and profit is still deeply entrenched. It is a commonly held view that can be traced back to economists such as Milton Friedman whose theories revolved around the idea that companies’ only real purpose was to maximise returns for shareholders. And despite 50 years of disproving this ideology, it is still holding court. Today’s leaders studied for their MBAs at a time when this antiquated philosophy was the dominant view, and built their careers in companies run on this maxim.

It’s a big ask to admit when you’ve been wrong. But talk of purpose versus profit needs to stop. In fact, purpose is about profitably solving the world’s problems. Rather than jeopardising financial returns, purpose powers competitive advantage for business. Brands backed up by the substance of sustainability are proven to be stronger, more effective organisations, increasingly outperforming the market on key measures. The evidence speaks for itself. Here’s why and how.

No excuses

For the first time this year, the Financial Reporting Council (FRC) has asked investment houses to provide evidence of how their activities meet a new ESG standard. The UK Stewardship Code means fund managers have to prove they are creating ‘long-term value for clients and beneficiaries leading to sustainable benefits to the economy.’ US and UK regulators are also clamping down on ‘greenwashing’ when it comes to misleading shareholders. In March, the SEC’s (the U.S. Securities and Exchange Commission) Enforcement Division announced a new Climate and ESG Task Force to identify ESG-related misconduct.

There is a reason the investment community is all over socially conscious investing. Purpose-driven brands are stronger and more effective organisations. They can innovate better, attract and retain talent better and their customers are more loyal. As a result, they perform better. In its Global Leadership Forecast, EY reported that purpose-driven businesses outperform their markets by 42 percent (based on compound financial measures.)[1] In short, they have increased, long-term returns and this is evidenced by investors’ engagement. And investors understand the longer term. Instead of a focus on short-term profit at the expense of all else, companies embracing purpose have a value creation mindset which will go the distance. In terms of making excuses not to be purpose-driven, there is increasingly little wiggle room from investors.

And pressure is also coming from within, and this is especially the case for organisations which attract and need a younger talent base. Increasingly, employees are demanding vocally that the organisations they work for step-up. Research by Monster[2] showed that 75 percent of Gen Zers rank purpose ahead of salary when it comes to job selection. An important benefit of being a purpose-driven business is around employee retention. There is compelling data to show how purpose-driven companies attract, motivate and retain their workforce. People are inspired by the chance to make a difference and so increasingly, job seekers are engaging with companies that have strong stances to make a difference in the world and who take a deliberate approach in communicating this.

Lastly, organisations have fewer excuses when it comes to consumers. Recent research by Edelman revealed that more than half of us (56 percent) now think capitalism is bad for the world, meaning for the first time, those viewing it as harmful are in the majority[3]. And when it comes to the products we rely on, 66 percent of us would switch from a brand we would normally buy from, to one from a more purpose-driven company. This figure rises to 91 percent for Millenials.[4] At the same time, the pandemic has helped usher in and establish a new breed of consumer. More so than ever, there is a higher expectation among consumers about the role businesses need to play in the world. There is now far less to hide behind, and Covid has shone a light on how brands behave, not just what they talk about in terms of purpose. Consumers won’t always choose to buy a brand simply because it is more purpose-driven, but they may avoid or cancel one for not living up to the standards it communicates. For example, BrewDog has built its reputation as a brand eschewing the purpose-less approaches of faceless corporate brewers. For years the brand claimed its aspiration was to be the ‘best employer in the world’ and yet in June, ex-employee whistle-blowers claimed in an open letter on Twitter that workers were in fact being bullied and ‘treated like objects.’ The accusations had an immediate impact on the brand’s health, with its buzz score plummeting from 9.7 to -19.7 by the 13th of June (‘buzz’ is a measure of how much positive noise consumers are hearing about a brand – the beer category average score is 0.7.) The damage, of what seems to be an example of purpose washing, is likely to be long lasting.

You can’t offset purpose with talk or profit

For those organisations who are bought-into the idea that the discussion has been had and won about purpose verses profit, there needs to now be a commitment to ending talk and focusing on action. Purpose has to be about what organisations do, not about what they say. Having a purpose statement does not make you a purpose driven business; it is not about corporate positioning, or making employees or customers feel good, it is about business transformation. This way of thinking about purpose is going to be as widespread and deep as the seismic shift in the way we work and live, brought about by the digital revolution.

People think purpose is about what you do with profit when you make it. It’s not. Purpose is It’s about how you make that profit in the first place. You can’t offset the damage you have done to the environment or to people using your profits.

People often mistakenly think purpose is fluffy but that is mistaking it for marketing speak. It is, in reality, going to change how corporations operate, shaking up legacy systems and ways of doing business that are no longer sustainable. It will change the products we buy and how we buy them. It will mould supply chains. It is going to be revolutionary and fundamental to shaping the future of capitalism.

[1] EY Global Leadership Forecast: (66) Why do purpose-driven companies do better? | LinkedIn

[2] Gen Z In The Workplace | Monster.com

[3] https://www.edelman.com/trust/2020-trust-barometer

[4] 2018 Cone/ Porter Novelli Purpose study: 2018 Cone/Porter Novelli Purpose Study: How to Build Deeper Bonds, Amplify Your Message and Expand the Consumer Base — Cone Communications | Cone | Cone PR | Cone Inc | PR Agency | Boston | NYC