Blueprint has carried out some desk-top research into the existence of a link between purpose and performance. The research analyses whether following the ‘Five Principles of a Purpose Driven Business’ has an affect on financial performance. The paper finds a positive correlation between improved financial performance and adopting proxies for the Five Principles. Other benefits for following the Five Principles include:
- more engaged and innovative employees
- loyal customers and suppliers
- improved staff attraction and retention
- risk reduction and management
- organisational growth
Download the research here.
The paper draws together insights from academics, business leaders and research.
Paul Polman, CEO of Unilever said; “purpose driven brands are growing ahead of the market” and “these brands accounted for half the company’s growth in 2014 and grew at twice the rate of the rest of the business”
Alex Edmans’ (London Business School) research showed that companies with the highest employee satisfaction outperformed the market by 2-3% per year, over a 26-year period from 1984-2009. The positive effect of employee satisfaction is also undervalued by the market, and it takes the market 4-5 years to include the benefits in its evaluation. Edmans posits that this is because the traditional valuations are too heavily focused on short-term profits, and not enough on integral, though often intangible aspects.
High sustainability companies are more than 50% profitable over the long term than low sustainability companies. Research from R. Eccles, I. Ioannou, and G. Serafeim from London and Harvard Business School’s research shows that $1 invested in the high sustainability companies in 1992 was worth $23 in 2010, whereas the low sustainability companies would have given a return of only $15. Those deemed as high sustainability companies; “significantly outperform their counterparts over the long-term, both in terms of stock market as well as accounting performance”.