Charles Wookey, CEO

At the end of last year I spoke at a conference titled: “Daring to leap” – a phrase which stuck with me. Choosing to do something different demands courage, belief and confidence – as well as a willingness to accept and embrace uncertainty. That in my view, is exactly what the choice to be a ‘purpose-led’ business demands.

Let’s contrast two stories.

One starts with the familiar idea that the purpose of business is to maximise profits. This is a powerful tool for attracting investment and asset allocation. But it has its downsides, and in the worst cases has led to the exploitation of people through unjust distribution of pay and benefits, heedless damage to the environment, opposing necessary regulation and failing to pay tax. The birth of the ‘CSR’ movement – in this context – was a response to these excesses. People realised business needed to ‘give back’ to help secure reputation and a license to operate. Initiatives – often excellent in and of themselves – were established alongside, but separate from, the core business to do that. Then, more recently, we have the growth of sustainability and now ESG. Investors, employees, and customers have become more aware of the impact that business has on people and planet and pressure business to act differently and mitigate risks. But in this story the fundamental mindset remains unchanged: it is a just a new siloed set of risks and challenges we need to deal with, in pursuit of the same ‘bottom line’.

And now we have ‘purpose’. You can go and buy one and the world is now awash with ‘brand purposes’. Why? Because whilst at some level there is an intuition that a purpose beyond profit really matters, the quick and easy response is to channel that desire for real change into a marketing or branding strategy. Talking a great purpose is the new marketing elixir, but when this happens nothing really changes at the core. The true purpose remains maximising profit. Again it’s just adapted itself and put on new clothing.

That is one story. There is another.

This starts with recognising that the core idea that the purpose of business is to maximise profits is relatively recent and it is just – an idea – not a law of physics, nor a law of the land (in the UK at least). David Packard in 1960, reflecting on his career at HP, said in a speech, “a group of people get together and exist as an institution that we call a company so they are able to accomplish something collectively which they could not accomplish separately.”

A business can choose to have a reason for being that is about the better world that arises from your success. Profit matters of course, but as one outcome, not its purpose.

It is a shift in mindset and in our view is both a personal and organisational challenge. It means:

• the core goal becomes a wider and richer one: creating value for society not just returns to investors;
• integrating into strategic decision taking social and environmental (ESG) factors material to long term success so there is a holistic value creation story;
• seeking to avoid manifest unfairness to anyone – having a positive impact not just mitigating risk;
• the board’s role evolves to become the collective trustees of the purpose and relationships – including with investor on which pursuing that purpose depends;
• the company sees itself as a part of society – a social organisation – not a nexus of contracts but a network of relationships, and one that cares about people. The responses of the best businesses to COVID and George Floyd’s murder have vividly demonstrated this;
• there is a competitive advantage which comes from authenticity: the pathfinder companies genuinely pursuing a purpose-led approach are in time differentiated from those taking a more superficial approach;
• being purpose-led brings a dynamic of collaboration – tackling systemic issues that no one company can address alone, such as the Rainforest Alliance, and in promoting better regulation for the good of all.

Being purpose-led is a mind-set leap and a belief about purpose and people. It takes courage and conviction. There is a transition and no frictionless win.

The world needs more businesses that see their role in this way: creating value for society and playing a vital role in solving the urgent systemic problems we all face today. Turning the constraints and needs of the planet into business opportunities that benefit society. Businesses need to be agents of this change. It’s a leap. But the future depends on more businesses taking it.