The importance of having a shared understanding of what the purpose means for the business
A key starting point for this shift in the role of Boards to act as ‘trustees’ of the purpose is a shared understanding and belief by members of the Board that being purpose-led creates a better business that is better for society. Unless there is a shared understanding at the Board level of what being purpose-led means, and a shared commitment to it, there is a risk that the company lacks clear direction and that purpose is seen as merely a tick box approach to governance and reporting.
Engaging the leadership – exploring questions and dilemmas – explores the importance of a shared understanding in the leadership team and discusses how to go about this. Much of this is also relevant to Boards if the purpose is to outlive the tenure of the CEO and to enable the Board to carry out its role in providing effective oversight.
The FRC code and Wates Principles, both highlight the importance of purpose, require a Board to establish the company’s purpose, values and strategy and satisfy itself that these and its culture is aligned. But they provide little guidance as to what having a purpose really entails and what difference it might make to the company and the way it operates day in and day out. So it is probably not surprising that the FRC observed in their first report on the adoption of the new Code by FTSE 100 companies, that too many companies substituted what appeared to be a slogan or marketing line for their purpose or restricted it to achieving shareholder returns or profit. If Boards are to invest in this change there has to be a genuine understanding of what purpose is and why it needs to lead.
The FRC publishes an annual review of corporate governance reporting. The latest report published in November 2025 references increasingly clear and transparent reporting in areas such as company purpose, culture and values, but this extract demonstrates there is still a way to go.
Many companies concentrated their reporting on stakeholder-related matters without explicitly referencing all of the matters outlined in Section 172 of the Companies Act 2006…. there were three specific provisions within Section 172 that were rarely addressed in terms of how the board considered them in its discussions and decision-making:
- The likely consequences of any decision in the long term.
- The desirability of the company maintaining a reputation for high
standards of business conduct. - The need to act fairly as between members of the company
Reporting on Provision 5 is not just about stakeholder outcomes – it is to demonstrate how the board takes part in developing and scrutinising the company’s long-term strategy and future performance. The annual report should explain how the board has discussed and/or made decisions fostering relationships with suppliers, customers and others in the context of strategy, and not just how the company deals with these stakeholders, or these stakeholders’ interests. The report should also show how the board discusses the need to act fairly as between members of the company and deal with any conflicting interests.
Blueprint’s paper Purpose for PLCs – Time for Boards to Focus outlines why purpose is important and what it really involves and is helpful in discussions with Boards.
This Enacting Purpose Initiative report Enacting Purpose within the modern corporation – A Framework for Boards of Directors also stresses the importance of the Boards having a shared understanding of what the purpose means for the business and how it connects to the strategy, and that the Board needs to “own” the purpose.