Purpose Incorporated: A primer for brands in APAC
This article is part of a special series on how brands in APAC can go beyond profit to do good and do better for themselves and others. Read more.
Non-WARC subscribers can read this series in its entirety by accessing the articles via the landing page.
Why it matters
Putting purpose into practice is not easy due to the persistent confusion between responsibility and purpose, which prevents focusing on the right activities and strategies, and because delivering a purpose usually means systems change, which is very hard.
- The pandemic has clarified and intensified the choice for businesses and their leaders: defend the status quo of business or drive a transition.
- Purpose is different from sustainability or responsibility because a purposeful business seeks to solve an external meaningful challenge profitably.
- Delivering a meaningful purpose usually involves some kind of systems change, which is hard although there are ways to make it more tractable.
You will have heard many times in recent years CEOs at Davos or UN summits proclaiming the need for a fairer, more responsible form of capitalism, a “stakeholder” capitalism that has in view the importance of communities and the environment, as well as company shareholders. Such is the tone and quantity of purpose talk that it has likely become white noise to many or worse yet, another source of frustration at business leaders who talk a good game but provide very little evidence for what has actually changed.
There are many examples of disappointing corporate and investor behaviour but take, for example, revelations that emerged earlier this year concerning JP Morgan Chase, that falls short of the intent of the 2019 Business Roundtable “Statement on the Purpose of a Corporation”.
JP Morgan's board cited a legal review it commissioned stating, among other things, that when the interests of stockholders and other constituencies conflict at a corporation like JP Morgan, "the board's fiduciary duties require it to act in a manner that furthers the interests of the stockholders".
With high-profile behaviour such as this, it is unsurprising that recent polls suggest there is increasing scepticism regarding talk of corporate purpose, starting with employees of the very companies that purport to be purpose-led.
- 68% say not walking the talk has a negative impact on their work, loyalty and/or trust in leaders
- 49% would consider leaving due to the hypocrisy
- 53% felt company talk about purpose doesn’t match the reality
The sad irony is that the very movement initiated to rebuild trust between society and business and finance is now showing evidence of further eroding of the integrity of those leaders who insist on talking but not doing.
Our goal, however, is not to point fingers but to try and understand why progress has been so slow and limited, and then to propose practical solutions.
The COVID effect on corporate purpose
It is important at this juncture to mention the impact of COVID-19 on the purpose conversation. The effect of the pandemic on our society is impossible to truly assess – it is certainly profound but its effect on companies is easier to articulate.
They have been forced to face up to some harsh realities about their business, not just how the company is run but more fundamentally, who they are. For some companies, COVID has been an excuse to return to the home comforts of purely top- and bottom-line concerns, a well-known basis from which to filter out other voices. These are probably the companies that would have talked about purpose but done little by way of making concrete changes.
For others, there is an even greater desire to question certain fundamentals, in fact asking themselves what business performance really means.
- Does it mean something more than share price, earnings and growth?
- Is it as much about the number at the end of the quarter as it is about how you got to that number?
- What are better, more complete measures of company performance and value?
COVID has clarified and intensified the choice for businesses and their leaders: defend the status quo of business or drive a transition. COVID has also given society at large a greater degree of sensitivity and transparency to whether companies will change in the coming months and years, and if so how. At this point, it is not clear which way things will go while companies get bailed out by taxpayers and still distribute huge shareholder dividends. The signals aren’t necessarily positive.
Why putting purpose into practice is so hard
In many ways, COVID has intensified the importance of the work we do at EoM Solutions, seeking to empower businesses and business managers to put purpose into practice. In our years of experience inside and outside of Mars, we have begun to see two key reasons why progress has been so slow:
- There is persistent confusion between responsibility and purpose, making it hard to focus on the right activities and strategies.
- Delivering a purpose usually means systems change and systems change is very hard.
Part 1: Persistent confusion between responsibility and purpose
An EY Beacon Institute study on purpose in business found that “the public discourse about ‘corporate/organisational purpose’ has increased five-fold since 1994, [and is] now trending at an exponential rate that surpasses the rate of public discourse about sustainability”.
While this quote implies a clear distinction between “purpose” and “sustainability”, the ambiguity of these concepts and their potential overlaps once we throw in the notion of “responsible business” may be one of the key reasons why there is so much talk about purpose and so little substantive action.
At its heart, the notion of “responsibility”, in business or elsewhere, implies a consensus about what is good and what is not, and a duty for businesses to comply with the former. This puts most businesses in a defensive position where they are trying to show the world that they are not as harmful to the environment and society as might be supposed.
Now, any activity might use, degrade or create different kinds of resources: natural (Natural Capital), people with their skills, knowledge and engagement (Human Capital), relationships and trust (Social Capital), and money to create liquidity in the system (Financial Capital).
It behoves any organisation to be a good steward of the four forms of capital and not to squander them. That would be a reasonable definition of “responsibility” or even “sustainability” in a business context. There is no obvious link to any specific “purpose” in this definition and that is for a good reason.
So what is it about the notion of purpose that makes it so different from sustainability or responsibility?
In a sentence, a purposeful business seeks to solve an external meaningful challenge profitably. It is about doing more good at a profit, instead of less bad at a cost.
Responsibility and sustainability involve a set of duties, focused on the firm’s existing value chain(s), imposed by external scrutiny from government, NGOs, consumers, potential employees, etc. Of course, this by no means implies that business leaders are not genuinely concerned with the non-financial impact of their business. It does not imply either that sustainable and responsible business practices do not have a potentially massive impact on the world, especially in the case of very large businesses.
The point here is that the “responsible business” mindset is typically concerned with “doing good” as a cost of doing business, ancillary to the main business model.
Purpose, on the other hand, is a choice, an opportunity, for an organisation to focus its resources on specific growth opportunities: those that address the barriers to successfully fulfilling their purpose. It is not an obligation.
It is useful to think of the distinction between the responsibility and purpose mindsets as the prove vs improve spectrum.
Mitigating harms, managing risks
Solving somebody else’s problem
Centred on the firm
Centred on an external stakeholder
Reputation, licence to operate
Cost of doing business
Source of growth and innovation
Performance = profit
Sustainability = mitigating harms
Performance = delivering purpose
Sustainability = doing it profitably
Part 2: Systems change is hard but can be made more tractable
Delivering a meaningful purpose usually involves some kind of systems change. That is because social problems tend to have stubborn root causes that involve multiple stakeholders embedded in dynamic networks of cause and effect.
Our ability to build a growth strategy around a meaningful purpose relies on a few non-trivial prerequisites:
- The purpose statement must be an actionable starting point for strategy
- The strategy must orchestrate the key stakeholders material to the purpose in order to change the system
- The resulting interventions must be collectively profitable, otherwise they will never be scalable nor sustainable in time
A step-by-step approach to putting purpose into practice will be described in more detail in the next article of this series, but in a nutshell:
- Choose a “meaningful challenge” as a purpose
- Map the ecosystem around the purpose
- Select a small number of strategic pain points in the ecosystem (those most relevant to the purpose and the capabilities of the organisation)
- Design the right interventions (or prioritise existing ones) to address them
- Use the right metrics to track performance
For now, we will focus on the first step. How can a purpose be an actionable starting point for strategy? In short, it should be specific and outside-in.
- Outside-in: the purpose statement should define an external target population and specify a desired change from their perspective. This means it cannot be about the firm’s products, services, supply chain, employees, etc.
- Specific: the desired outcomes should be specific enough to be measurable.
We call a purpose statement fulfilling these two criteria a “meaningful challenge”. Note that “inspirational”, or “easy to communicate” is not one of the criteria.
More broadly, we distinguish three archetypes of corporate purpose statements. We can illustrate them using the hypothetical example of a pet food manufacturing company:
- The descriptive archetype describes the company’s existing activities, products, and services with a positive spin, eg “Manufacturing and distributing high quality sustainable pet food products”
- The values archetype broadcasts what the company stands for: eg “Improving the life of pets” or “We love pets”
- The meaningful challenge archetype defines a target group and what specifically we want to change for them: eg “Increase the healthy lifespan of cats and dogs”, or “Reduce the number of homeless cats and dogs”
Each archetype has its uses, strengths and weaknesses but a meaningful challenge provides a more actionable starting point for formulating a purpose-driven strategy. Used well, it puts purpose at the heart of the business model, making it a driver for growth instead of keeping it a peripheral, defensive, costly communication exercise.
Don’t pin all the blame on marketing
Cries of purpose-washing are growing each week and often it’s the marketers who get blamed. Somewhat paradoxically, this is probably both fair and unfair.
It is fair because there can be little doubt the ad agencies and marketing firms do often push shallow slogans and claims alongside vague calls to action. But it is also unfair because the companies themselves continue to conceive of purpose first and foremost as a communications and PR exercise.
It is worth asking what the motivation for a company beginning a purpose-led journey really is.
- Is it reactive, driven by a desire to keep up with trends and competitors?
- Is it a pacifier, driven by a need to keep employees feeling content and investors green?
- Is it defensive, driven by a desire to prove to the world that “we are a good company”?
Any of these motivations for embarking on a purpose journey will take you down the wrong path. As we have argued, they will often result in purpose statements that are descriptive or values-driven and so over-index on the inspirational and general, while missing out the specific and meaningful.
Embarking on a purpose journey is a whole-company endeavour involving strategy, finance, sustainability, HR and marketing. What is needed in a company-wide transformation is an orchestrator, someone that can see how the different teams can work together, what they bring and what they don’t.
This is in fact a role that marketing teams could be ideally placed to play as a function that must constantly be in contact with all parts of a company operating system.
But more than that, if purpose is about meaningful challenges and the role of companies is truly to solve the challenges, then this shifts the emphasis of the goal of marketing from brand-building to brand-doing. In other words, the best way to build a brand is to drive actions and interventions that solve the meaningful challenges.
We have briefly covered different purpose archetypes and their implications on the “prove vs improve spectrum”. In the next article, we will cover in more depth some of the key tools at our disposal to put purpose into practice and how marketers can (and should) play a central role in this endeavour.
What is the Economics of Mutuality?
The Economics of Mutuality is a groundbreaking management innovation based on 15 years of indepth academic research and business practice. It was developed within Mars, Incorporated in close partnership with Oxford University’s Saïd Business School and other leading organisations.
It empowers companies to adopt a fair and purposeful form of capitalism that performs better than the purely financial version operating today. Its robust methodology and cutting-edge tools transform business at the core, going beyond peripheral approaches such as CSR and ESG that are driven by compliance.