In 2018, Alex Edmans, Professor of Finance at London Business School, estimated that talents today would only want to work for purpose-driven firms. He predicted that in a decade, “purpose” would be ingrained in corporate plans. Two years later, this insight is front and center of organizations’ growth strategies.
With the pandemic upending norms and the rise of the digital workplace, organizations are also recalibrating workflow. With employees now more reflective of “why” they work, businesses are likewise reflecting, and for good reason. In a Livetiles event, Simon Sinek said that talking about “where you’re coming from, and what your belief is,” makes people perk up. “People become much more open to [a company’s] message when they understand the reason behind its existence,” he added. Gone are the days when profit was the main business driver.
‘Shareholder value is no longer everything’
In 2019, the Business Roundtable, an association of chief executives of some of the US’ top companies, boldly proclaimed: shareholder value is no longer everything. From Apple’s Tim Cook, to Mattel’s Ynon Kreiz, CEOs agreed that companies must now bring more value to customers and employees alike. They agreed business practices must have the environment in mind, as they embrace “sustainable practices” and “foster diversity and inclusion, dignity and respect”.
Outdoor clothing brand Patagonia is one of the leading purpose-driven brands. In 2018, the brand tweaked its company mission, now focused on building a business to save our planet. It is a bold statement that has reaped benefits and one they back up with action. Their ‘care and repair’ programs for instance promote longer product life and they regularly fund environmental protection as they recently did from their Black Friday profits.
More companies helped combat climate change in 2021
For the past 18 months, it is apparent that the pandemic has served as a catalyst for more to do the same. 2021 saw a record number of companies pledging significant efforts in their bid to help curb the effects of climate change. There are now more companies that have signed up for the Science-Based Targets Initiative (SBTI) compared to 2020, according to a report by The Guardian. SBTI, as its name suggests, helps companies calculate emissions targets in line with the Paris Agreement goals.
Tech giant Microsoft pledged to be “carbon negative” by 2030. Car manufacturer GM Motors said it would be carbon neutral by 2040, and only sell vehicles that produce zero emissions by 2035. A representative from SBTI has said: “science-based target setting is becoming standard practice”.
Purpose-driven business is good business
Naysayers may think being purpose-driven is only good as a marketing strategy. But numbers have proven that having a strong “why” means good business too.
New York-based communications agency Zeno Group found that consumers now prefer to purchase from purpose-driven businesses, and are even more likely to recommend brands with such messaging to friends and family. The agency, which surveyed 8,000 consumers in eight markets from Europe to Southeast Asia, also learned 8 out of 10 believe companies should only turn a profit if they deliver a positive impact.
The need for strong messaging on brand purpose also translates internally. Gallup found an increase in employee engagement when employees find more purpose and meaning in their work. This translates to a 23% increase in profitability, 81% less absenteeism, and 43% lower turnover among employees. There is also the undeniably strong pull-factor to attract talent.
Sinek underscored the same belief in the LiveTiles event: “Starting with ‘why’ really is about idealism. It’s about purpose, cause, or belief that is bigger than the product you make.” The challenge now for businesses is to find a compelling answer to their “why”, one that will help them not just survive, but thrive during these unprecedented times.
As the past few months have proven, for a business to prosper in this new era, companies need to deliver not just great products but find (and communicate) the compelling reason why they make them.