In today's climate, businesses have good reason to be nervous. The current state of political flux, along with ongoing social, economic and environmental instability, is creating uncertainty for both businesses and consumers - and uncertainty is not a friend to the bottom line.
What can businesses do to not just survive in this climate, but thrive? Over recent years there has been a steady rise in the number of companies embracing purpose-led values to help them navigate this increasingly tricky business environment. Both traditional luxury brands and emerging newcomers are rethinking how they measure value and are, in-turn, achieving success by standing up for - and sticking to - principles.
What do we mean by purpose? Ernst & Young’s Beacon Institute defines purpose as “an aspirational reason for being that is grounded in humanity and inspires action”. According to this definition, companies that behave with purpose can create more value for their shareholders and society in the long-term than by simply pursuing profits or narrow self-interest.
As highlighted in Positive Luxury’s 2016 intelligence report, Shopping with a Purpose: The New Retail Revolution (sponsored by the EY Beacon Institute), creating or selling a good product or service is no longer enough to create value for customers, stakeholders and the physical environment. Consumers are demanding that industry leaders position themselves and their products as agents of positive change and growth in society.
In previous decades, sustainability and business growth were considered separate responsibilities, and were divided respectively between a company's corporate social responsibility and sales teams. Recently, however, an increasing number of businesses are driving growth by integrating values into the heart of their business model - and are achieving success by doing so. Research from the Beacon Institute and Harvard Business Review Analytic Services shows that purpose-driven firms are more than twice as likely to be successful in innovation and transformation efforts as companies without a clearly articulated purpose.
Compassion and community
What does this purpose-led approach look like in practice? To begin with, companies must stand up for what they believe in. As the public’s trust in politicians sinks to an all-time low, companies are taking more proactive roles in society, finding opportunities to innovate and foster change using market-based solutions unencumbered by the bureaucracy associated with government.
This seems like a new phenomenon, but many of today’s household names have roots in a desire to improve the fabric of society, often in times of political or social turbulence. Chocolate giant Cadbury’s, for example, was founded in the 19th century on principles of community. It provided quality homes for its workers, democratizing a luxury item and providing a template for compassionate business leadership as it did so.
Today more and more businesses are moving in this direction, in many cases in response to customer and employee expectations. Following the US presidential election last year, almost 900 businesses signed an open letter to incoming President Donald Trump stating their support for the global commitment to combating climate change as set out in the Paris Agreement. These companies told the world and their customers that they would continue the path towards a sustainable future, even if their government considered taking a step back.
While some may believe that acting purposefully comes at the expense of profit and performance, research shows otherwise. Former P&G Global Marketing Director Jim Stengel, for example, collected 10 years of data from 50,000 brands and discovered that the top performers were built upon ideals and a higher-order purpose. These leading brands grew at a rate three times greater than their competitors.
In addition, a strong sense of purpose is increasingly important to the employees of today.
LinkedIn’s recent Purpose at Work report revealed that 74% of candidates want a job where they feel that their work matters – an ethos that is often articulated more strongly by younger generations.
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“Most millennials don't care about the bells and whistles found in many workplaces today: the ping-pong tables, fancy latte machines and free food that companies offer to try to create job satisfaction,” says Jim Clifton, CEO of pollsters Gallup. “Giving out toys and entitlements is a leadership mistake, and worse, it's condescending. Purpose and development drive this generation.”
A desire for purpose is not limited to the young, however. In a new global survey of 1,400 global executives from Beacon Institute, 95% of respondents said their organization’s purpose is very or somewhat important to their personal job satisfaction.
In today’s marketplace for talent, purpose has become a critical tool for recruiting and retaining employees, too. Research revealed that employees who believed their organization embodied purpose were three times more likely to stay - and in these uncertain times, retaining staff takes becomes even more important.
Basic corporate social responsibility is now a given for major brands, but we are seeing first-hand a movement of companies who are ahead of that curve and leading the way towards a more positive future. The brands that thrive will be those that go beyond mere corporate box-ticking and chasing profit. Success in the 21st century will belong to companies with a purpose beyond mere profits.