Busting the myth: purpose-led companies are not charities

We’ve been inundated in the past few months by business leaders seeking ‘purpose-led’ strategies as an antidote for controversial Australian stock exchange new governance principles which require Board Directors to add “defining the entity’s purpose” to their long list of duties.

The updated principles aren’t signed off yet but will take hold from July 1, 2019 if they pass muster later this year or early next year.

The recent upsurge of interest in purpose-led or activated businesses has been triggered by the ‘trust deficit’ between organisations and the community.

“Purpose-led” has become the latest buzzword for organisations seeking to tap into the zeitgeist of 21st century business.

But scepticism abounds. What does “purpose-led” actually mean? Is it simply strategy with another name? And does it mean sacrificing profits for philanthropy?

What about boards, employees and shareholders? Is purpose just another fad or are there real benefits to be gained? And aren’t successful companies quietly doing it anyway, minus the hype?

This is the first in a series of four blogs where I’m aiming to demystify the noise around purpose and debunk some of the myths.

First up is the myth around profit. Despite what naysayers and sceptics might believe, profit and purpose are not mutually exclusive. In fact, if you think purpose is not about profit, you’re missing something fundamental. Purpose is all about growing profits in the right way.

A great example is global consumer goods firm Unilever. Since 2010, when CEO Paul Polman accepted the challenge to transform it into a purpose-led company, Unilever has become the poster-child for purpose-led organisations.

After settling on its purpose “to make sustainable living commonplace” – Unilever began quietly and methodically, to align every element of its business, including key brands, under a clearly defined sustainability remit. But it wasn’t plain sailing – at least, not at first. Paul faced a massive backlash from investors who told him that while it was terrific that he wanted to save the world, they were there to make money.

But he was resonating with consumers who cared deeply about sustainability and wanted to buy products that were aligned to that cause.

Today, Unilever has 26 sustainable living brands which are growing 46% faster than the rest of the business and delivering 70% of its turnover growth. Just last month a note from the investment community described Paul’s strategy as a “winner”, saying “this is the right thing to do”.

Unilever is a rare example of a conglomerate that’s purpose-led. Over the past eight years it has systematically but discreetly built its purpose into every operational element of the business, brand by brand. Investors and employees – and the market - can see, compare and contrast its purpose-led brands with those that are not - and measure the difference.

The trick, of course, is keeping the financial trajectory on track. That’s why it takes organisations between five and seven years to embed a purpose-led culture.

The good news is there is no downside. Taking a purpose-led approach will only accelerate an already sound strategy. There’s really nothing to lose, so what are you waiting for?

Tomorrow: Is purpose just strategy with another name?