The Heart of Purpose

Purpose-Washing or Purpose-Driven?

Purpose is all the rage today. We want to buy from companies that we feel connected to and with whom we share similar values. It allows us to support brands that we find personally meaningful. In their book, Good is the New Cool: The Principles of Purpose,? Afdhel Aziz and Bobby Jones suggest that purpose is “an aspirational reason for being that inspires action that benefits shareholders and stakeholders as well as local and global societies” (1). The United Way (British Columbia) Social Purpose Institute suggests, “A social purpose business is a company whose enduring reason for being is to create a better world. It is an engine for good, creating social benefits, through everything it does. Its growth is a positive force in society” (2). With the rise in consumer sentiment for this brand connection, this has led to an increase in “purpose-driven marketing” (3). The nonprofit Ad Council describes this form of marketing as “a strategy used by an organization to center its external communications efforts around a social cause that aligns with its core values” (4).

On the surface, this sounds wonderful. It allows for an alignment of purpose and profit. Or does it?

Coro Strandberg, an advisor to the United Way Social Purpose Institute cautions,?

With customers, employees and investors clamoring for it, more and more companies are proclaiming purpose pledges as their raison d’être and adopting purpose mantras in their marketing and public communications. But are they truly implementing their purpose? How will we know? How do we separate the bogus from the bona fide? As companies scramble to create a purpose as their reason for existence, they will be accused of purpose-washing unless they act on it (5).

Purpose is so much more than a marketing concept or a means in which to attract customers, clients and investors. It’s also more than adherence to regulatory reporting requirements. There is increasing criticism of ESG (environmental, social, governance) reporting and investing suggesting that it is simply a form of virtue signalling (6). Kenneth Drucker, in his Harvard Business Review article, observes that over the past 20 years the number of companies submitting corporate social responsibility (CSR) reports based on the Global Reporting Initiative (GRI) standards have increased by one hundred times. At the same time, investment in socially responsible companies has grown to $30 trillion. And yet, during this period the impact of this reporting and investing seems to have been exaggerated. Drucker suggests that “reporting is not a proxy for progress” (7). Duncan Austin, a former ESG investment manager, refers to this as “greenwishing–the earnest hope that well-intended efforts to make the world more sustainable are much closer to achieving the necessary change than they really are” (8).

In my interview earlier this year with Nic Beique, founder and CEO of Helcim, he echoes these sentiments:

I think ESG and those initiatives… they're obviously not bad. I think they're coming to the right place and they're important. I do think that you can get into all of this massive reporting. Maybe it's attracting the right investors. And there's a certain amount of virtue signaling to it all. But I think if you take all that noise aside and you look at just some of the core key decisions that a company is making, whether with its workforce, with its pricing, with its customers, or within its investment, they speak louder than any of that reporting on those initiatives. I think you can look at three or four headlines of a company and probably get a better sense of how mission-driven they are or what's important to them and where their core values are more than any kind of reporting. I think it's just key decisions that speak a lot louder (9).

This isn’t to say that the intentions of companies who report on their ESG commitments are wrong or deceptive. In most cases, there is a corporate desire to be “good” and to generally align their business with environmental or social justice aims. Ranjay Gulati, author of Deep Purpose: The Heart and Soul of High-Performance Companies, calls this type of commitment to purpose as “purpose-on-the-periphery.” That is, “they adopt a purpose statement and take steps to deliver on it, only to treat these efforts as secondary to their core businesses. They divide their efforts into “doing good” through purpose-driven corporate social responsibility (CSR) and “doing well” through their core businesses, perceiving these as separate” (10).

He adds,?

They give themselves a pass on reimagining their businesses to serve a higher purpose, thinking it’s enough that they return some social value in the form of charity on the side. They fail to transform their operations to become more purpose-driven—more sustainable, more beneficial to local communities, more valuable to employees, and so on (10).

In this “dance” or trade-off between purpose and profit, for some the question is ‘how much purpose is enough?’. If a company submits the right report or donates the right amount of money, will this do? Gulati suggests that companies that practice purpose-on-the-periphery place significantly greater emphasis on shareholder wealth maximization with just enough emphasis on purpose to “maintain a veneer of respectability” (10).

What We Mean By Purpose-Driven

So, what might it look like to go beyond appearances and be more purpose-driven??

In part, it begins with the ‘why’. We often hear the idea of businesses both doing well (profit) and doing good (purpose). This sounds great on the surface. However, in some cases, the ‘doing good’ simply makes up for the instances where business has not done good or perhaps, not enough. In their article, Why business must harness the power of purpose, writers for Ernst and Young outline several factors in why purpose has increased in importance for all stakeholders (11).

Some of these include:

• Trust in corporate leadership has dropped substantially following the 2008 financial crisis which exposed a lack of clear standards and accountability
• Environmental sustainability is being demanded of companies?
• Economic and social inequality continues to persist

In this way, being purpose-driven serves to address businesses’ “doing good” gaps. But being purpose-driven must mean more than this. It’s adopting the perspective that business can indeed be a powerful source for good. In responding to the interview question about how his company influences its stakeholders, Jason Hennessey, founder and CEO of Hennessey Digital, notes that, “What you put into the universe, you get out. And so I'm deliberate about that, and I think to your question, does it impact our suppliers? Does it impact our customers? Does it impact our staff? Absolutely. I think it's just how you show up in the world” (12).

As such, what does it mean to be purpose-driven? To use Jason’s expression, It’s how you show up in the world. This is reflected not only in his company’s mission (to elevate and humanize digital marketing by working hard, innovating constantly, and caring personally) but in how they interact with their employees and their clients (13).? Nell Derrick Debevoise suggests that purpose is vitally linked to meaning and impact. He notes, “If we make these basic shifts in belief systems (which have long been and are still held by many global communities), we are positioned for a rapid transition to the most equitable, peaceful, and healthy global society ever” (14).

For many companies, this may involve examining their purpose activities and exploring whether they are truly purpose-driven. In addition to those companies that place purpose simply at the periphery of their priorities, Gulati also suggests that there are other companies that try to pursue a “win-win” approach by delivering value to both shareholders and society–and who ultimately struggle to do so. He argues that,?

Although these leaders strive to serve society, they tend to perceive shareholder value as a performance baseline or nonnegotiable, and social value and purpose as (sometimes) negotiable. They limit their pursuit of social value projects to those where the economic payoffs are also clear. To this extent, we can describe these firms’ commitment to purpose as “convenient” (15).

Gulati adds that in many cases, the only way that these convenient-purpose companies succeed is to adopt a portfolio-mindset whereby only portions of the company’s operations are targeted to become purpose-oriented.

The result of pursuing purpose only when it is convenient limits the degree of transformative societal change. Kenneth Drucker’s sobering account of limited societal progress despite the significantly greater ESG-related efforts gives credence to the notion of convenient purpose (16). Michael Hiltzik, writing for the Los Angeles Times, notes that the 2019 Business Roundtable’s declaration of their commitment to deliver value for all stakeholders is scarcely evident. He offers, “There have been few signs that major corporations have taken real steps to serve nonshareholders that they wouldn’t have taken without outside pressure, whether from public opinion or government regulation.” Hiltzik adds that rather than a sign of substantive change, the Roundtable’s declaration was a publicity move.

So, if peripheral or convenient purpose doesn’t reflect genuine purpose nor deliver societal change, the question remains, what does it mean to be purpose-driven? And, how might companies make the shift from being nominally purpose-driven to having purpose at the core?

Purpose at the Core

In my interviews with leaders of purpose-driven organizations, it's readily evident that purpose lies at the heart of these leaders.

Colin Schmidt is the CEO of TerraPro, an earthworks and matting company based in Sherwood Park, Alberta. They describe themselves as a group of innovators, leaders, and problem solvers who work to create success for all of their stakeholders. When asked about the evolution of his purpose journey, Schmidt remarked that others have often said of him,?"I've never met a CEO like you, Colin. You're not the numbers guy, and you care more about the people than you care about your strategic plan or the money that's in the account." He added that relationship is central to building trust and that this is a matter of saying who you are and then walking in complete alignment with this (17).

Afdhel Aziz and Bobby Jones’ echo this thought. They suggest that purpose needs to start on the inside out.

[It…]starts at the CEO and leadership level and permeates throughout the organization. Employees are invited to contribute their gifts and passions in service to a higher purpose, creating a greater sense of meaning and fulfillment in their work. This internal energy is then outwardly manifested through inspired innovation, authentic storytelling, and impactful marketing that attracts enthusiastic customers, investors, and employees. When these forces are aligned and working together out of genuine care for others’ well-being, it forms a conspiracy of love that helps uplift business and humanity to its highest forms (18).

Another example of a purpose-driven leader is Evelyne Nyairo. Evelyne is the founder and president of Ellie Bianca–an environmentally sustainable, socially conscious skincare company. Her company’s motto–Kind to Your Skin. Kind to the Earth. Kind to Women–summarizes her commitment to empower women through business and education. In response to the interview question of how to do purpose, Nyairo told me that all aspects of the business must be involved in purpose, “Impact has to be weaved in. It’s the way a company runs, the way that a company does business.”?

This fine weaving of purpose throughout the organization is what fuels a company’s capacity to be truly purpose-driven. In contrast to companies that pursue purpose at the periphery or who seek the convenient “win-win”, Gulati refers to what he calls deep-purpose companies and leaders. He notes, “deep purpose leaders ultimately don’t conceive of purpose as a mere tool. To them, it’s something more fundamental: an existential statement that defines the firm’s very reason for being” (19).

He adds,

Deep purpose leaders orient their organizations existentially around the “North Star” of purpose, articulating a conscious intent to conduct their business in a more elevated way. Purpose in their minds is a unifying statement of the commercial and social problems a business intends to profitably solve for its stakeholders (19).

Jane Bisbee is the Executive Director of the Social Enterprise Fund, a Canadian impact investment fund. Over the last 10 years, she’s helped build their portfolio to more than 80 projects with over $85M (CAD) invested. As we spoke about the types of organizations they fund, her focus turns to the question, “are we doing good with the money?...the first thing I have to get past the investors at the table is that this [project] has actually got a full 360-degree mission, and their threshold is pretty high.” When we spoke about investment topics such as valuations and funding raises, she understood why so many social entrepreneurs focus on the numbers. She again reiterated the point, “I understand you need money…but I’d rather you talk to me about what you're actually trying to do. Why are you doing this?” (20) Like Gulati, she wants the entrepreneur to understand their mission and purpose–what is their North Star?

Gulati invites founders and senior leaders of purpose-driven businesses to ensure that their own personal purpose deeply aligns with the organization’s reason for existence. He argues, “leaders ultimately are the source of intent within deep purpose companies. If you can’t channel the corporate intention with every fiber of your being, taking on the role of an activist personally, you won’t lead your company toward a deep purpose” (21).

Investing in Purpose

When companies and their leaders have purpose at their core, there is the recognition that the “win-win” paradigm between profit and purpose involves trade-offs. In order to show up, to walk the talk, it involves paying the price and making the investment in purpose. Aaron Griffths? suggests that purpose is about “putting your money where your mission is” (22). Aziz and Jones? add, genuinely authentic, purpose-driven leadership sometimes means risking your profits to stand by your values. It is often challenging for leaders to do but forsaking long-term trust and credibility for short-term sales is rarely a good idea (23).

Nyairo tells the story of a prospective supplier for one of her skincare products. She had given their lab explicit instructions that all of the ingredients for this product had to be 100% natural. However, when she received a sample–listing all of the ingredients–she noticed, particularly as a chemist that there was an ingredient that was not natural. When she asked the supplier about the ingredient, they responded, “Oh, it’s a small percentage.” She replied, “No, it needs to be 100%.” In the end, she decided to formulate the product herself because of her commitment to her customers.?

“I want to be able to tell the customer with confidence that these products are clean. Yes, it takes time. We could be a $50 million company by now if I was just buying formulas off the shelf. [I could] just package it differently, it's good to go. But taking the longer route and starting to work from scratch, formulating it from scratch, it's a journey, but it's worthwhile. It’s fulfilling” (24).

Nyairo puts her money where her mission is.

This isn’t to say that purpose trumps profit every single time. Gulati refers to this decision making as “walking along the razor’s edge.” He suggests that deep purpose leaders commit themselves to continually exploring the “ongoing and imperfect navigation of trade-offs between stakeholders.” He notes that this decision-making process often becomes a messy process of “practical idealism.” Gulati offers, “Rather than try to be superhuman enterprises that magically get decision-making right for everyone every time, deep purpose companies prove themselves uniquely willing to linger in a space of discomfort, ambiguity, and contradiction, staying as true as possible to their animating intent” (25).

Journeying Toward Purpose

Everyone’s path is different. For many in the social enterprise space, the dream begins with the social mission and continues with how to sustainably earn revenue. Bisbee highlights, “Rule number one…you have to have more income than outgo…or you don’t get to play.” Aziz and Jones highlight as one of their principles of purpose that “purpose must be profitable to be scalable” (26). They add, “Purpose-driven businesses recognize that their ability to make profits expands their opportunities to make a change” (27). For some companies, the realization moment can come when they see that they can generate scalable profit and still maintain their commitment to purpose.

In some cases, the focus on profit is considerably less than the purpose focus. Jesse and Rachel Ward operate Hope Cleaning. Their company hires individuals who are often new immigrants to Canada. They pay their employees a living wage, train their employees both vocational and life skills such as resume building and financial literacy. Conversing with Jesse Ward, he notes that while every project must be profitable,?

Profit is something that we focus on purely so we can keep our doors open and keep people stably employed. Anytime we do have a little extra, we try to develop a scholarship fund for ladies that have kids that are going into school or if they need a health spending account. That’s the way we manage our profit–we’re trying to reinvest it back into the community and [create opportunities for] people to come from poverty into prosperity.

One of the keys to scaling comes from both understanding your ecosystem and then finding a product that can scale within that environment (29). Innovative products, services, or businesses alone aren’t enough for purpose to scale. Connecting and dialoguing with stakeholders from across the ecosystem allows prospective social entrepreneurs to map the system. Once they better grasp the various players and interactions, they can determine if their product can scale. Ward notes that in growing their business, they’ve discovered that some clients fit better than others with their social purpose and values. Their company assesses prospective clients and explores key areas of fit such as care for people and mission alignment. He offers, “the clients that we know are a good fit and believe in our mission have been awesome. They stick with us for years and they really support the ladies. They are fantastic both in the workplace [environment they create for our employees] and in dealing with [as clients].”

Some profit-oriented companies have always had purpose at the core. This includes companies like Chemco Products Company based in California. Erica Utz Wochna, along with her sister Jamie, now serve as president and CEO, respectively, for this business that has been in their family for three generations. Chemco’s commitment to purpose can be seen through the quality and safety of their products that are delivered to their customers and through how they honor and serve their employees. As the impact of the pandemic became evident in 2020, their products played an important role for many companies in the food industry. As Erica and Jamie provided leadership to their family business, their company’s aha moment was when it realized that both purpose and profit could take place at the same time. In our interview together, Erica noted that at that point they finally realized, “We can do it all. It doesn’t have to be one or the other” (30).

For companies in the more traditional profit space, the journey involves integrating purpose deeper throughout the organization. It’s not a simple journey. Rosabeth Moss Kanter highlights that it takes a great company to combine “financial and social logic to build enduring success” (31). She describes financial logic as the business thinking aimed at maximizing shareholder value, while social logic is the business thinking focused on social purpose and bringing social benefits to stakeholders. As noted earlier, the challenge for many “win-win” companies is that they are “quick to abandon social goals in the quest for profitability” (32). In order to walk this line, Julie Battilana and her colleagues suggest that companies must use a hybrid organizing approach. This approach requires: prioritizing and monitoring both social and financial goals; structuring and leading the organization in a way that this prioritization can readily take place; and ensuring that the company has hired team members who embrace the social and financial ethos. Companies like Patagonia initially placed greater emphasis on the financial goals. Throughout their journey, social goals have risen increasingly to the forefront.?

Scaling Purpose, Scaling Love

Regardless of where a company begins or continues the purpose journey, the role of community and the broader ecosystem–including the purpose ecosystem–remain critical elements to scaling purpose. There’s a strong relational element to purpose. A tight connection forms between the organization and all of its stakeholders, both internal and external. Purpose serves as a common goal that invites collaboration that can develop over time into deeper business relationships. It creates a sense of partnership that goes beyond the formal. There’s a sense of trust that forms along with a desire to see a collective winning together. This is in line with research that suggests that purpose-driven organizations, particularly those focused on social purpose, are more likely to align with their suppliers and other stakeholders in order to generate better results for all. Sisodia and his colleagues note that in these situations, “suppliers to firms of endearment [their term for purpose-driven companies] find them not only better to work with, but also valuable partners in their own enterprises, helping them become more productive and financially more successful” (33).

At the beginning of July 2022, I attended the Social Venture Institute in Banff, Alberta. Hosted by Hollyhock, BeLocal and Momentum–organizations committed to supporting and strengthening the social enterprise ecosystem–SVI Banff was a powerful gathering of social entrepreneurs and other members of the ecosystem. What struck me more than just the number of great businesses, people and ideas was the connection that existed between each person. I was particularly struck by the conversations I had over the course of the institute with Raj Rathnavalu and Sebastien Rioux from Newo Global Energy (a non-profit social enterprise) (34). The word, Newo, signifies “four” in Plains Cree. It is sacred to that culture in that it encompasses the four elements, seasons, directions, and aspects of being human. One of Newo’s guiding beliefs is that “solutions are bountiful when a community works together with mutual respect, selflessness, and love.”

And this is what emerged from my conversations with them–the ongoing presence of a steady, persistent grounding in love. I was both surprised and moved by the stillness of their spirits. When Raj offered a closing comment to the Institute, what I heard at a deeper, soul-level was that scaling purpose involves scaling love. Each of the individuals present contributed in their own way to the love that is central to the purpose ecosystem. This is purpose at its core.

Purpose: The Continuing Journey

As we continue with the Purpose + Performance Project, more stories will emerge from the purpose ecosystem. Our desire is that you will be both encouraged and inspired–not just by the stories–but also by the desire to reach out to the organizations whose stories have been told and to those in your corner of the purpose ecosystem. Aziz and Jones offer that, “Purpose is a journey. Building a purpose-driven company is a marathon, not a sprint. It requires patience, persistence, and perspective to overcome the temptation to resort to short-term gains that contribute to many long term problems” (35). Your story and those of many others is only partially written. The beauty is, we get to write it together.

Let me conclude with this. When I asked James Boettcher, founder of Righteous Gelato, about his continuing role in helping to build this ecosystem, he shared,

I think if there was one thing that would be a great legacy would be when other companies speak of us and say, "Those guys really helped us become a B Corp, or helped us see that living wage was not so hard, or whatever it might be," because I think that's been our mission. We've assisted probably half a dozen to a dozen companies become B Corp certified and helped guide them along the way. I take a lot of calls from different founders and startups to just play a role in maybe sharing some knowledge (36).

What will your role be in growing and expanding the purpose ecosystem? How will you contribute to scaling purpose, to scaling love?

NOTES:

(1) Aziz, Afdhel, and Bobby Jones. Good is the New Cool: The Principles of Purpose. Conspiracy of Love, p. 207. 2021.

(2) Social Purpose Institute at United Way. What is a Social Purpose? United Way Lower Mainland. 2021. https://socialpurpose.ca/wp-content/uploads/sites/6/2019/08/social-purpose-business-definition-080719.pdf ?

(3) Goleman, Daniel. “The Rise of Purpose-Driven Marketing.” Korn Ferry Institute. 2022. https://www.kornferry.com/insights/this-week-in-leadership/the-rise-of-purpose-driven-marketing ?

(4) Charles, Khalem. “What is Purpose-Driven?” Ad Council. 2021.?

https://www.adcouncil.org/all-articles/what-is-purpose-driven-marketing

(5) Strandberg, Coro. “The End of Purpose-Washing.” United Way (British Columbia) Social Purpose Institute. 2021. https://socialpurpose.ca/the-end-of-purpose-washing/

(6) Levine, Seth. “ESG is a Superfluous Virtue Signal.” The Integrating Investor. 2021. https://integratinginvestor.com/esg-is-a-superfluous-virtue-signal/

(6) Irina Slav, “ESG Investment: Virtue Signalling at Its Best.” Energy Now. 2022. https://energynow.ca/2022/02/esg-investment-virtue-signalling-at-its-best-irina-slav/

(7) Drucker, Kenneth P. “Overselling Sustainability Reporting: We’re Confusing Output with Impact.” Harvard Business Review. 2021.

?https://hbr.org/2021/05/overselling-sustainability-reporting

(8) Duncan, Austin. “Greenwish: The Wishful Thinking Undermining the Ambition of Sustainable Business.” Preventable Surprises. 2019. https://preventablesurprises.com/wp-content/uploads/2019/07/2019-07-19-Greenwish-Essay.pdf

(9) Nic Beique, Performance + Performance Project Interview, April 18, 2022.

(10) ?Gulati, Ranjay. Deep Purpose: The Heart and Soul of High-Performance Companies. New York: Harper Business. p. 5. 2022.

(11) Ernst & Young Global Ltd. “Why Business Must Harness the Power of Purpose.” Ernst & Young Global Ltd. 2020. https://www.ey.com/en_gl/purpose/why-business-must-harness-the-power-of-purpose

(12) Jason Hennessey Interview, Performance + Performance Project Interview, July 26, 2022.

(13) Hennessey Digital. “Who is Hennessy Digital?” Hennessey Digital. 2022. https://hennessey.com/about/our-culture/

(14) ?Debevoise, Nell Derick. “How Impact, Meaning, and Purpose are Different and Why You Should Care.” Forbes. 2019. https://www.forbes.com/sites/nelldebevoise/2019/12/10/how-impact-meaning-and-purpose-are-different-and-why-you-should-care/?sh=683b44c057f2

(15) Gulati, Ranjay, p. 6.

(16) Hiltzik, Michael. “Last Year CEOs Pledged to Serve Stakeholders, Not Shareholders. You Were Right Not to Buy It.” Los Angeles Times. 2020. https://www.latimes.com/business/story/2020-08-19/big-business-shareholder-value-scam .

(17) Colin Schmidt, Performance + Performance Project Interview, February 15, 2022.

(18) Aziz, Afdhel, and Bobby Jones,? p. 139.

(19) ?Gulati, Ranjay, p. 11.?

(20) Jane Bisbee, Performance + Performance Project Interview, August 16, 2022.

(21) ?Gulati, Ranjay, p. 20.?

(22) Aziz, Afdhel, and Bobby Jones, p. 207.?

(23) Aziz, Afdhel, and Bobby Jones, p. 208.?

(24) Evelyne Nyairo, Performance + Performance Project Interview, August 11, 2022.

(25) ?Gulati, Ranjay, p. 28-29.?

(26) Aziz, Afdhel, and Bobby Jones, p. 180.

(27) Aziz, Afdhel, and Bobby Jones, p. 181.?

(28) Jesse Ward, Performance + Performance Project Interview, August 18, 2022.

(29) Moving Worlds. “The Complete Guide to Growing and Scaling Your Social Enterprise.” Moving Worlds. 2022. https://movingworlds.org/social-entrepreneurship-guide

(30) Erica Utz Wochna, Performance + Performance Project Interview, July 22, 2022.

(31) Moss Kanter, Rosabeth. “How Great Companies Think Differently.” Harvard Business Review. 2011. https://hbr.org/2011/11/how-great-companies-think-differently .

(32) Battilana, Juline, Anne-Claire Pache, Metin Sengul, and Marissa Kimsey. “The Dual-Purpose Playbook: What It Takes to Do Well and Do Good at the Same Time.” Harvard Business Review. 2019. https://hbr.org/2019/03/the-dual-purpose-playbook .

(33) Sisodia, Rajendra, Jagdish N. Sheth, and David Wolfe. “Firms of Endearment.” Pearson Education, p. 138.?

(34) Newo. “Our Team”. Newo. 2022. https://newo.energy/about/our-team/

(35) Aziz, Afdhel, and Bobby Jones, p. 315-316.?

(36) James Boettcher, Performance + Performance Project Interview, March 15, 2022.