The Rope Trick of Managing a Purpose Driven Business

When you make purpose or impact a condition for running a business, in addition to making money, you choose the hard path. 

Whenever a sun-god is knocked down the international press becomes a firework display. No different since the forced exit of Emannuel Faber, CEO of Danone, the darling of the #ESG (Environmental, Social, Governance) talk-about-doing-good crowd. In all the noise there is occasional good analysis, like in this FT article by Leila Abboud, where she correctly pinpoints the two reasons for his dismissal: shortcomings in performance and governance. 

However, it falls short on two important pieces of the purpose driven enterprise puzzle. One, the mechanics of the CEO rope trick involved in balancing purpose with financial results. Two, the underlying practical and ethical pitfalls in using someone else's money to pursue a yet unproven model or philosophy.

As an upcoming executive at the haloed Paris headquarters of Danone at the turn of the century, I first hand experienced the ‘magic world’ created by Franck Riboud, the then CEO and Faber’s mentor. His ploy was to balance his message and acts of purpose, with the shrewd staffing of the Danone executive team with competent business heavy hitters for whom money seemed like more than adequate purpose. In fact, Emanuel Faber, then a hotshot handpicked 35 year old child prodigy CFO, felt like one of the most incisive business brains one could find - or “too financial’ as some French colleagues would say. It’s ironic that in the years since he tilted far too much the other way, or certainly his messaging did, and he seems to have sidelined his mentor’s brew.

A trick that Mr. Riboud missed in my view, however, was to consolidate his shareholding when he could have. A hard learned lesson I have learnt, as the founder of an impact business in education, is that if you want to pursue the difficult path of a purpose driven business - then stay independent. It’s a thorny path where near term returns are uneven, and long term success far from certain. Do not expect others to understand your passion except in word, and there is no such thing as an ‘impact investor’. We have prided ourselves when we have beaten expectations on financial returns (been there), and equally felt remorse when we have not (been there too). Experiments with OPM (Other People’s Money), is an opium with significant side-effects. While purpose driven business is the one social experiment the planet sorely needs, the traditional money bags won’t fund it and perhaps should not.

When you make purpose or impact a condition for running a business, in addition to making money, you choose the hard path. You are neither like the just-purpose charities nor like the just-money businesses. The dish needs business smarts and independence, both - and must be served with lots of tenacity and some luck.