What is the business case for social purpose?

Building resilience through purpose during challenging times

You must be hearing the word ‘purpose’ a lot these days! The current climate has forced many businesses to re-evaluate their company mission, vision and societal purpose. Indeed, for companies who didn’t have a clearly defined purpose before the pandemic, it is now more important than ever before to get started. As stakeholders continue to demand more from businesses, and employees search for more meaning and value in the work, it seems like more businesses are finally starting to think about it. 

“Purpose is fundamental. It’s fundamental to our health and our happiness.”  

– Richard Lieder

The discussion and research surrounding the importance of ‘purpose’ is not new. Indeed, even before the pandemic, many were looking to demonstrate the benefits of putting purpose before profit, and the positive impacts this could have on business growth and long-term resilience. In a 2016 PwC survey on purpose in the workplace, 79% of business leaders expressed the belief that an organisation’s purpose was central to business success, and that businesses must demonstrate a commitment to responsible business leadership to boost innovation and brand value. Yet by 2020, PwC still found that almost a quarter (24%) of employees didn’t feel their employer was making an important contribution to society.

For many years, companies have been taking action to become more purposeful and create positive change in their communities through adopting the UN Global Compact framework, becoming a B Corporation, integrating their strategies with Sustainable Development Goals and establishing Corporate Social Responsibility programmes that create positive change. Yet, purpose is still often ignored in day-to-day decision-making, with 78% of CEOs stating their business is failing to deliver on social purpose pledges, illustrating the divide between the desire to act and effective implementation and measurement

Responsible business leadership, and making decisions that tie back to an organisation’s purpose is particularly important during a crisis. It is during such times that companies are under increased scrutiny and pressure to align the impact of their work with human needs and values, as society does rally behind common good. We know from research on purpose-driven organisations that they tend to thrive during challenging environments like a global crisis. So why are business leaders taking so long to get on board? 

It can be a daunting challenge to define your purpose in line with your mission and vision. And simply articulating a corporate purpose that fails to resonate with your stakeholders would be unproductive, and miss the mark. The point is - purpose needs to be backed by strong leadership - and by employees. 

Read on to learn more about the business case for creating purpose, and how companies can move beyond purpose as a marketing strategy, and instead utilise their core skills and expertise to make a positive difference in society.

The business case for instilling purpose. Attract, retain, and improve performance. 

There are many compelling reasons for instilling or reviewing your company’s purpose, post Covid-19. The facts speak for themselves. According to a 2019 YPO Global Leadership Survey over 92% of CEOs agree that “the purpose of business is to have an impact on society, beyond pursuing profits and wealth”. Additionally, according to Deloitte Insights 34% of executives rank “societal impact” as the most important factor to evaluate their annual performance. More importantly, as noted by Peter Fisk, purpose can have a significant impact on the bottom-line. In an EY study, 58% of respondents that prioritised purpose experienced growth of 10% or more over the past three years. Businesses who proactively align a clear purpose with their brand typically experience increased revenue, more engaged employees and positive brand sentiment amongst the media and consumers. 

Discover the benefits of creating a purpose-driven culture in your business:

For Customers: 

Purpose attracts loyal customers who will stick with you in a downturn. Eight in 10 consumers say they are more loyal to purpose-driven brands, which can help sustain customer relationships in a downturn and beyond. According to Accenture’s global COVID-19 Consumer Research, two-thirds of consumers expect companies to commit to higher ethical standards and be increasingly responsible to employees, customers, greater society and the environment in the wake of this pandemic. By creating a brand purpose that aligns with the key values of consumers, your business is more likely to have a strong reputation as a morally ethical brand and will subsequently secure more favourable media coverage and long-term trust.

Purpose helps increase customer loyalty

• A 2018 study from Cone/Porter Novelli found that 66% of respondents would switch to a purpose-driven brand for products they typically buy, a figure that rises to 91% for millennials.
• Nielsen found that 2 in 3 consumers will pay more for products and services from brands that are committed to making a positive social impact.
• In a recent study over 50% of Gen Z respondents said knowing that a brand is socially conscious positively influences their purchase decisions.
• Nine in ten millennials are willing to switch brands that are positively associated with a cause and purpose.
• Accenture found 53% of people disappointed with a brand’s words or actions on a social issue complain about it with 17% not returning.
• An Edelman Earned Brand study found that 64% of consumers around the world will buy or boycott a brand solely because of its position on a social or political issue, with almost 60% of Americans saying they would “choose, switch, avoid or boycott a brand based on its stand on societal issues,” compared to just 47% in 2017.

For Employees:

When companies are centred on an authentic purpose, employees feel that their work has more meaning, which helps reduce staff turnover and increase performance. Research suggests that employees who feel a greater sense of connection to their organisation's purpose are far more likely to ride out volatility and be there to help companies recover and grow when stability returns. A recent Global Shapers survey of 30,000 young people found that 40% viewed “an employer’s sense of purpose or impact on society” as the most important factor, after salary, in their decision to work for any company. Surprisingly, a whopping 90% of a business workforce is willing to earn less if they found a job that resonated with their personal purpose. 

Purpose helps cultivate engaged employees and improves performance

• 89% of all respondents in an EY study said companies with a shared sense of purpose would have greater employee satisfaction.
• Gallup research indicates employees who are more aligned with their company's identity perform higher on key business performance metrics than do employees who are less aligned.
• Employees are 69% less likely to quit within the next 6 months if they find work highly meaningful. Additionally, they stay on average 7.4 months longer than employees who find their work lacks in meaning.
• The Deloitte Insights 2020 Global Marketing Trends Report found that purpose-driven companies had 40% higher levels of workforce retention than their competitors.
• Bain and Company in 2015 identified that there is productive power in an engaged and inspired workforce.

For Investors:

Founder of impact investing and advocate for social impact Richard Cohen often touted that ‘money and meaning can be a synergy’. Securing investment funds is much easier when you have a strong purpose that investors can really identify with. Evermore, investors are looking for innovative businesses that can change the world for the better, so if you can prove a social impact element to your business, you’ll be in a great position when pitching for investment opportunities. You may even enhance your businesses creativity and innovation potential. 

• A survey of millennial investors found that 77% say environmental, social and governance concerns are their top priority when considering investment opportunities.
• Swell Investing’s ‘Money Meets Morals’ survey found that 84% of Gen-Z investors are either already invested in socially responsible or impact investments or plan to invest this way in the future.
• Nearly one in three Gen-Z investors said they would be willing to allocate 50% or more of their investment portfolio to socially responsible or impact investments.
• Ethical business behaviour often correlates with higher financial returns.
• A Harvard EY Beacon Institute survey found that “companies with a strong sense of purpose are able to transform and innovate better.” This extends to executives as well, the same study finding that purposeful leaders have “greater ability to drive successful innovation and transformational change.
• Following the financial crisis of 2008, commercial investments were seeing losses of 20-40% while many impact investments were consistently reporting returns of 4% or more.

The final point? Kantar’s Purpose 2020 study demonstrates the WHY of purpose is clear - over a 12 year period, brands recognized for high commitment to purpose experienced brand value growth of 175% - more than twice the rate of others.  

Convinced yet? Share and comment your thoughts to let us know how you’re making strides towards purposeful leadership, and embedding purpose into your company DNA.