Why your business needs a purpose.

Your customers, employees and investors are not happy.

You're finding it difficult to attract and retain customers, engage employees, and excite investors. Your business does not inspire people—and you are not alone. Customer retention, employee satisfaction, and profit margins are all down.

It's going to get worse. Here is why.

Your business is a shareholder-value business.

Most are, probably, 90%. If your business is more than 5 years old, you're over 30, or you've had business education in the last 20 years, your business is a shareholder-value business.

Shareholder-value businesses became popular in the 1970s, after a stock market crash. Managers had created huge conglomerates, making themselves look more prestigious but with questionable value for owners. A shareholder revolt started.

In the 1980s, Margret Thatcher, Ronald Reagan, and Milton Freedman, an economist, supported the movement. At that point, maximising shareholder value became the way to run a business, and for a while, it worked.

Since then public opinion has shifted. Environmental disasters, product failures, corporate scandals and the credit crisis have all been blamed on maximising shareholder value. The reputation of business has been damaged.

People now distrust business, and it's affecting your business.

95% of consumers now think that businesses should benefit all stakeholders. 70% of employees want to work for businesses that improve the world, and 73% of investors said they now consider the social impact of their investment decisions (Source: Harvard Business Review).

People struggle to find businesses they want to work for, buy from, and invest in.

In a?social-purpose business, what you do for the world comes first.

This isn't new. In the 1980s, The Body Shop put animal rights and fair trade first. It was a huge success. It led to animal testing bans in the UK and many other countries. It created a ￡50m fortune for Anita Roddick. Since then, there's been a big increase in social-purpose businesses from cars (Tesla) to toilet rolls (Who Gives a Crap, Cheeky Panda) and Chocolate (Divine, Tony's Chocoloney).

Social purpose businesses are still the minority, but that will change.

A shift towards social-purpose business is happening.

Businesses that successfully make this shift have a queue of customers, the best staff, and willing investors. That is why Social Purpose businesses are growing twice as fast as shareholder-value businesses.

Tesla is a good example because everyone knows it. It's not perfect, nor is its founder. It does shows what a huge difference purpose can make.

Tesla's Social Purpose is to "Accelerate the world’s transition to sustainable energy." As a result of this purpose, and a superior product, they sold 2 million electric cars faster than any car company. They provide jobs that contribute to sustainability, and they've attracted billions in investment.

They've invested in giga-factories that use less energy and water. Their cars have avoided an estimated 13.4 million metric tons of CO2 a year.

Tesla's revenue growth was 50% in 2022 and Elon Musk's net worth has increased to $230bn.

Musk's popularity has declined since his botched, (then successful) Twitter take-over. But cast your mind back to Tesla's glory days. It's clear the growth was due to its Social Purpose. That purpose delivered a real impact by accelerating the car industry's transition to sustainable energy.

Tesla isn't the only example. You don't have to be a big, well-known brand to transition to a social-purpose business. The businesses I work with every day are small and medium businesses that have transitioned to become purpose-led. They've created impact, engagement, and faster growth.

Social Purpose Guides Your Business

The great thing about a social purpose business is that your social purpose creates a foundation for everything else. A clear purpose helps drive product development, marketing, employment value proposition, processes, systems, and your financial plan. Having a clear social purpose helps with decision-making and prioritisation every day.

Profitability isn't a good decision-making tool. Business cases and investment calculations are based on financial assumptions and unknowns. At best, they're inaccurate. At worst they're fanciful.

The profitability approach to decision-making can't account for negative impacts. For example, it's hard to calculate the cost of plastic packaging ending up in the ocean. As a result, shareholder businesses tie themselves in knots by having a business strategy and a separate CSR/ESG approach. This creates a drag on both 'the business' and the 'impact agenda'. There is internal turmoil.

In a shareholder-value oil company, it's possible to have a business strategy focused on exploring, drilling, and selling oil and an ESG strategy about sustainability. They don't fit together, but the result is net-zero policies that allow 'the business' to do damage while the ESG approach offsets with carbon credits. This creates internal tension and a real risk of greenwashing accusations.

An energy company with an authentic social purpose of "clean energy for all" would have a more transformative business plan. It would create and distribute energy cleanly without the need to offset. As well as being more efficient it would attract customers, employees and investors, resulting in impact, growth and financial gain.

There aren't enough social-purpose businesses

Many startups today are social-purpose businesses, but new start-ups are insufficient to meet the huge demand for social-purpose products, employment and investment. I worked with a major fund manager who raised ￡5bn virtually overnight to invest in social purpose businesses. Three years later they still can't find enough social purpose businesses to invest in and stick to their impact investment mandate. As a result, billions of that initial investment is still unspent.

Your business can transform from a shareholder-value business to a social-purpose business. Social purpose businesses create more impact, higher engagement, and faster growth, making them more financially rewarding and exciting to lead.

You can take three steps to start your transformation to a social-purpose business.

(1) Assess - Review how well-defined and integrated your social purpose is. Challenge yourself on whether your business's purpose is really a social one, or whether it's a commercial statement in disguise. There are various tests to assess this. If your social purpose references your product, customer, growth or financials, it's a commercial statement, not a true social purpose. You should also assess how well your social purpose is integrated into your business and where it can be improved. A social purpose needs to be integrated into every aspect of your business. It may be well integrated in some areas, and not in others. (Assess your social purpose).

(2) Define? - If your social purpose isn't crisp or doesn't pass all of the social purpose tests, it's worth spending time to get this right. There is a set of techniques that help you define your social purpose better. They create an authentic purpose that's unique to you and your business. Define your purpose in stage 1 of the DREAM business method.

(3) Integrate - You can integrate your social purpose into your business in less than a year. The good news is that it can be done in bite-sized chunks, so you can benefit as soon you complete the first chunk. You can prioritise the parts of your business that will give you the most immediate value and impact. As soon as that first piece works well (usually within 3 months) it will start creating positive momentum for the rest of your integration. The key is to have a plan and have others hold you to account for the plan. Stages 2 to 5 of the DREAM business method show how to integrate your Social Purpose.

In the long term, all businesses will be social-purpose businesses. Those that are not will not survive. Right now, being a social-purpose business is a competitive advantage. There are not enough social-purpose businesses yet for everyone who wants to buy from, work for, or invest in them. The quicker you transform your business into a social-purpose business, the faster you'll benefit. The more impact you'll create, the more enjoyment you'll get from your business.

You can learn more about transforming your business into a social-purpose business at our free webinar.