The role of purpose in building future-fit businesses

We have joined forces with Skating Panda to share a series of four articles to help businesses understand the why, what, and how of becoming purpose-led.

There are two main schools of thought explaining the huge growth in the hype surrounding purpose in business. The first, and hopefully the one that will win over time, is the recognition of the huge role and responsibility that businesses must adopt in relation to building a fair and healthy society while looking after the planet. The other is that this is just the latest buzzword or ‘big idea’ that the business community has got excited about to drive short term profits and enable a new brand story that pleases customers and shareholders alike.

We believe that the former will ring true. And not just for the next few years, but for the long term. But before we explain our reasons and rationale for why, it’s helpful to begin with a reminder of what is meant by ‘organisational purpose’.

The CMI (Chartered Management Institute) defines it as “An organisation’s meaningful and enduring reason to exist that aligns with long-term financial performance, provides a clear context for daily decision making, and unifies and motivates relevant stakeholders”.

The Harvard Business Review defines it as “An aspirational reason for being which inspires and provides a call to action for an organization and its partners and stakeholders and provides benefit to local and global society”.

With the world currently grappling with the vast disruption and uncertainty of COVID-19, businesses have been put under huge pressure, forced to ask new and extremely challenging questions encompassing every area of the organisation from investors to employees and customers. Business’ response to the crisis has been varied, with many actions being called out as purpose washing. Pret a Manger is amongst those gaining the plaudits, having embraced their purpose to make healthy food more accessible within communities, to open cafes close to NHS hospitals and working with their partners to supply free food to vulnerable people. As businesses begin to look ahead, reassessing their strategies, growth projects and decision-making structures, they are exploring existential questions such as ‘what is our unique role in the world?’, ‘who do we serve?’ and ‘why do we exist?’, to establish their essence, and anchor decisions and plans in the foundations from which they grow.

These are exactly the type of questions that purpose-led businesses have explored, involving a wide representation of their stakeholders to articulate a meaningful and enduring reason for existing before embarking on the work that embeds purpose across all parts of the business. It acts as a vital principle and benchmark for decision making throughout the whole business – from sustainability and CSR, to business growth and investment, to human rights and research and development. It is the anchor of a business’s strategy.

But let’s return to our conviction that purpose is the long-term answer to businesses playing a leading role in the future success of our world.

The business case for becoming purpose-led is compelling. As more businesses make the transition and measure the impact on the bottom line, the already established data trends are getting even deeper. The benefits are widely felt, including some fundamental elements:

• Trust – with employees, customers and wider stakeholders. In fact, trust strengthens when a business’s key actions and behaviours are clearly aligned to the organisation it says it’s going to be – its purpose – and show a pattern of alignment when compared.
• Innovation – as organisations with a strong sense of purpose are more likely to embrace diversity and different options, this encourages innovation among employees, and provides the tools and resources to realise their full potential.
• Accountability – because public expectations of businesses have never been greater, every company must not only deliver financial performance, but also show how it makes a positive contribution to society.
• Individual wellbeing – by placing higher importance and value on the unique needs and goals of the individual, employees' individual contexts and challenges are better managed, leading to higher levels of meaning and happiness.

If we agree on the above, then we can move past the ‘why should we embed purpose?’ question and focus on ‘how do we embed purpose as a strategic and operational lever?’

Exploring this question has brought Skating Panda and CAF together to partner on a new blog series. We’ll be combining our collective experience on purpose, corporate giving and social impact to equip the business community with the insight, ideas and approaches to become courageous and purposeful leaders.