How protecting your purpose can help to drive profits
When Patagonia Founder and Chair Yves Chouinard declared, "Earth is now our only shareholder" in September, he shone a light on the pressures felt not only by the outdoor apparel company, but also by many other companies with purpose close to their hearts.
"Even public companies with good intentions are under too much pressure to create short-term gain at the expense of long-term vitality and responsibility," he warned in his game-changing statement.
His decision to essentially give the company away to the Holdfast Collective, an American charity "dedicated to fighting the environmental crisis", represents an inspired solution to an increasingly common dilemma: how to protect a company’s purpose from the weight of a business world driven by profit?
A new dawn
Recent years have seen purpose become a growing priority for businesses – a trend that was accelerated by the forced period of introspection brought on by the pandemic.
The ‘2022 CEO Purpose Report’ by global brand consultancy Brandpie showed that 83 percent of CEOs either have or want a purpose, while 73 percent agree that purpose influences the majority of their decision-making. Furthermore, 62 percent of CEOs are now accelerating their efforts related to their company purpose as compared with just 34 percent in 2021.
"Even public companies with good intentions are under too much pressure to create short-term gain at the expense of long-term vitality and responsibility." – Yves Chouinard
"Purpose has always been integral to business, but the pandemic has caused business leaders at unprecedented scale to re-examine priorities across almost every area," Brandpie’s United States CEO Marylee Sachs tells The CEO Magazine.
"The last three years will have lasting implications on how businesses operate and organize, and as a result most leaders have adopted purpose or are looking to bring purpose into their organizations to provide direction, to be a north star, for futureproofing the business."
The greatest pressure that limits a company’s ability to embed purpose is internal legacy thinking and operations, according to Carolyn Butler-Madden, the Chief Purpose Activist of B Corp-certified consultancy The Cause Effect, who has also authored two books on social purpose: For Love & Money and Path To Purpose.
"This can come from anywhere: the board, the executive leadership team, shareholders and managers," she explains. "It can also come from systems – for example, bonus structures linked to short-term profit gains."
"The key to balancing purpose with profit lies in changing the way we think about them – purpose is the destination that drives a business. Profits are the fuel that gets them there." – Carolyn Butler-Madden
However, the reality is that protecting your purpose can also help to drive profits. According to research by Harvard Business Review Analytic Services and EY Beacon Institute, companies with a clearly identified purpose reap a range of rewards including higher growth rates, higher levels of success in transformation and innovation initiatives, as well as customers who are more loyal and employees who are more engaged.
"The key to balancing purpose with profit lies in changing the way we think about them – purpose is the destination that drives a business. Profits are the fuel that gets them there," Butler-Madden says. "Purpose cannot exist without profit. Equally, profit existing as the animating force of business is what has brought society to this critical juncture – it is a dead-end road."
For any companies out there seeking to embed purpose, Butler-Madden has a few words of advice.
- Start with who. Understand your unique organizational identity. This is your shared narrative that attracts like-minded people to your business in the form of employees, customers, partners and investors. It is the key to getting clarity on your ‘why’.
- Put purpose at the center of your brand. Get clarity on your vision and mission. This is the change you are committed to creating through your business, products, services and people.
- Embed actionable purpose through your organization. Through your people and culture; through the partnerships you pursue to create and amplify impact; through your marketing and communication channels, as well as through your customer experience; and finally, by building short- and long-term business performance and impact goals.
Motivations behind a purpose-led transformation can vary quite dramatically from company to company, according to Butler-Madden. "Some pursue a full transformation, seeking to embed purpose through the organization so they can ‘lead with purpose’," she explains. "Others are simply looking to tick a box and lock down a purpose statement that gives their business a contextual ‘why’."
That’s why it is so crucial to build trust around your purpose, through transparency and authenticity – even more important because mistrust is the default emotion for six out of 10 people, according to Edelman research.
"Any disingenuous effort to be purpose-driven will soon repel rather than attract," warns brand communication and reputation specialist and author of Enhance Your Reputation, Ros Weadman.
"Any disingenuous effort to be purpose-driven will soon repel rather than attract." – Ros Weadman
Articulating your purpose statement in the first place is therefore crucial, particularly when it comes to the pillars of purpose, vision, mission and principles. "I’ve noticed that when there is a lack of clarity between the concepts, it can result in culture statements sounding the same or lacking meaning, often leading to misunderstanding, confusion and disengagement by staff," Weadman says.
Brandpie’s Sachs agrees, identifying lack of clarity and communication externally and internally as a major barrier. "We advocate for ruthless consistency in communications – engaging internal audiences first and then communicating with external audiences," she says. "The organization as a whole needs to fully embrace its purpose."
Such clarity will also help businesses attract the ‘right’ types of investors – those who are focused on longer-term impacts rather than short-term returns.
Share your motivation
Having worked as a professional communicator for nearly four decades, Weadman has come to understand what companies need to do to achieve maximum engagement.
"Brands can achieve a deeper level of connection with their target audiences when they communicate and act from a place of purpose rather than product," she says.
"When brands make clear the difference they seek to make in the world beyond selling a product or service, they become a brand that stands up and stands out."
In an age where talent acquisition and retention is increasingly challenging, companies are realizing they need to better cater to the needs and desires of their people, and purpose appears to be the key.
According to PwC, millennials are 5.3 times more likely to stick with their employer if they feel a strong connection to the company purpose, with non-millennials 2.3 times more likely to do the same.
"In the aftermath of the pandemic, we’re seeing CEOs actively putting employee and customer needs front and center, and wanting to create long-term value for this growing stakeholder network." – Marylee Sachs
Consumers, too, are demanding more, choosing ethical, sustainable and purpose-led brands over others, and are willing to pay more for this assurance.
"In the aftermath of the pandemic, we’re seeing CEOs actively putting employee and customer needs front and center, and wanting to create long-term value for this growing stakeholder network," Sachs reflects, describing it as a "marked paradigm shift" from shareholder value to purpose-led values. It’s a dynamic she sees continuing.
"I doubt we’ll see another Patagonia in the near future, but I suspect we’ll see other visionary and innovative leaders trying different things that will be just as revolutionary."
Denim with a difference
Outland Denim was founded in 2008 with the aim of providing trafficked women in Cambodia with a way out through safe employment and education. Built on a foundation of purpose but with a focus on quality, its jeans are now worn by celebrities such as Megan Markle and Leonardo DiCaprio.
But CEO James Bartle admits it took time for the brand’s momentum to build, as it sought to stay true to its values in a world of "fast wins, fast success, fast profit".
"You have to be comfortable with the wins coming at a slower pace, more expensive pace," he tells The CEO Magazine.
Doing things differently comes with a myriad of pressures – not just financial, due to Outland’s hefty investments in innovation and research, but also to maintain the status quo. There is constant scrutiny, too, due to a wave of anti-greenwashing that focuses on perfection rather than progress, he explains.
Ensuring investors in the company are aligned with its values is therefore critical. "It’s really important that majority ownership is held by people who are personally purpose-led, not profit-led."
That’s why, when new legislation in Australia made it possible for like-minded members of the public to come on board as minority investors through equity crowdfunding, Outland welcomed the opportunity. Although the campaign coincided with the start of the pandemic, James reveals that hundreds still pledged their support.
"When you put people first, you wouldn’t believe the ripples of positive impact that result."
Read more: New insights on how to find your true north