A 2019 report by EY neatly encapsulates the definition and value of purpose driven companies. It initially defines purpose as “an aspirational reason for being that is grounded in humanity and inspires a call to action,” then creates a more practical definition for business: “an aspirational reason for a business that is grounded in humanity and inspires a call to action.”
EY goes on to say “a purpose-driven organization/ company is therefore one that endeavors to show its stakeholders (consumers/clients and employees) that it takes purpose seriously by actively demonstrating all measures that it’s put in place to achieve this milestone.”
Why is Purpose So Compelling to Stakeholders?
Peter Fisk states that “Purpose-driven companies are more ambitious, they attract the best talent, inspire richer innovation, make faster decisions, are more trusted, have greater loyalty, and attract more investment.” The afore mentioned EY survey reveals that a steadily rising number of organizations are successfully driving purpose into their businesses. What leads to their success?
Per EY, there are three key factors:
- Purpose is a core differentiator. Purpose-oriented companies have higher productivity and growth rates, along with a more satisfied workforce who remain loyal and stay longer with them. Such companies also go on to report 30 percent higher levels of innovation and 40 percent higher levels of workforce retention than their competitors. While traditional trends might dominate purchasing behavior, new opportunities exist to connect with customers through purpose.
In 2019, our consumer survey showed that price and quality remain the biggest factors driving customer decisions. However, many of the same respondents (55 percent) believe businesses today have a greater responsibility to act on issues related to their purpose. Those failing to do so risk being displaced by purpose-driven disruptors. For example, Unilever’s 28 “sustainable living” brands (i.e., brands focused on reducing Unilever’s environmental footprint and increasing social impact) such as Dove, Vaseline, and Lipton delivered 75 percent of the company’s growth and grew 69 percent faster on average than the rest of its businesses in 2018 (compared to 46 percent in 2017). Soap, petroleum jelly, and tea are everyday household essentials, but by promoting sustainable living, these products became differentiated as they embody the company’s purpose.
- Purpose means something to all people. Purpose-driven businesses factor in the experiences of all the people they touch, as people want to work for and support a company whose purpose is focused on impacting the society positively. People look to work with brands that mirror their values and ultimately make them feel like they contributed in making the world a better place.
Companies that cultivate an authentic relationship with all their stakeholders can create meaningful connections with them, building loyalty in them along the way. This is especially very important to the current crop of young people who seek more purpose from everything around them as compared to their predecessors. For instance, 53 percent of South African millennials suggest they’ve changed their relationship with a business because of the impact its products or services or brand has on the environment or society.
- Purpose is who they are. Purpose-driven businesses truly embed purpose in each of their activities with the sole aim of enabling a lasting positive impact on people’s lives. Customers are also looking to indulge in products or services of companies that help them achieve their goals. Be it Kellogg’s aim to “nourish families so they can flourish and thrive” through nutritious breakfast cereals; Patagonia’s being “in business to save our home planet”; or Sumo Salad aiming at “make Australia a healthier and happier place”—shaping a business’s activities and goals around purpose can help companies to gear their operations towards maximum value for their stakeholders.
A PwC study adds a fourth reason: purpose-driven companies connect more strongly to a younger generation. The study posits that “millennials who have a strong connection to the purpose of their organization are 5.3 times more likely to stay”. In a world that evolves every day, millennials are always seeking something meaningful to train their focus on and gain satisfaction from. Purpose presents that anchor or reference point on which millennials draw their gratification from. Fresh consumer data shows that customers view purpose-driven brands as being more caring and, as a result, are more loyal to them.
Purpose-Centered Pushes Purpose-Driven To A New Level
At Stuart McFaul Associates, we believe that purpose-centered is even more powerful than purpose-driven. The focal point is critical: the more focused you are on your purpose objective, the more likely you are to be always conscious of why you do what you do. It’s a success mindset that helps you get up in the morning enthusiastic, always keeps your purpose in sight, and helps you more easily enroll others in your cause. Here’s the difference at a glance:
|Self-motivated||You’re being pushed|
|Centered; it’s your focus||It’s behind you, making it easy to lose focus|
|A target others can see and move towards as well||Not easy to share with others who don’t feel the same “push”|