A majority of business leaders believe in the value of a strong corporate purpose and only a minority say their company’s main purpose is to maximize shareholder value says a new report by EY. Based on a survey of 1,470 global leaders representing companies across various industries in developed and emerging markets around the world, the report reveals that purpose, not profit, is the key to success amid a turbulent global economy.
According to the report, there is a marked shift taking place in organizations’ conceptions of purpose. Forty-percent of respondents said their organization’s purpose is aimed at creating value for multiple stakeholders or offering an aspirational reason for being, as opposed to bringing value to customers (33 percent), boosting share price (15 percent) and bringing value to employees (11 percent) — all of which focus on a single stakeholder group.
The reason for the shakeup? Resilience. Sixty-eight percent of companies that broadly define purpose and integrated it into their organizations say purpose gives them the ability to innovate in times of disruption.
Additionally, the survey finds that 97 percent of companies that deeply integrate a broader sense of purpose into their DNA report a good or great deal of incremental value from doing so. From building customer loyalty to preserving brand value and reputation and the ability to develop new and innovative products, embedding purpose across activities allows companies to remain competitive and continue to generate value even in a less-than-ideal economic climate.
“Our research shows the real advantages companies gain when going on an authentic purpose journey. The data also busts the myth of purpose versus profit. Seventy-five percent of purposeful companies involved in our survey tell us that the integration of purpose creates value in the short-term, as well as over the long run,” said Valerie Keller, Global Lead, EY Beacon Institute and EY Global Markets.
But according to Keller, companies have to walk the talk in their strategies, products and services and customer and employee experiences — simply supplying the narrative isn’t enough. “A purpose patina of words without action runs the risk of unmet stakeholder expectations, decreased trust and missed opportunities,” she adds.
In its report, EY provides a pathway to transforming purpose rhetoric into reality, identifying four steps that can help organizations reach their purpose goals:
- Clearly articulate a purpose that responds to the needs of their stakeholders and is grounded in what an organization does.
- Embed purpose into their strategy and operations and align their decision-making with that purpose.
- Constantly evaluate where they were in their journey and what needs to change.
- Accelerate the journey by placing purpose at the center of their culture and ensuring it is owned by their people.
“All the disruption geopolitically, economically and technologically is a catalyst for a new evolution in business. Those most able to thrive in this new world are focused on their impact on the humans they touch — the customers, the employees and the wider society,” said Keller.