Corporate Knights has developed the world’s ﬁrst rating system to assess companies’ implementation of their social purpose commitments. Its research finds that the gap between ‘say’ and ‘do’ varies from one company to the next.
Every day, more and more companies are committing to bettering the world by acknowledging their role in addressing today’s most pressing issues — including climate change and inequality. But if businesses are to succeed in transforming the world for the better, their commitments must be backed up with action.
A new report published by Corporate Knights, released today, investigates how 34 ‘Social Purpose Businesses’ (defined as a business whose enduring reason for being is to create a better world) with headquarters or significant operations in Canada are implementing their purpose. The Social Purpose Transition Pathway: Helping Companies Move from “Say” to “Do” features both public and private companies (including co-operatives and crown corporations) — including BASF Canada, BlackRock, BCLC, Lululemon, Starbucks and Unilever.
Report findings suggest that while companies are increasingly stating a social purpose, not all companies are as successful when it comes to implementing it. In other words, the gap between “say” and “do” varies from one company to the next.
“What’s interesting is that, out of an initial sample of 197 businesses, only 34 clearly stated that they create value for society — and not just for their shareholders or customers. These are the 34 businesses we selected for inclusion in the study; so, we’re really emphasizing that, regardless of a company’s rating in this report, they’re already doing good work and arguably ahead of the curve,” says Michelynn Lafleche, who co-authored the report.
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To rate companies, Corporate Knights developed the world’s first rating system to assess companies’ social purpose implementation. Companies were given an overall score and divided into four quartiles — platinum, gold, silver and bronze — to establish a score-based rating.
The study found that companies taking action to embed their social purpose are doing so in some areas more than others. For example, companies tend to be strongest when it comes to aligning values and company culture with their purpose; while companies are more likely to lag when it comes to social purpose governance.
“As an expert in business strategies for a sustainable future, I’ve seen how transformational it can be for businesses to not only embrace social purpose, but to also implement it,” says Coro Strandberg, President of Strandberg Consulting and co-author of the report. “However, leading businesses lack guidance on authentic and eﬀective implementation, and risk piecemeal execution. To accelerate social purpose in business and unlock their assets for social good, best practices are needed. This report ﬁlls the gap by shedding light on the transition pathway that lies ahead.”
Companies taking action to embed their social purpose are embedding purpose in some areas more than others. In addition to disclosing progress on their purpose, Corporate Knights found that companies tend to be strongest when it comes to aligning values with their purpose. Many companies also include social purpose deliverables in their corporate strategies, business plans or strategic priorities.
Companies tend to lag in two central areas related to social purpose governance: board oversight and CEO role. This means that when CEOs and boards are not guided by an explicit statement of responsibility to implement or govern its social purpose, the company may struggle to execute on purpose across all criteria.
Corporate Knights found that the private companies included in this study were stronger social purpose performers than public companies. Overall, they tended to execute on multiple criteria and seemed to do so with greater success than the rated public companies. The reason for this remains unclear — but it could relate to factors such as company size, co-operative form, lack of shareholder focus, or exposure to social purpose training.
Embedding purpose in the corporate strategy and executive performance incentives are considered the two top indicators of authentic purpose execution. Execution on purpose-driven pay and performance objectives for the CEO and executive team varied from one company to the next, with well over a third of companies scoring 0 on this criterion.
"This report captures an important sentiment at the heart of Corporate Knights’ mission,” says Toby Heaps, CEO and co-founder of Corporate Knights. “We believe that to address society’s challenges, business needs a new operating system. Businesses that adopt a social purpose as the reason they exist get partway there but need to go the second step to implement their purpose. This operating system is in its infancy; and that is where this report comes in. We hope the best practices and recommendations we’ve outlined in this report provide the guidance companies and their boards need to fulﬁll the potential of their purpose and put society on a sustainable path."
To learn more about the companies involved, their ratings and best practices for social purpose implementation, read the full report here.