Purpose-driven firms play a critical role in helping to build a sustainable world. Purpose-driven work drives innovation, creativity, and out of the box thinking.
Climate change, diversity inclusion, wealth disparity, gender wage gaps. These once contentious topics are now central conversations with your peers, colleagues, and friends. These issues are significant, dynamic, and interdisciplinary; they are layered with questions of who should be the accountable change agent integrating these topics into daily life. The truth is: purpose-driven firms are critically important in driving change.
Consumers, professionals, and c-level executives are changing. People are demanding more from business and want more accountability. Business leaders realize that there is an urgent need to re-define the overall purpose and strategy of their organization.
There is an emerging trend of consumers purchasing sustainable products knowing that it was sourced ethically and fairly. However, once this trend became apparent, there was a pressing need for companies to change the core of the purpose within why it chose to exist in the way it does. We can observe this shift with companies like Unilever, Walmart, and Nike.
The simple truth is: individual firms with purpose are one step ahead of creating the future, compared to those who didn’t have a purpose and are trying to adapt and replicate their business models.
It’s a ripple effect, and although it takes time, it’s amplified beyond the specific firm that takes the first step. But, what does it mean to run a purpose-driven firm in practice? Can purpose-driven firms not only survive but thrive in a brutally competitive world?
There are benefits to being an authentically purpose-driven professional. A professor at Harvard Business School, suggests that people who are driven by the purpose of their work are significantly more likely to cooperate even in situations where the returns may be less gratifying. Purpose allows organizations to think of long term rather growth even if it means short term loss. In the long run, being purpose-driven can significantly improve the financial performance of a firm. Lipton Tea is an excellent example of this. Lipton started with a purpose; it made its sustainability commitment before doing a thorough analysis of the business case.
Purpose helped Lipton embrace sustainable tea by being the inspiration for the transition. The purpose shifted and grew the consumer base and gave it an extra value differentiating from all other teas.
Purpose shaped Walmart’s actions after Hurricane Katrina by reminding Walmart what it felt like to be a company that does “good”. Walmart had initially prepared to contribute $2 million to Katrina relief. But in the end, Walmart ended up donating $20 million in cash, 100 truckloads of goods, and 100,000 meals. After this, Lee announced three new broad goals for Walmart: to become 100% supplied by renewable energy, to create zero waste, and to focus on selling products that sustained both resources and the environment.
Walmart also made several immediate commitments, including pledging to reduce its greenhouse gas emissions by 20% over the next seven years and to double its transportation fleet’s efficiency. Purpose entirely disrupted and remolded their business model.
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Executives can convince their employees that they are serious about this purpose and that it extends beyond the bottom line by making these long-term investments. They need to act on things that can typically feel like buzzwords and put them in action. The most effective way to ensure this purpose permeates throughout the entire organization is to pay justly, beyond legislation, to produce mentorship, and to cultivate a work culture that celebrates transparency. It may also be that its commitment to purpose is supporting a level of productivity and innovation that some of its leading competitors have trouble imitating.
But in the short term, authentically purpose-driven firms occasionally need to sacrifice economic returns in the service of the firm’s purpose to establish their credibility. Being genuinely purpose-driven requires firms to at least occasionally sacrifice profits in the service of the purpose. After all, would you believe someone was authentically purpose-driven if they only acted on their purpose when it was going to make them money?
Another theme among purpose-driven companies is that they always appear to be juggling the business case and their commitment to purpose. But, science is in favor of purpose. There is a stream of research that suggests that adopting a purpose helps a firm to develop a set of shared beliefs, and then further work that suggests such shared ideas help drive strategic alignment, lower labor costs. People who are motivated by purpose will work harder for the same compensation and ultimately shed clarity and credibility on the part of senior management.
The promising reality is that purpose helps an organization develop a set of widely shared beliefs, a strong sense of identity, and a reputation for “doing the right thing.” It encourages people to bring their authentic selves to work, and can sometimes create an environment where employees express the most “prosocial” or “group orientated” aspects of their personalities.
In the cover picture: Making a decision is like crossing a bridge. Picture Credit: Unsplash