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Investing in Purpose
Over the decades, the Earth Day campaign has brought hundreds of millions of people into the environmental movement, creating opportunities in 193 countries for people to engage in activities that celebrate and protect our planetary home. This year, the theme is #InvestInOurPlanet. The first Earth Day in 1970 was a national demonstration, organized by a United States senator, to raise awareness about environmental issues. By the end of that year, the U.S. government had created the Environmental Protection Agency and other regulatory groups and laws began to emerge throughout the world, aimed at addressing the negative impacts that chemicals, manufacturing and working conditions can have on the natural and human world.
This need to address unintended consequences – by government regulation or voluntary company commitment - is now part of a systems thinking approach that brands are operationalizing through purpose and sustainability strategy.
What is purpose?
To understand what purpose is, it’s important to define and distinguish it from sustainability and ESG (Environment, Social, Governance). Sustainability became a mainstream concept in the 1980s when the United Nations Brundtland Commission referred to it as “meeting our own needs without compromising the ability of future generations to meet their own needs”. Since then, scientists, sociologists, economists and experts across many other fields have come to look at sustainability practices in three dimensions: environmental, economic and social.
Purpose as a business concept emerged in the mid-2000s, referring to a company's understanding and articulation of the greater good that it wants to create in the world, using its business as a mechanism for delivering a regenerative planet and equitable society. A company’s purpose usually is focused primarily on either environmental or social outcomes but always takes into consideration the intersectional nature of both.
Companies that understand purpose understand that they exist beyond the singular interest of shareholders and delivering shareholder value. They realize that they must take responsibility for their impact on the planet and society.
Purpose goes beyond an organizational self-interest that “it’s got to be primarily good for the company,” with its efforts being required to serve all of their value directly to the organization. It looks beyond the company, beyond the industry and at the whole. At the commons.
I use the term ‘commons’ to describe what every company, every individual, has a responsibility to protect and nurture. The commons are all the resources we depend upon but that none of us owns. ‘Commons’ is an expression of the collective that works for all of us.
How you can build purpose
When building a purposeful strategy, we must first ask: Does the company understand how it can take the vast resources it has control over - everything from dozens to hundreds of thousands of employees, millions of customers, everything it buys - and orient all of those in service to some greater good? In service to protecting or nurturing the commons?
When you think about the sheer scale of all the dimensions of a corporation and how they can be deployed toward preserving the planet and society alongside delivering business value, then you clearly understand purpose.
Purpose is also not a marketing strategy or a communications technique. When done authentically, it drives business strategy and unlocks creativity, innovation and stakeholder engagement. Customers want to buy from purposeful brands, employees want to work there, investors want to support expansion and regulators look to align regulatory constraints while NGOs and nonprofits partner to support a shared theory of change.
From a purposeful brand perspective, sustainability holds the operational strategy that a company will deploy to manage its environmental and social impacts in a way that allows for financial stability. It is the way in which the brand will operationalize its purpose and create shared value for all stakeholders. It will also guide decisions for how the company will manage the entirety of its value chain – some of which indirectly deliver on purpose but nonetheless must be carefully directed to ensure the least harmful impacts.
How ESG can help
ESG is primarily a language the financial sector has adopted to understand is the risk (and in some cases opportunity) of a company’s environmental and social impacts and inputs. From net-zero commitments to diversity targets, from packaging innovation and zero waste to landfills to human rights policies, brands have a far-reaching set of activities that can have either positive or negative outcomes on the planet and society.
Progress in ESG leads to clear sustainability goals and vision and can be evidence of a well-run company – one that carefully manages its resources, reduces expensive waste, has minimal staff churn thanks to talent management and DEI programs that create a welcoming culture and has the expansive policies, commitments and organizational structure in place to ensure consistency in delivering strong ESG results.
The “say/do” gap
There is always some space between what a company communicates about its ambitions, challenges, progress and examples of addressing business challenges around environmental and social dimensions and what it is actually doing.
So, what are companies doing? Based on a survey by Verndantix analyst firm, data shows that not only are companies scheduling major investments in decarbonization over the next two years, but they are also dealing head-on with the challenge of decarbonizing core business processes. Alan Murray said in a recent CEO Daily newsletter that he “can’t find a big company that is backing off its ESG plans.”
However, when it comes to what companies are saying about ESG, the dynamics are shifting – for the better. It is settling into its proper place of being a good (and increasingly regulated and refined) framework for understanding and communicating specific environmental and social risks and the goals, processes and resources aimed at addressing those risks. ESG has mistakenly conflated with purpose and sustainability. What we are now seeing is a proper distinction made between purpose (vision for the greater good), sustainability (strategy for the interplay between environmental, social and economic outcomes) and ESG (the framework for tracking specific types of mostly business risk).
Purpose is the highest expression of shared value creation. I am not suggesting that driving growth is not an essential outcome of a defined purpose. It is. When you set and articulate a purpose that is more expansive than the company itself, it generates momentum that will drive engagement, loyalty and expansion. It’s like that adage that your financials are a trailing indicator that proves you’re taking care of your employees and your customers. In the same way, when you have a clear and inspiring purpose, you invite others to join you on your journey to a better world, a better business.