COVID-19 Puts Social Purpose and Sustainability on the Boardroom Agenda

In the corporate lexicon, the word “purpose” is simultaneously widely used and poorly understood. With so many organisations reaching out to support their employees, customers and communities during the COVID-19 crisis, one might expect that many have discovered the true meaning of purpose. In reality, though, COVID-19 has only served to confuse the concept.

The fundamental misunderstanding is that purpose – or social purpose – is not defined by a response to a specific event, even if that event is as monumental as a pandemic. For example, a distillery that switches its production lines over to making hand sanitiser is not by definition a purpose-driven company. Rather, it’s a company doing a decent thing, making a societal impact – but decency is not purpose. At best, decency is a symptom of purpose: the system of values that defines a company’s reason for being.

Where are the Purpose-Led Companies?

Purpose-led companies are most commonly found among the population of founder-led companies or, in cases where the founder is no longer in the business, companies where the CEO still abides by the founders’ original vision and values. Founders have the unique ability to drive a vision and purpose beyond selling product and making profit (in each case, a different variety of helping the world become a better place). A number of high profile companies highlight that purpose-driven operations can help to drive customer engagement, which can ultimately lead to superior financial results alongside societal impact.

It is more difficult to find non-founder-led companies that are authentically purpose-led. This is not surprising, since boards typically hire new CEOs to turn around or grow companies, all in the service of meeting financial targets, not of forging societal impact. You typically do not hear boards telling would-be CEOs “We want you to transform the company into a purpose-led enterprise.”

There are exceptions to this rule – for example, when Paul Polman became CEO of Unilever 10 years ago, he made purpose the top corporate priority. The company’s tag line today is “Making sustainable living commonplace for eight billion people,” and his successor, Alan Jope, was recently quoted in Bloomberg Businessweek saying “… by positioning our brands on doing real good, by running our supply chain in a sustainable way, by being a responsible employer and creating great opportunities for people, a byproduct will be better financial performance.”

This is a rare occasion where an established company brought in a new CEO who implemented a true purpose-led strategy. The financial results ultimately validated the strategy, which is why the same purpose-led strategy has been adopted by his successor. Still, it remains a leap of faith for many CEOs and boards to stray from the comfort zone of “profits first.” This is why the Business Roundtable made international headlines when nearly 200 large-company CEOs - representing more than 15 million employees and more than US $7 trillion in annual revenues -

issued a statement saying that a corporation’s purpose is no longer to maximise shareholder value, but to serve all stakeholders. This is a significant departure from a centuries-old status quo.

The Pandemic Prompts Purpose

The Business Roundtable statement preceded the emergence of COVID-19 by six months and proved to be prescient. The spread of a global coronavirus pandemic has made the interrelationships between companies, communities, employees, customers and other stakeholders glaringly clear. Whether it’s working to create a safe environment for employees, reconfiguring supply chains so they are more sustainable, providing more generous payment terms to customers, or providing products and expertise to the community and the world in its fight against COVID-19, the pandemic has made it easy to understand that there is no way to survive and thrive without all stakeholders. The coronavirus pandemic has also brought to the fore tensions between and the need to meet, both shareholder and stakeholder needs, manage both financial and non-financial goals, and balance both short-term and long-term imperatives.

Will COVID-19 Create More Purpose-Driven Companies?

Still, the question remains: will the lessons of the pandemic cause an increase in the acceptance of purpose as a core business strategy? Companies enacting new policies and programmes around sustainability and social responsibility are not by definition transforming into purpose-led enterprises. And this is where the general confusion around purpose becomes a problem.

Becoming purpose-led requires a top-down commitment to an enduring set of values that guides all business decisions. Swift action taken by companies to meet the immediate needs of stakeholders is a good thing, but it needs to translate into a long-term commitment to using corporate purpose as a core business strategy.

Purpose-driven companies need to live their values. They should use their purpose to inform the highest levels of decision-making. These values should be continuously referred to in order to guide businesses not only in their initial response to the crisis, but also as they recover and thrive post-crisis. Their values should also provide a moral compass for the business; they should be ingrained into the organisational culture and procedures, guiding individual and collective behaviour of every member of the company.  The purpose should also communicate to customers, communities and other stakeholders the values to which the company should be held accountable.

CEOs and the Purpose-Driven Organisation

For organisations seeking to transition to a purpose-led system, it is incumbent on the board to set the purpose direction and empower the CEO to communicate that purpose and drive it into action. In recent months we have seen a growing number of CEOs find their voice on purpose, using this time of crisis to speak out and speak up for the values that underpin their company. For companies seeking to drive a business-transformation and implement a purpose agenda, the voice and actions of the CEO are critical for building trust.

To earn trust, support and enthusiasm, the business will need to redesign and redefine its performance metrics to ensure they are in tune with the purpose transformation. Growth and financial performance have been the most important metrics to date – and we are witnessing the flaws in this approach in real-time. To illustrate this point: who would you rather be today – a company with the world’s most efficient supply chain, or a company with the world’s most resilient and sustainable supply chain? Before COVID, most companies would say they want the former. Today, it’s a safe bet to say all companies want the latter. In reality, it should be a combination of the two – but traditional performance metrics have placed the emphasis on cost and efficiency, not on resilience and sustainability. This will need to change.

The Purpose-Led Future

COVID-19 has given companies a taste for why being purpose-led is necessary and also why it is a major undertaking: there is not yet a playbook for transforming from profit-led to purpose-led. Just like there isn’t one for conducting business in a world where employees must stay home, large numbers of customers may not be able to pay and supply chains grind to a halt due to virus-control mandates. The coronavirus pandemic has been a humbling experience for companies that normally feel strong and in control and it has also inspired a new type of dialogue between companies and their stakeholders – a dialogue based on joint wellbeing rather than traditional business objectives. This type of dialogue builds trust, which is the essence of effective leadership in times of crisis: resilient leadership requires strong “followership,” which can only be achieved by catalysing greater trust.  

Fundamentally, the pandemic has shone a bright light on how inextricably connected business is to society and society to business. That is the enlightened premise of stakeholder capitalism. Even the world’s largest organisations are not powerful enough to stave off the damage caused by a pandemic. And, this shows the flaws in the “profits first” strategy – because profits are an outcome, not a purpose and cannot protect a business in the face of this or other global disruptions. Transitioning to a purpose-led business, where all stakeholders are organised around a common set of values that benefit society and all business decisions are guided by those values, can make organisations far more resilient and sustainable in the face of all types of disruptions – from local to global.

The crisis has given CEOs, employees and society as a whole a moment of pause and reflection.

It is critical for organisations to take stock of themselves in the wake of COVID-19 and make the changes required to thrive in a world where seismic shifts are taking place. Adopting a purpose-led strategy can be the foundation of this transformation.