Emerging stronger with purpose

Survive till ’25 – the dominant mantra of 2024. From stickily high inflation to energy security, continued global supply chain challenges and a slowdown in key domestic industries, businesses have understandably had their gaze down trying to withstand the headwinds of an unusual recession.

As well as keeping a close eye on the numbers, this is also an opportunity to review your business’ reason for being. 

Although ‘purpose’ in business is not a new concept, its definition and application has crystalised much more in recent years. A well-defined, measured and embedded purpose has the potential to be the steadying force through challenging times – a beacon to help maintain focus on the long game.

In turn, the success of purpose-led businesses will also build a more resilient Aotearoa, aligning the needs and interests of communities with that of business. 

The next horizon for business

The movement for purpose-led business has been bubbling away for quite some time. Triple-bottom line, integrated reporting, shared value – there are many frameworks looking to redefine the role of business in society.

As it tends to do, legislation is sweeping in behind, levelling the playing field to meet the standards of those who have voluntarily been demonstrating what ‘good business’ could look like

With 60 per cent of global GDP now being covered by mandatory climate-related disclosures and compliance with climate targets being embedded in our trade agreements, a more holistic view of success is turning from fringe to norm.

While much has been made of the increased burden of climate reporting – and other ESG matters, too, from modern slavery to diversity, equity and inclusion – businesses could also view this as a tipping point towards a new horizon where purpose plays a much stronger role in an entity’s success.

Eventually, the dust will settle and accounting for social and environmental impacts will become more streamlined and integrated into everyday practices. Businesses that centre their strategy around a clear purpose will no longer have sustainability as a side project or as solely in the remit of corporate affairs. They will have embedded it across the business, from risk management and governance to financial modelling, product design, executive remuneration and KPIs.

Greater access to, and understanding of, non-financial data will give these businesses a competitive edge, not just for the increased reporting requirements but more importantly when it comes to accessing the increasing flows of capital towards impact, attracting the talent required for a more complex and changing future, and meeting the expectations of more discerning customers who are wary of greenwashing.

In short, purpose is the foundation of successful business models of the future. Some would argue it has always been this way and we just lost our way for a little while. – but that is a column for another day. 

Aligning business and community interest in Aotearoa

Not only does purpose create an edge for businesses themselves, but it will also make us more efficient at addressing our social and environmental challenges in Aotearoa, too. 

It has been more than 70 years since Milton Friedman spouted his famous doctrine, ‘the social responsibility of business is to increase its profits’. However, we now know the ‘profit-at-all-costs’ mindset has been a significant cause of the social and environmental challenges we face today – so much so it is even undermining long-term profitability itself.

A more holistic view of success has emerged in which businesses can, and should, take more responsibility for the wellbeing of the communities in which they exist.

In the United Kingdom, an Institute of Directors’ survey of more than 700 directors found 62 per cent believed businesses should not exist solely to make money and generate shareholder profits.

By embracing this view that the role of business is to contribute positively to society, companies can align their efforts with the genuine interests of the public. Imagine the efficiency gains if all businesses directed their capital, innovation and efforts towards outcomes that benefit communities and nature, and it wasn’t only left to governments and non-profits to fund the solutions.

With the recently increased focus on social investment and outcomes measurement, there is an opportunity for the public sector and purpose-led businesses to align on the future we want for Aotearoa.

There are a number of innovative Kiwi businesses demonstrating this is not only possible, but profitable – from Simplicity’s investment in affordable housing to Critical transforming  our nation’s hard-to-recycle plastic into striking new interior materials.

There are also now more than 150 B Corp certified businesses in New Zealand, including household names from Kiwibank to Pic’s Peanut Butter, which represent around $3 billion in annual revenue – all of whom have embedded a commitment to have an overall positive social and environmental impact in their company constitution, approved by directors and shareholders.

Setting new goalposts

So, what makes a good corporate purpose? The Future of the Corporation programme puts it simply and clearly – “to be a source of solutions to society’s problems, not the causes of the problems”.

Those seeking greater clarity on what is needed to solve society’s problems needn’t look too far. Well-established frameworks, such as the Sustainable Development Goals, provide a blueprint on specific ‘social goods’ that we should pursue as a society – from clean water and sanitation to food security, inclusion and equity. There is no shortage of human problems in search of clever solutions.

Specific standards and guidance for positive impact are also emerging to help businesses not only mitigate their negative impacts but pursue a positive contribution to society. 

The ‘ABCs’ of impact help explain the spectrum of contributions business can make to society from ‘A=Acting to avoid harm’ to ‘B=Benefitting stakeholders’, and ultimately ‘C=Contributing to solutions’, with more and more businesses finding opportunities to thrive in the ‘B’ and ‘C’ spaces.

B Corp Certification’s ‘impact business models’ and the Future-fit Business Benchmark’s ‘positive pursuits’ also provide a blueprint for the kinds of business models that drive positive impact, including the design of products that minimise resource use, employee-owned company structures, or procurement targeted at alleviating poverty.

These are not exhaustive lists for ways a business can contribute positively to society, but they do provide a helpful starting point when exploring the idea of corporate purpose.

Delivering on purpose

Bringing purpose to life is, of course, the most challenging part. Just as shareholders scrutinise financial results, broader stakeholders will hold businesses to account on their purpose, making impact management as critical an embedded daily practice for businesses as financial budgeting and decision-making are. When everyone in the business can speak the language of impact, purpose will materialise.

Of course, the journey will not be linear or smooth. Some of the most significant hurdles will seem outside the control of even the most senior leaders. Instead of feeling disheartened by this, they should lean into the discomfort and ask, ‘what else needs to be true in order for us to deliver on our purpose?’ 

The answer will likely lead to some kind of systemic change, whether that is legislation to level the playing field, such as the UK’s Better Business Act campaign, or industry collaboration on a wicked problem, such as the recently launched Common Ground, bringing the food and fibre sectors together in New Zealand.

Ultimately, a purpose-led path leads to a much greater awareness of how connected businesses are to the wellbeing of society. This interconnectedness is what has created many of the social and environmental challenges we face today, but it could also be the source of our future prosperity – if we harness the power of purpose to fuel it.