Recently, a group of 181 CEOs, collectively representing over 15 million employees and more than $7 trillion in annual revenues, declared that they are no longer putting shareholders before everyone else. The “Statement of Purpose of a Corporation”, issued by the Business Roundtable, is a bold re-imagining of the principles of corporate governance that they have issued several times since 1978 and that have until now “endorsed principles of shareholder primacy – that corporations exist principally to serve shareholders”.
One could reasonably ask why it took so long. I vividly remember listening to Anita Roddick, the charismatic founder of The Body Shop, giving a passionate speech back in the late 1990s about the power of purpose. Others have blazed a trail too, including most obviously Paul Polman, the former Unilever CEO, and Yvon Chouinard, Founder of Patagonia.
Perhaps, the real significance of the Business Roundtable statement is that we are finally moving along the equivalent of Everett Roger’s “diffusion of innovations” curve: from innovators to early adopters, to early majority, to late majority, and eventually to laggards. Leaving aside where one would place the individual signatory companies, Everett’s core idea – that innovation must be widely adopted in order to self-sustain – means that the statement deserves a warm welcome.
The bigger question about the statement is about whether and how it will be translated into action. In a counter-statement, 33 CEOs of B Corporations, a movement of companies certified against social, environmental and government standards, called on the Business Roundtable CEOs to put their words into action by adopting the benefit corporation governance model that requires boards of directors to balance profit and purpose.
As a B Corp, ourselves, we know that this model provides a powerful and practical tool for any business to embed purpose, and more importantly, to be constantly challenged and inspired to continually improve. This week, B Corp announced the 2019 Best for the World Honorees. I’m proud to say that Business Fights Poverty was among them, recognised in the Workers category (I have previously outlined the philosophy that has guided my wife, Yvette, and me that focuses on empowering our team through fully flexible working).
The wider point is that purpose needs to be made real – and embedded authentically across the business. Otherwise, companies are rightly open to criticisms of purpose wash. In her article reflecting on the Business Roundtable’s statement, Irit Tamir, Director of Oxfam America’s Private Sector Department, captures the wider sentiment, arguing that any new commitments “must be more than words on paper.
This was a central theme of our recent event, Business Fights Poverty Oxford 2019 (you can watch the videos here and read the online discussion about “saving purpose from purpose wash” here, and summary of the discussion here). Embedding purpose is also the focus of a Challenge we are running with the support of GSK, Unilever and Visa. We are exploring how businesses can embed purpose, and initially identified Five Pillars to build authentic purpose within organisations.
Based on our conversations and research to date, we have decided to zoom in on the key role that investors can play. Both investors and companies are putting an increased emphasis on purpose, yet the conversations all too often are happening in separate bubbles. Through our work we want to better understand the approaches being taken to embed purpose into companies, by both companies and investors, and to identify areas for collaboration. We would love to hear your thoughts and ideas. To find out more and get involved, please sign up here.
The recent wave of interest in purpose is to be welcomed. But we must take the opportunity to genuinely understand how companies can make this real.