Corporate purpose

Fad or Future?

The global pandemic has had a huge impact on many sectors, businesses and individuals. The Covid-19 crisis has highlighted the value of articulating a clear corporate purpose beyond primarily making profit for shareholders. This is important from a regulatory and governance perspective: the UK’s Corporate Governance Code provides that Boards should “establish the company’s purpose, values and strategy and satisfy itself that these and its culture is aligned”. But, it is also valuable for driving employee engagement and productivity and delivering a business which is long-term sustainable in environmental, social and governance terms. And, the Stewardship Code requires signatory asset owners/managers to show their purpose, investment beliefs, strategy, and culture to enable stewardship that creates long-term value for clients and beneficiaries leading to sustainable benefits for the economy, the environment and society.

So we think corporate purpose is fundamental to the future of an organisation. It’s not a fad: corporate purpose informs why an organisation exists, who it serves, how it makes the world a better place, its long-term sustainable success and how it solves the problems of society and people, profitably.

10 key considerations for organisations

1. Tailor: You can choose your purpose to show why your organisation exists and how it solves the problems of society and the people. It should reflect factors such as the organisation’s culture, history, strategic goals, competitive position, risk profile, and stance on long-term sustainability. Your organisation’s purpose cannot be meaningful if it is standardised.

2. Consult: Consult with staff and other stakeholders on the development of your corporate purpose including the challenges facing the organisation, the opportunities open to it and how the purpose can not just avoid harm but also impact its stakeholders positively. In a regulated business an excessive focus on avoiding harm (such as regulatory misconduct) can be at the expense of innovation, creativity and positive outcomes.

3. Prioritise: Reflect the corporate purpose in your business strategy: set clear parameters and make decisions within them. This will allow for more measurable progress to be made within a defined focus.

4. Communicate: Communicate your purpose both internally and externally. Ensure that expectations are clear and specific in order to build trust and credibility. This will increase engagement.

5. Embed: Lead from the top but ensure that all members of senior management set a model which will resonate throughout the organisation. When a sense of purpose is cascaded down effectively, organisations can trust staff to use their initiative when making critical decisions.

6. Align: Align your decision-making, supporting data and policies and procedures with the purpose to facilitate consistency and benchmarking.

7. Execute: Find the people with a real interest to drive change forward and whose energy will catalyse progress. Link reward to performance against targets.

8. Evidence: Evidence the actions that have been taken and demonstrate responsibility through transparent reporting to stakeholders including investors, employees, clients, and the broader community. Verification, consistency and accountability are critical.

9. Assess: Assess the effectiveness of purpose as a driver of strategy and culture, and their alignment with behaviours and values.

10. Future-proof: Think long-term and, if you commit to social responsibility, do so in a defined and measurable way. Embracing a corporate purpose has been shown to drive better risk management, help protect brands and reputation, attract talent, enable growth, increase profit and achieve long-term sustainable success.