Insight

How we’re helping clients embed purpose in their decision-making

In a world facing a climate emergency and long-term economic damage following a global pandemic, purpose-driven businesses, committed to solving problems for people and planet, are needed now more than ever.

At a time when some companies are fighting to survive, many business leaders may be tempted to focus on financial returns above all other factors. This could be a false economy, as research increasingly shows that purpose-driven companies deliver growth and profits above the industry average.

We may also see changes to the regulation of business in the coming years which will demand a purposeful approach. MPs and progressive business coalitions are exploring how businesses can be incentivised to put social and environmental purpose more firmly at the centre of their strategies. A number of proposals are being looked at, including tax relief for good business practices and reform of the Companies Act to put public purpose, not just shareholder return, at the heart of directors’ responsibilities. Changes to the Corporate Governance Code and listing rules may also be introduced to support the transition to net zero and bring the value of nature into economic decision-making.

The pandemic has drawn more attention to the issues that have been propelling the shift to purposeful business. How should businesses respond, and how can Lexington help companies adopt a purposeful approach to help people and planet to thrive?

“Evidence suggests that employees who feel fully connected to their company’s purpose are very much in the minority.”

Integrate purpose into decision-making

As Larry Fink, CEO of investment management company Blackrock, so succinctly put it in his annual letter to CEOs last year, purpose “is a company’s fundamental reason for being – not the sole pursuit of profits but the animating force for achieving them.” Many viewed the US roundtable’s subsequent shift away from stakeholder primacy and towards delivering value for all stakeholders as game-changing. But for many in the business world, particularly those below the C-Suite level, “purpose” is still a relatively new term. Evidence suggests that employees who feel fully connected to their company’s purpose are very much in the minority.

Purposeful business requires purposeful leadership. While the majority of listed multi-nationals have done the hard work of defining their purpose and creating strong narratives to explain their vision to stakeholders, what it means for the average executive and how it impacts their day-to-day hasn’t yet been spelt out. Businesses need to integrate their purpose into every aspect of their decision-making in order to drive positive social and environmental change, build trust and deliver sustainable growth. That means everyone – from sales to HR to the finance team – needs to be upskilled and incentivised to make purposeful decisions.

Work with partners to solve problems together

Consumers want to shop with purposeful businesses. Employees want to see their values reflected in their employer. Investors demand evidence of a strategic approach to social and environmental risk. Government wants to work hand-in-hand with businesses to find solutions to social, economic and environmental challenges.

With these increasing demands, companies need to think through how their day-to-day decisions and operations create value for all stakeholders. As Lord John Browne, former CEO of BP, puts it, “businesses succeed through radical engagement”. This is about listening and checking what stakeholders want, and working in partnership with them to co-create solutions.

Now, more than ever, businesses need to check in with stakeholders. The way we live and operate has changed dramatically since the pandemic and so have stakeholder expectations and beliefs. The questions we need to ask our stakeholders now are different to those we asked before the pandemic and executives need reassurance that the business remains fit for purpose and on track for a sustainable future.

“Companies need to think through how their day-to-day decisions and operations create value for all stakeholders.”

Communicate with humility and authenticity

Corporate purpose can’t just exist as a catchy strapline. It is more than words in a statement or a marketing tactic. Purpose is a management approach that drives the way a business thinks, responds to crises and engages with its stakeholders.

Stakeholders are alive to purpose-washing, where a brand is presented as operating according to a higher purpose, when in reality it only operates to serve its own interests. But does that mean businesses can’t communicate the good things they’re doing in one area for fear of being found wanting in another? Most businesses that have adopted a purposeful approach have yet to fully realise their ambitions. As long as you communicate with humility and authenticity, being transparent about steps you still need to take, your stakeholders will respond positively.

Navigating responsible business communications can be tricky due to lack of consistency around measuring and managing ESG data and the wealth of frameworks available. But businesses that hold true to their purpose and play the long game when it comes to communicating progress will reap the benefits in the future.

“Businesses that hold true to their purpose and play the long game when it comes to communicating progress will reap the benefits in the future.”

At Lexington, our purpose is to help our clients shape tomorrow. That means working with them to create value for their stakeholders and mitigate social and environmental risk for a more resilient and sustainable economic future. We aim to help our clients find profitable solutions to the social and environmental challenges the world is facing.

Come and talk to us about how we can help you embed purpose across your company. We can upskill your teams to make purposeful decisions through our Purposeful Leadership workshops; help you engage radically with customers, employees, suppliers, policymakers and NGOs to co-create solutions; develop strategies to create shared value, and design authentic and meaningful communications and campaigns to inspire positive change.