Purpose & Sustainability: Are They Really Different?
It would be a tragedy if misinterpretation of definitions (aka jargon) could play a role in us not achieving the 2030 United Nations Sustainable Development Goals (UNSDGs).
Yet when it comes to the terms ‘purpose’ and ‘sustainability’, there’s often variance in how they are defined, which can lead to confusion for stakeholders as well as measurement inconsistencies. In recent years, particularly post pandemic, both concepts have gained significant attention from companies, investors, employees and consumers worldwide. Often these two terms are used interchangeably, however they are not the same.
In brief, purpose comes first. Sustainability can either contribute to it, or detract from it. Companies that are making investments in sustainability while failing to produce profitable solutions to people and planet are also failing in purpose. Companies that are profitable while degrading the environment and society are focused on profits, not purpose.
While they are interconnected, it is important to understand the distinctions between the two.
Corporate Purpose Defined
Corporate purpose refers to the fundamental reason for a company's existence beyond the pursuit of profits. It goes beyond the mere delivery of goods or services and encompasses the broader impact a company seeks to create in society. A well-defined corporate purpose articulates the company's mission, values, and vision. It serves as a guiding principle for decision-making, strategy development and stakeholder engagement.
It revolves around answering some fundamental questions:
Why does the company exist?
What positive change does it aspire to bring to the world?
How does it aim to make a difference?
It aligns the interests of various stakeholders, including employees, customers, communities, and shareholders, by focusing on the greater societal value a company can provide along with profit, or “stakeholder capitalism”. This simply means that the company’s purpose will deliver value to all its key stakeholders, rather than just the shareholder. Further, It is not corporate social responsibility, nor not for profit.
Some great examples of purpose statements include Patagonia, Virgin, Tesla, Salesforce and Coca Cola to name a few.
Understanding Sustainability
Sustainability, on the other hand, is a concept that emphasises responsible resource management and the long-term well-being of society, the environment, and the economy. It revolves around meeting present needs without compromising the ability of future generations to meet their own needs. Sustainable business practices aim to balance environmental, social, and economic factors to create a more resilient and equitable world, and encompasses a broad range of issues, including reducing carbon emissions, conserving natural resources, promoting social equality, ensuring ethical supply chains, and fostering transparent governance.
It requires businesses to consider the environmental and social impacts of their operations, products, and services, and strive for continuous improvement in these areas.
Differentiating Corporate Purpose and Sustainability
While corporate purpose and sustainability are intertwined, they represent distinct concepts within the realm of business.
The key differences between the two can be summarised as follows:
Focus: Corporate purpose primarily centres around a company's reason for existence and its broader societal impact. It defines what a company seeks to achieve beyond financial success.
Sustainability, on the other hand, is concerned with minimising negative environmental and social impacts and maximising positive contributions in the long term.
Scope: Corporate purpose is more holistic, encompassing the company's mission, values, and goals across various dimensions, including social, environmental, and economic aspects.
Sustainability, although broad, tends to focus specifically on environmental and social aspects, often measured through ESG targets.
Stakeholder Orientation: Corporate purpose aims to align the interests of all stakeholders, ensuring their needs and aspirations are met. It involves engaging employees, customers, communities, and shareholders in the pursuit of a shared vision.
Sustainability, while also considering stakeholder interests, tends to prioritise the interests of the environment and future generations.
Value creation - long-term value creation starts with clarity of purpose. The products and services that are the solutions for people and planet today will need to change as the world evolves in terms of its sustainability concerns - but the purpose should remain the same regardless. Addressing these concerns must be done in a way that keeps the solutions profitable. Failure to do so will result in sustainability detracting from purpose, rather than supporting it.
Both corporate purpose and sustainability have become increasingly vital for businesses due to the following reasons:
Enhanced Reputation and Brand Value: Companies with a well-defined corporate purpose and a strong commitment to sustainability are more likely to gain customer trust, attract and retain talented employees, and build a positive brand image. This can result in increased customer loyalty, market differentiation, and improved financial performance.
Risk Mitigation: Integrating sustainability into business practices helps identify and manage potential environmental, social, and governance (ESG) risks. This proactive approach reduces vulnerabilities and enhances resilience, safeguarding the company's long-term viability and reputation.
Innovation and Competitive Advantage: Embracing sustainability can drive innovation by encouraging the development of environmentally friendly products, services, and processes. It opens up opportunities for cost savings, resource efficiency, and new markets, providing a competitive edge in a rapidly changing business landscape.
Conclusion
Corporate purpose and sustainability are intertwined concepts that play crucial roles in shaping the future of business.
While corporate purpose defines a company's reason for existence and broader societal impact, sustainability focuses on responsible resource management and long-term well-being.
Both concepts contribute to a company's reputation, risk mitigation, innovation, and competitive advantage. By understanding and integrating these concepts, businesses can strive for meaningful, sustainable growth while creating positive impacts on society and the environment.
References:
https://unglobalcompact.org/sdgs/about
https://www.theworddepot.com.au/blog/purpose-vision-mission-do-we-need-them-all
https://ceoworld.biz/2022/12/09/how-to-build-a-purpose-driven-brand-and-enhance-your-reputation/
https://corpgov.law.harvard.edu/2021/08/20/the-difference-between-purpose-and-sustainability-aka-esg/