Purpose: The Day 200 CEOs Changed History
Purpose in business is now rewriting history
On August 19, 2019, around 200 CEOs attended the Business Roundtable in The United States and changed the past 50 years of corporate history to redefine the 'purpose of a corporation'. Company executives included the leaders of Apple, Pepsi, Accenture, Walmart, Coca-Cola and Amazon all with a common goal - to improve the role of business for society.
For context, this group of CEOs employ more than 15 million people worldwide with a collective annual revenue of $7 trillion.
The power pack agreed that maximising profit at all costs to deliver purely to shareholders is no longer viable. This had been a philosophy embedded in boardroom ethos and Wall Street for decades. They argued that companies must deliver value to customers, employees, the environment and there must be a focus to deal ethically with suppliers.
In short, value must be delivered to all key stakeholders.
Return on purpose and investment
This foundational shift had largely been facilitated due to the perceptions of an increasingly skeptical public, who believed (and still do) that companies have a larger responsibility to society than a purely delivering a financial return on investment. The public want to see a return on purpose too. While each corporation had their own purpose at the time, they agreed to an approach on the way they will deliver to it in the future for the benefit of all.
Till this time, many corporations had traditionally followed the Friedman Doctrine that suggested that “the social responsibility of business is to increase its profits.” By doing so, the tightly held view was that shareholders could ultimately decide which social initiatives they'd prefer to pursue with their shares of the profits.
This no longer flies in the face of a global trend towards companies needing to build transparency and trust with customers.
The purpose of a company needs to be in alignment with its customers VALUES
Customers want to know when they deal with a brand what it's back story is, its societal impact (and how this is measured), as well as details on their key stakeholder relationships.
Trust in companies and its brands can only be built with transparency and collaboration.
The full Purpose of a Corporation Statement:
Americans deserve an economy that allows each person to succeed through hard work and creativity and to lead a life of meaning and dignity. We believe the free-market system is the best means of generating good jobs, a strong and sustainable economy, innovation, a healthy environment and economic opportunity for all.
Businesses play a vital role in the economy by creating jobs, fostering innovation and providing essential goods and services. Businesses make and sell consumer products; manufacture equipment and vehicles; support the national defense; grow and produce food; provide health care; generate and deliver energy; and offer financial, communications and other services that underpin economic growth.
While each of our individual companies serves its own corporate purpose, we share a fundamental commitment to all of our stakeholders. We commit to:
Delivering value to our customers. We will further the tradition of American companies leading the way in meeting or exceeding customer expectations.
Investing in our employees. This starts with compensating them fairly and providing important benefits. It also includes supporting them through training and education that help develop new skills for a rapidly changing world. We foster diversity and inclusion, dignity and respect.
Dealing fairly and ethically with our suppliers. We are dedicated to serving as good partners to the other companies, large and small, that help us meet our missions.
Supporting the communities in which we work. We respect the people in our communities and protect the environment by embracing sustainable practices across our businesses.
Generating long-term value for shareholders, who provide the capital that allows companies to invest, grow and innovate. We are committed to transparency and effective engagement with shareholders.
Each of our stakeholders is essential. We commit to deliver value to all of them, for the future success of our companies, our communities and our country.”
How this could affect companies brands
While there is no regulatory or legislative requirements to comply with this revision, it will guide corporations as a benchmark for best practice in governance and key stakeholder management.
For a corporation to authentically embody the values and actions of the Statement, they will need to align it with their internal purpose, brand and communication programs at all levels of the organisation. Failure to execute consistently to this promise will erode trust and ultimately affect performance.
In the reverse, the Statement provides an exciting opportunity for corporations to build their brand as well as acquire and engage audiences in ways that have been previously overlooked.
At this early stage, the jury is out on whether this change will have a long term impact, with a variance of opinions and industry commentary. However, the prospect of these financial giants truly getting it right and embracing this foundational shift could be of great consequence for humanity and our planet in the future.
Words by Katrina Savell
https://www.nytimes.com/2019/08/24/opinion/letters/corporations-social-responsibility-business-roundtable.html
https://www.forbes.com/sites/georgebradt/2019/08/22/how-the-new-perspective-on-the-purpose-of-a-corporation-impacts-you/#24ba86ee94f1
https://link.springer.com/chapter/10.1007/978-3-540-70818-6_14
http://www.forbes.com/
