In 1970 Milton Friedman famously said: “There is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits.”
That statement is being challenged by a modern reality that requires profit generation to be matched with sustainability. Many organisations are being challenged by customers, employees and regulators to generate profit without negatively impacting the climate and communities – which has unfortunately far too often been the case.
This has heralded an age where companies seek to define, bring to life and communicate organisational ambitions that balance making money with doing good.
This is popularly referred to as organisational purpose.
Purpose is a company’s reason for existence, best articulated as how that company makes the world a better place.
Executed effectively, purpose drives organisational performance and shareholder value
To illustrate: Google organises the world’s information to make it universally accessible and usable; Pep Stores brings dignity to customers’ lives, and the Kellogg Food Company nourishes families so they can flourish and thrive.
It’s no surprise that organisations across the globe are striving for this balance. Society is more conscious of the often-devastating consequences of industry and thus is holding companies accountable.
How to position this balance and inject it into everything the company does, creates new publicly available measures of accountability that customers and employees are using to make competitive choices.
Executed effectively, purpose drives organisational performance and shareholder value. Through embedding purpose within the core business strategy, companies can address societal needs while creating value for investors.
This approach, called shared value, is a management concept through which companies finding business opportunities in social problems can set themselves apart from the competition.
This is evident in Nike’s famed advertising campaign in support of American footballer Colin Kaepernick, who refused to stand for the US anthem in protest against police killings of African-Americans.
After an initial drop in sales, Nike posted a 31% boost in sales and a $6 billion brand value increase.
Google has organised the world’s information and built an $864 million market cap business. Safaricom’s M-Pesa has revolutionised the mobile money payment market, is used by two in five Kenyans and processes almost 48% of Kenya’s GDP.
Vodacom’s Mum and Baby prenatal care service has 1.8 million registered users who receive daily baby care tutorials for free. These users stay on the network longer and generate more revenue than similar customers who don’t use the service.
Purpose, therefore, isn’t a part of the growth strategy, it is the growth strategy
Is purpose the same as corporate social investment (CSI)? No, purpose is about orientating an entire business to generating profit while simultaneously developing society.
CSI is a function of purpose. Most CSI programmes are run by foundations under the stewardship of companies’ corporate affairs departments. It’s a critical function that has matured and becomes more professional over time.
However, purpose is an organisation-wide programme that needs to be accounted for by the CEO to be effective.
Purpose, therefore, isn’t a part of the growth strategy, it is the growth strategy.
Can corporations under increasing shareholder and market pressure take on the added responsibility of making the world a better place? The US’s top CEOs think they can.
In August last year, the Business Roundtable, an association of the CEOs of the US’s leading companies, refreshed the organisation’s purpose and committed to delivering value to its customers, investing in employees, dealing fairly and ethically with suppliers, supporting the communities in which they work and generating long-term value for shareholders.
In the 300-word statement, shareholders are only mentioned at word 250.
From a marketing perspective, purpose is a great opportunity for brands to drive customer choice. Chief marketing officers have for years been sought more influence – purpose allows them to dig into the guts of a company and align its operations to what is eventually amplified through communication and customer experience.
This ultimately builds customer trust – the core objective of any brand.
Purpose is a competitive advantage because it aligns a company to do what it promises. This builds trust, drives customer choice and in turn, grows shareholder value.
Abey Mokgwatsane, is Vodacom’s executive for brand marketing and communications