Purpose: It’s about Economics
For all the hot press last week surrounding CEO Business Roundtable’s revised statement declaring shareholder value could no longer be a company’s leading priority, the statement and lack of initiatives to back it up was pretty underwhelming. For over twenty years, the tenants of CSR and Michal Porter’s Shared Value Initiative, among many others, have spoken to the inherent value of investing in the workforce, the community and in operational standards and procedures that protect the environment and steer moral governance. The UN General Assembly released the MDG’s in 2000 and then the SDG’s in 2015, not as separate tenants for a functioning economy but as guideposts for all organizations to support human and environmental prosperity.
CEO’s need their peers for moral support.
I’m an optimist and I’d like to believe that Mike Froman, Vice Chairman and President of Strategic Growth at Mastercard is right. He recently stated that “CEO’S need a support group, they need company; there needs to be a turning of the page, a next stage”. He was referring to the courage it takes to lead a company’s shift towards inclusive and sustainable business practices.
Intentions have been declared. The support group has surfaced.
Commercial opportunity must drive the growth.
The Daily and many other leading media outlets posed skeptical assessments of BRT’s revised proclamation. The underpinning of this skeptism is the soft “do good for society” ring the announcement came with. The reality is businesses won’t change their business models because it’s moral. Companies earn money so they can re-invest and expand.
The revised acknowledgment missed the mark on the fundamentals: operating with “Purpose” means increased profitability over time because the ecosystem in which it operates is healthy. Customers, employees, and the environment are operating at full capacity, not deficits. A business model shift driven by Purpose makes sound commercial sense. A lens of Purpose seeks to find market opportunity such as where our current set of systems is failing and unmet needs exist.
Increased revenue benefits everyone.
Purpose-driven innovation has recently been done and with compelling results. HBR published the results of a study this month with examples of B2B and B2C companies from around the world who were able to increase their revenue by double digits because they redefined their value propositions, found new markets and fundamentally shifted their products, services and delivery mechanics. If CEO’s are looking for additional support, this is surely the one to enlist.
Action and innovation must come next.
In the last few days, the list of suggestions for business to put its might and meaning behind the hoped-for influence of this statement is long. Concrete action and measurable outcomes against realistic timetables are the only possible next steps if this revised statement is to hold any weight. There is momentum but will these CEO’s take action before their multi-million dollar exit package takes effect? The millennial generation is filled with employees, customers and CEO’s in-waiting. Fall Board meetings are coming up. Will CEO’s make this part of their agenda and present an immediate action plan with clear, measurable and detailed goals? The facts are out there, let’s see if they have the courage or the will.
Photo by Aaron Burden on Unsplash