Why purpose-driven companies perform better (but only if they practise what they preach)

As we emerge from the pandemic, many businesses are re-evaluating what success means to them, and how they pursue it. But as businesses look to ‘build back better’, they are also having to contend with wider ‘megatrends’ that are influencing society at large.

From the climate emergency, to rising inequality, and the ‘fourth industrial revolution’, the world is changing fast, and businesses need to adapt to maintain their place within it.

Adapting to new realities

As organisations look to adapt to the new realties, there is a great opportunity to align corporate purpose and strategy with the transition to a sustainable economy, and in doing so, become ‘purpose-driven’. This might all sound very worthy, but not only is becoming purpose-driven the ‘right’ thing to do for our society and planet as a whole, it can help accelerate growth and boost employee and customer satisfaction.

So, what is a purpose-driven organisation (PDO), how do organisations avoid the trap of ‘purpose washing’, and how can PAS 808 help organisations build a sustainable future?

What do we mean by ‘purpose’?

In simple terms, a purpose provides an answer to the question of why an organisation exists. It provides a ‘north star’ aspiration that guides the future direction of a business, while allowing it to better navigate complexity, manage risk and capitalise on opportunity.

However, to be truly authentic and effective, a purpose should focus on the distinct contribution a company makes to society and the world. It can’t and shouldn’t be all things to all people.

What is Unilever’s purpose?

Unilever is a great example of a highly successful, well-known PDO. Its stated purpose is to ‘make sustainable living commonplace.’ In practical terms this means ensuring all of its operations and products ‘do good for our planet and society – not just less harm.’

Examples of this include spending €445m on diverse businesses owned by under-represented groups. The company also ensures the majority of its plastic packaging is reusable, recyclable or compostable, and has reduced Scope 1 and 2 greenhouse gas emissions by 64% since 2015. With Unilever products appearing in 98% of UK households, the company’s commitment to purpose has clearly not throttled its growth ambitions.

Elsewhere, the clothing brand Patagonia has been purpose-driven since its foundations in the 1970s. Its core values include aims to: Build the best product, cause no unnecessary harm, use business to protect nature. Amongst other measures, since 1985, the company has pledged 1% of its sales to causes that preserve and restore the natural environment.

What are the benefits of becoming a ‘purpose-driven’ organisation?

As well as ensuring the wellbeing of society as a whole, defining a purpose can help businesses ensure long-term sustainable growth by:

• Shaping long-term direction that factors in a rapidly changing world (by describing what ‘good’ looks like, it is easier to understand where a company is today and inform where it needs to get to)
• Helping identify new markets and innovate sustainable value propositions
• Attracting, retaining and motivating talent and stakeholders (46% of Gen Zs and millennials in senior roles have rejected a job and/or assignment based on their personal ethics)
• Improving organisational performance, efficiency & agility (brands recognised for their strong commitment to purpose have grown at twice the rate of others between 2008 and 2020)
• Reducing negative impacts on nature and society and therefore liabilities and risks

Avoiding the ‘purpose washing’ trap

Whether intentional or not, many businesses fall into the trap of ‘purpose washing’ and end up being accused of cashing in on a cause or issue, without making a real and meaningful contribution to changing business practices.

According to the 2022 Edelman Trust Barometer, although 58% of consumers will buy or advocate for brands based on their values or beliefs, 63% believe that business leaders are intentionally looking to mislead people by saying things they know are false or gross exaggerations. Reversing this trend will rely on businesses clearly following through with purpose.

How PAS 808: 2022 can help businesses become truly purpose-driven

While PDOs tend to vary widely in their form, structure and their contribution to long-term wellbeing for all people and planet, they tend to be united by certain core worldviews, principles, and behaviours.

PAS 808 sets out how these principles and associated worldviews manifest within a PDO. Rather than busy leaders having to read the wide range of views on what a purpose-driven and sustainable organisation looks like, then assimilate these views, this standard does this for them.

Woirldviews, principles and behaviours

The standard starts by setting out worldviews. These are the assumptions and values that sit behind any principle, and explain why PDOs are different to other organisations.

The standard then sets out ‘principles’. These describe what ‘good’ looks like for an organisation. They can be used to diagnose where an organisation is currently and inspire how it wants to be in future.

PAS 808 then establishes ‘behaviours’. Behaviours set out how the organisation can behave in a way that is in line with the principles and worldviews. Principles and behaviours seek to be as practical and widely applicable as possible.

Once adopted, the standard can be used to facilitate change, enable accountability, and mitigate against purpose-washing.

If you have any other questions about standards like PAS 808, BSI members can get in touch with the Knowledge Centre’s information experts – just one of the advantages of BSI Membership.