Leadership: Roots and Wings

Companies have the right to dream, to be driven by a singular passion, or spurred on by a worthy cause. They have earned the right to be fully-committed players and to identify their purpose.

Companies have the right to dream, to be driven by a singular passion, or spurred on by a worthy cause. They have earned the right to be fully-committed players and to identify their purpose.


Introduced by the Pacte law (France’s action plan for business growth and transformation), this discreet revolution was not to everyone's liking at Medef (the largest employer federation in France). Indeed, the dogma that had prevailed since Milton Friedman’s time, that a company's only mission is to make a profit, was a sacred cow to many businessmen and women.
Having a purpose means transcending this dogma. By spelling out its purpose, a company is undertaking to devote some its profits to its fundamental mission. Every time a company names its purpose, it is one small step for the company, but one giant leap for mankind. A profound revolution is underway in capitalism. How do we embrace it in a meaningful way? Here are some keys to understanding the purpose revolution.

Every business has its own raison d'être. In its heritage, going back 10s or even 100s of years, a deeper meaning can always be unearthed. Companies that dare to be different are the only ones that thrive, attract interest and stand the test of time. That a company’s uniqueness, essence, and distinctive soul is one of the keys to success, is a notion as old as capitalism itself.

Yet when the founder has gone, when overly financially minded shareholders have seized control from enlightened management, the fundamental mission risks being stripped of its substance to become nothing but empty words.

Investors are increasingly aware that companies must think beyond short-term profit. For example, Larry Fink, who heads BlackRock, one of the world's largest investment funds, recently stated that: "Companies that fulfil their purpose and their responsibilities to their stakeholders reap the long-term benefits; those that ignore them stumble and fail.”

A company is a locus for all its stakeholders: employees, customers, suppliers, management, along with the community and its entire ecosystem. But it is not an inert thing. A company has an impact on stakeholders: it brokers compromise and aligns interests that are as contradictory as they are convergent. Like the master ballerina, these movements are subtle, often invisible, but set the tone for all.

 

Doing good, on a large scale

 

Why not use the power of a business to contribute to society’s wellbeing?

When a company identifies its underlying purpose, it can then build internal cohesion, find meaning and create a sense of belonging. Capitalism as a whole has a compass. One small microeconomic step, but one giant leap for mankind.

Formalizing a company’s purpose provides an enlightening and inspiring framework, above and beyond the usual economic cycles, three-year strategies, or managerial fads. It establishes supra-economic governance. Which is why Veolia, SNCF, Atos, Crédit Agricole, BNPP and many others have stated that they are addressing the issue.

Since the Pacte law, the excitement has been palpable. Despite initial reluctance on the part of some Medef members, both SMEs and large groups have adopted this new legal status.

Crédit Agricole opted for a short mission statement: "Acting every day in the interests of our customers and society." BNPP, on the other hand, penned a longer text consisting of two key points: "We are at the service of our customers and the world in which we live. We give ourselves the operational means to have a positive impact." The banks have used the opportunity to rehabilitate and even give new meaning to their activity, which had been obscured by the bank-bashing that followed the collapse of Lehman Brothers.

On the industrial side, Veolia and Atos set the ball rolling. Veolia's aim is "resourcing the world and contributing to human progress, in line with the United Nations sustainable development goals, in order to achieve a better and more sustainable future for all."

For many years under the leadership of Thierry Breton - now with the European Commission - Atos has wanted to "shape the information space" and support "the development of knowledge, education and research (...) the development of scientific and technological excellence. Everywhere in the world, to enable (...) as many people as possible to live, work and progress sustainably and with confidence in the information space.”

Medef itself responded to the call and defined its purpose simply and boldly: "Acting together for responsible growth." As far as SMEs are concerned, enthusiasm is also evident in Paris and in the regions. Vivo and Mobil Wood have taken the plunge, as have others. But the trend is not as high-profile as it is in the CAC 40.

 

Guidelines for conscious capitalists in the B Corp age

 

In the United States, the upsurge in awareness has been reflected by various moves, the two most visible of which are the rise of B Corps and the Conscious Capitalism movement inspired by John Mackey, who in 1985 founded Whole Foods Market, a chain of organic and eco-responsible supermarkets.

To be part of the purpose revolution, companies should move forward methodically by adhering to the following six steps:

1- Engage in a period of introspection

2- Consult with stakeholders

3- Establish the purpose of the company, the principles governing its actions and its values

4- Invest time and effort in its implementation and ensure support for it

5- Develop your business model

6- Develop your governance

Each step helps build a stronger vision and framework, and contributes to defining how fundamental balances can be struck between purpose and profit. Although management must be fully engaged, it is nevertheless necessary to go beyond this by including representatives of employees and suppliers.

In the modern world, capitalists will have to be (more) conscious or will probably not survive the wrath of populist detractors, who via, social networks, are able to quickly tarnish reputations.

 

Towards a three-tier system for companies

 

Given the speed at which leaders and employees are seizing the tools made available to them by the Pacte law or its international equivalents, the business world is consequently moving towards three main categories of company, seperated on the basis of their level of societal consciousness.

The first level will be that of unconscious enterprises, those that have not defined their purpose or identified their contribution to the general interest. Some will implicitly adopt these principles but will not reap all the benefits. Others will struggle with the work of introspection and carry on as before. These will find recruiting, motivating, communicating with and retaining customers increasingly difficult.

The second level will be that of companies with a purpose. By articulating how they contribute to the common good, they will gradually gain a competitive advantage over those at the first level.

Finally, certified companies will be at the top of the pyramid. Among them will be mission-oriented companies, setting even higher standards for themselves because they decide to submit to an evaluation, depending on the mission, via an organisation (B Corp or other). The early adopters will be joined by others. As for B Corp certified companies, there are already over 3,000 of them in the world. Great news!

 

By Pierre-Etienne Lorenceau

Read the full Special Report: Leadership & the Purpose Revolution

First explored in the United States in the 1970s, the idea that purpose can go hand-in-hand with profit has gained mainstream acceptance.
Summary Elisabeth Laville (Utopies): "A business can be both profitable and serve the public interest" Ben Cohen and Jerry Greenfield: The Americone Dream Christian Kroll: Webpage & Plant Yvon Chouinard: Social Climber Fit for Purpose

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