corporate purposeOur value system is changing in times of corona. Issues such as responsibility, sustainability, and fairness are in the public eye and rapidly increasing in importance: big problems of the world have reached our society as a whole, as the ‘Fridays for Future” or “Black Lives Matter” movements prove.

There is a public demand for taking on more responsibility that no one and no company can ignore anymore. People are tackling social problems louder than ever, letting the well-known corporate goals like sales records, gains in market share and satisfied shareholders, come second.

Today’s organizations need to try bringing “social” and “business” into harmony with their new ideas and ventures, just like established companies initiate transformations and further developments. Especially since by now even financial investors are turning their back on the mantra of shareholder value and demanding that companies create value for all their stakeholders.

The concept of “corporate purpose” reflects exactly these developments and wants to make them usable as an orientation tool for companies, for instance, a management and control instrument for all activities of a company. In short, a corporate purpose is the formulated assumption of doing business responsibly in the environment of all stakeholders that use the product/service provided by the company.

Two aspects are particularly important: the foundation for the common good, which complements the company's profit targets, and the integration of activities that are oriented towards the common good in the value chain or business model. The latter is an important distinction from the area of corporate social responsibility (CSR), which is usually decoupled from the management of a company. CSR commitments are often at risk if profitability falls and savings must be made, while a corporate purpose can give the company orientation and inspiration for crisis management.

At the World Economic Annual Meeting corporate purpose has been defined “to produce profitable solutions to the problems of people and planet, and not to profit from producing problems for people or planet.” It is about producing solutions, doing so profitably not just philanthropically, and measuring fair – not fake – profits.

As you can imagine, many companies came up with a melodious purpose statement to reap the fruits of the new concept. From a marketing perspective, this may work quite well in one case or another, but often it had little to do with a real corporate purpose. Nevertheless, some companies have already successfully established themselves on the market this way.

This clarifies, why the World Economic Forum explains in detail why the definition for “purpose” is so important here. “Because relying on competition or regulation to enforce the rules of the game is simply inadequate. Competition is great where it works but it fails too often. Regulation and competition policy are not meeting public expectations or keeping up with fast-moving, global, tech-savvy businesses. The prospect of a combination of AI and genetic engineering in the hands of purely profit-driven corporations is a cause of justified public concern that demands a policy response”, the organization states in their meeting.

It is about precise descriptions of what problems companies are solving, for whom, how, when, and why they are best suited to do that. If a corporation’s statement of purpose is credible, it builds trust and authenticity, as well as loyalty in customers, employees, suppliers, and communities. So, corporate purpose needs brave forward thinkers to show that the economy can do more than just optimize itself.

By Daniela La Marca