Has Purpose Peaked?

In the second episode of our new podcast series, Insight to Impact, Sir Craig Oliver, Co-Global Head Of Corporate Reputation And Leadership Strategies at FGS Global, sits down with Oliver Shah, Associate Editor at The Sunday Times, and Louisa Moreton, FGS’s Global Head of Employee Engagement and Change, to discuss whether the business case for purpose has peaked – and what comes next.

In recent years, purpose has become a buzzword in the business community. Now, however, investors are increasingly asking if in today’s difficult landscape it has been overblown. Some now argue for a sharper focus on finances and various US states have withdrawn funds from managers that do not prioritise the bottom line above all.

This debate is cyclical, as Craig Oliver discusses in the second episode of FGS Global’s podcast series, Insight to Impact. More than 50 years ago, economist Milton Friedman stated: ‘There is one and only one social responsibility of business — to use its resources and engage in activities designed to increase its profits’. More recently, BlackRock founder Larry Fink pushed back against that idea, arguing: ‘Purpose is not the sole pursuit of profits but the animating force for achieving them.’ It can feel as if we are in a ‘tug of war’ between the two positions, says Oliver, who asks: where are we heading today?

While ‘no one’ today would see a company’s role as just to make money, the view of The Sunday Times’ Oliver Shah is that the weight placed on purpose is changing. In a bullish business environment, purpose is talked about as if there is no ‘trade-off’, but that changes in a tougher economy, he says – bluntly, ‘If you’re not making money, you can’t do anything else.’

As one of Britain’s leading business journalists, Shah believes purpose should be seen as simply ‘what a business does, and the way it does it.’ He thinks it has recently become too abstract, tied to the rise of ESG (Environmental, social, and governance). He warns leaders against conversations about purpose that do little to change an underlying business. A company’s purpose should be ‘very obvious’, he says, adding: ‘If it’s not clear to the staff and customers, whoever they are, it probably isn’t real.’

Purpose is ‘not about taglines’, agrees FGS’s Louisa Moreton, but about decision-making: ‘It's about what we're going to do, and how we're going to do it, and what we're not going to do and how we don't want to behave.’ While ESG can be key to that, the focus must be on profitability, products and services, and actually responding to what clients need – integrating purpose into operations as much as into communications, she says. ‘The minute you tell a team, or a person or a function, that they're responsible for something, it by definition isn't embedded into your business.’

While communications does still play an important role in this area, that does not always mean joining in ongoing discussions, she adds: ‘There are businesses that have got themselves in trouble by trying to speak out on things that they don't really have the authority to do.’ At worst, there is a risk of being embroiled in ongoing culture wars, says Oliver Shah.

As for the future, purpose will remain on the agenda, but in altered form. ‘Faux purpose, or purpose-washing - people talking about it in an airy-fairy way - is going to be seen through more and more,’ says Shah. ‘Companies that genuinely bake good behaviour, I would say, rather than purpose, and good future planning around what they're going to be, into their business models, will be the ones that will do well.’

To achieve this, collaboration will be crucial, says Louisa Moreton, with be that with academia, start-ups or competitors: ‘Much more of businesses saying: to stay in business we need to be less individualistic and much more collaborative, whilst also watching our own bottom line.’ As she sums up: ‘Purpose has not peaked – but marketing-driven purpose has.’

To listen to the podcast cast, click here.