A PURPOSE STAMPEDE
Companies are coming to terms with this new paradigm. Many are hurrying to create purpose statements—a practice so widespread that a Forbes article termed it “a purpose stampede.” They are eager to position themselves as part of the solution, and are keen to avoid being seen as part of the problem.
However, companies may be disappointed when their shiny new purpose statements are greeted with skepticism by internal and external audiences. The sudden enthusiasm to play a positive role in society can be greeted with a collective “you must be joking.”
“Purpose is not a mere tagline or marketing campaign,” BlackRock’s Larry Fink wrote in a 2019 letter to fellow CEOs. “It is a company’s fundamental reason for being, what it does every day to create value for its stakeholders.” However, depending on how it is approached, a company’s purpose can fail to connect to the core of the business. In our experience, it can miss the mark and fall into Five Common Pitfalls:
1. They sound meaningless. Purpose statements have been criticized for being hyperbolic, platitudinous, simplistic or simply, as one anonymous investor put it, “bullshit.” They tend to blend vagueness with grandiosity, full of statements such as “to empower every person,” “to unlock potential,” “to enable progress” or “to live life to the fullest.” In short, they are bland and fail to provide any real direction.
2. They lack differentiation. Usually the reason a company exists is also why its sector exists. Mining companies, for example, talk about “human progress,” “a better future,” “improving lives,” or “society’s changing needs.” Health companies tell us about “helping people lead longer, healthier, happier lives.” These are all noble aspirations, but they feel generic and often dissonant with people’s experience of these companies. People want to know what this company stands for.
3. They’re disconnected from corporate strategy. A global survey of executives by EY found most leaders believed a strong sense of purpose is important for a company’s success—and yet less than half said their company had or was trying to develop a sense of purpose. Too often, people think of purpose as something peripheral to the core of the business—or even talk about it as a “higher purpose,” as if it were floating above the business itself. Purpose must be rooted in the activities of the business—its products and services, its processes and practice—or it will be seen as an insubstantial marketing exercise.
4. They’re disingenuous (purpose washing). The Nation, a US weekly magazine, labeled the new wave of purpose statements as “empty promises and self-serving slogans.” Alan Jope, the CEO of Unilever, wrote in 2019 that “green washing, purpose washing, cause washing, woke washing” were “beginning to infect our industry.” This suggests companies are deliberately overstating the case; touting a purpose the company does not mean, and cannot fulfill, in order to look good.
5. They highlight dissonance. At the heart of any critical reputational crisis is a dissonance between what a company says and what it does. For example, talking about helping people live better lives while your products make them less healthy will ultimately result in a threat to your license to operate. A purpose statement must recognize the real impacts a company has on the world, or it risks leading to reputational damage.