These days, companies frequently talk about purpose as a way to engage society. Business leaders leverage a compelling purpose statement—a company’s fundamental reason for being—for a range of reasons, from recruiting and retaining top talent, to securing customer loyalty, to gradually engaging investors, partners and other stakeholders. BlackRock CEO Larry Fink’s recent shareholder letters have famously become leading catalysts for corporate leadership to more actively address societal challenges through purpose.
While stating a purpose is an increasingly common practice, few companies are actually leading with it. In fact, while the term is used today 5 times as frequently as in 1995, and while most corporate executives believe purpose matters, less than half of companies claim to have a strong sense of purpose, according to a report from Harvard Business Review Analytic Services. Business has tremendous power to change and improve the world when driven by a purpose. But companies cannot simply commit; leaders have to work to make that purpose come to life.
The Shared Value Initiative gathered folks in Milan, Italy on February 28 to tackle this dynamic. More than 40 shared value practitioners spent the day identifying mechanisms companies are using to activate their purpose to meaningfully improve business and societal outcomes. We were hosted by Enel, an energy company that is undergoing a worldwide transformation to shift its energy mix towards renewables in an effort to provide the world access to affordable, reliable and clean energy. A leading shared value company, Enel started its journey in 2014 first in making a commitment to carbon neutrality by 2050 and then by bolstering that purpose with a strategic plan overseen by CEO Francesco Starace.
We at the SVI believe there are five steps to effectively lead with purpose:
- Reveal or discover your purpose – why does your company matter to the world?
- Define what it means for your principles, culture, business choices and leadership
- Tell your purpose story again and again
- Live your purpose, however imperfectly, through actions and choices
- Refine, reinforce, reward
We were joined by other companies who are also leading with purpose. Helen Medina of Nestlé described how the food and beverage giant constantly considers new practices and innovations to remain relevant in a changing market environment while sticking with the same purpose for more than 150 years – to enhance life now and contribute to a healthier future. Alfred Vernis of Inditex, a Zara company, highlighted the fashion retailer’s entrepreneurial culture in living into its purpose and in becoming a sustainability champion.
The overall message was clear: Understanding why your company matters is critical to defining a purpose and maintaining competitive advantage in the current market environment; but companies must move beyond the “why” and focus on the “how” – how to live into your purpose and how to create meaningful shared value. As this conversation continues, the Initiative is working with leading shared value companies to develop a Playbook that will help practitioners accelerate shared value performance by cultivating and living into a shared value purpose and culture.