I’m inspired by the number of companies that prioritize Purpose as part of their missions. On the first day of its Ariba Live event in Las Vegas this year, SAP Ariba dedicated its entire General Session to Purpose. They shared how companies can impact humanity, economy, and the environment, while mitigating their own risk exposure, through Purpose-driven procurement. Alexandra Lopez, CPO of Cisco, declared, “What’s good for the world is good for business.” But how do we know this?
Padmini Ranganathan of SAP Ariba advises that Purpose is revenue enabling: “When companies operate with their heart, brain and soul together, they also improve their bottom lines.” A Deloitte study found that “organizations that focus beyond profits and instill a culture of purpose are more likely to find long-term success.” That focusing on Purpose, rather than profits, builds business confidence and drives investment. EY Beacon Institute research shows that Purpose results in increased engagement, stronger culture, more agility, resilience, broader vision and an improved learning environment.
While I’m an eternal optimist, whose heart wants to believe in the significant impact a “Culture of Purpose” can play, I am too logical to take this on its surface. The heart alone will not drive enough change, if the head does not have a logical reason to act. What follows are some thoughts on the practicality of Purpose in today’s enterprises and some tangible ways for an organization to focus on it.
The Pessimistic Perspective
In his latest book, Balancing Green, Yossi Sheffi challenges the assumption that consumers will pay more for sustainable products. Without business reasons to act, such as efficiency, risk mitigation and segmentation, he argues that Purpose alone will not be enough to influence change. Sheffi doesn’t pit “profits versus planet” – he asserts that sustainability is a “more subtle issue of (some) people versus (other) people —those looking for jobs and inexpensive goods versus others who seek a pristine environment.”
Companies like Patagonia and Seventh Generation deliberately link their brands to a higher purpose, and are able to command a higher premium as a result. But a notable gap exists between the percentage of consumers wanting more eco-friendly products (26%) and those who say they purchased them (10%). Many businesses, whether or not they admit it publicly, are only willing to pursue initiatives that influence their bottom line. Purpose still has an impact here; irresponsible companies suffer commercial consequences such as reduced investment, inability to attract top talent, and lost sales.
Optimists point to a 2015 global study by Nielsen which indicated that almost three-quarters of millennials are willing to pay extra for sustainable products. But we can’t just rely on Millennials to save the day. The most sustainably minded generation, who can crowdsource by consumerism, can also be one of the least likely to participate in simple daily actions that promote sustainability. Today’s young shopper who orders three pairs of shoes online, knowing he will return two, is uninfluenced by environmental impacts such as packaging and fuel consumption.
A Platform for Change
People begin to pay attention to Purpose when a platform is created which goes beyond cost, quality and efficiency.
In his inspirational book, A Selfish Plan to Change the World, Justin Dillon tells his story of finding purpose. Dillon and his company Made in a Free World have created a platform to arm companies with data to identify the risk of human trafficking in their supply chains.
Dillon points out the difference between saving the world and changing it. Instead of just funding charities to ‘save’ the world – we should challenge ourselves to ‘go upstream’ to influence real change. “Saving can be performed over and over, but changing a system requires risk and innovation.”
Dillon encourages the match between those with a poverty of means, and those with a poverty of meaning, to drive real change. That instead of “giving back”, if people “give in” to pursue their own self-interest, they can alter the dynamics of the world’s most challenging problems.
Management Innovation eXchange founders Gary Hamel and Michele Zanini remind us that “today’s organizations were never designed to change proactively and deeply — they were built for discipline and efficiency, enforced through hierarchy and routinization.” The creation of change platforms – a real-time, socially constructed approach to change – allows anyone to hack current processes, suggest solutions, and launch experiments.
When will the Consumer Care Enough to Change Behavior?
Customers must first trust an organization’s commitment to purpose. Brand trust influences purchasing for nearly 2/3 of consumers, globally, according to Nielsen. Organizations that simply pursue random acts of sustainability rather than having a discerning strategy and purpose will not influence real change.
Businesses and consumers should leverage the following three components to shift their outlook towards purpose.
“If you can’t see it, you can’t solve it.” – Kofi Annan
The answer may once again be found in the data. Companies which make sustainability and purpose measurable need to hold themselves and everyone in their supply chains accountable. Sustainability indexes, reporting initiatives, regulations, coalitions and councils take important steps in the right direction. Businesses need to hold their contractors, suppliers, and partners accountable to the same sustainability standards they adopt. Companies are going beyond Codes of Conduct and contracts, to redefine sustainable methodologies and participate in co-development.
Japen Hollist, Director of the Digital Transformation Organization of SAP Ariba, encourages employees to “tap into what is important to the leadership.” Instead of looking only at cost reduction, a procurement leader could show her management other positive impacts that Purpose can have on revenue. For example, by using measurements such as Supplier Diversity Spend, a company could generate more interest from public sector customers, which could lead to more opportunity.
Measurements that compare how to ‘do good better’ will help consumers assess their options. Using the fundamentals of Effective Altruism, William MacAskill challenges how we define value, benefits and effectiveness when evaluating how to make the world better. Separating intentions, assumptions and emotions, MacAskill uses a data-driven approach to analyze the impact of good deeds. For example, he shows data on the inefficiency and limitations of donating towards noticeable natural disasters or cancer research, as compared to broader, more effectual but less salient services such as malaria treatment and prevention.
MacAskill sets aside the heart almost entirely, teaching an important lesson on how data could be used to drive ethical choices. As businesses discover ways to share data and the impacts of their missions towards Purpose, consumers will make more informed decisions.
“Transparency is arguably one of the hottest currencies in the world, transforming the way people produce, communicate and access digital information.” – Benjamin Herzberg, World Bank Institute
Transparency should enable greater accountability. This requires credible, comprehensive and comparable public disclosure of information about supply chains, business practices and the impacts of these practices on workers, communities and the environment. Going beyond the existence of data alone, transparency opens up the hyper-connected world to become more responsible and responsive.
Fragmented supply chains obscure who is responsible for various behaviors. Consumers and businesses need to be curious – asking questions about how and why outcomes are achieved. Transparency provides consumers with more decision-making power and enables companies to drive continuous improvement across their value chains. As an example, Sedex Global has partnered with the World Bank Institute to pilot the Open Supply Chain Platform. This collaborative platform shares responsible sourcing data on supply chains and is used by more than 50,000 members in over 150 countries to manage performance around labor rights, health and safety, the environment and business ethics.
Carry Somers, founder and Global Operations Director of Fashion Revolution, agrees that transparency is power. “The brands that are still sitting in the armchairs in their fifth floor apartments, who haven’t yet learnt how to sail on the tide of transparency, will be drowned by it. The wave is coming; now is the time to get ahead of the curve.”
“Blockchain technology has been used to combat slave labour within fishing industries in Thailand. It works by improving transparency and tracking the fish from “catch to consumer.” – Tania Seary, founding chairman of Procurious
Technology will transform not only the bottom line but will truly enable real change. Elephants, Rhinos & People (ERP) protects Southern Africa’s wild elephants and rhinos using SAP HANA, GPS, drones and predictive machine learning. Emerging technology innovations have the potential to create more inclusive and sustainable food systems. Wearable technology, smart contracts, and trackable payments to laborers across the globe are disrupting the supplier landscape. As companies go beyond corporate purpose in their day-to-day activities, they will find innovative ways to transform the systems of the future.
But technology is only as good as the value it generates. Padmini Ranganathan from SAP Ariba reminds us of the importance of driving real incremental change, not just disrupting an existing framework. “It’s not just about taking a child out of a slave labor situation. That takes food away from the family, and that is not sustainable.” By applying technology to connect the stakeholders that are needed to solve the bigger picture, these children will be enabled to improve their circumstances over time.
Businesses with a purpose matter to their partners, consumers, and employees. Per Punit Renjen, Deloitte Global CEO: “A culture of purpose guides behavior, influences strategy, transcends leaders – and endures.” Change needs to go well beyond the creation of a Purpose Statement. Sustainability programs or initiatives from top management are only a step in the right direction. By leveraging data, transparency and technology, you may be able to move the needle towards Purpose, in your businesses and in your lives.