Why you should wake up to the power of purpose

A new tool is helping businesses to redefine success for their company. Here's why.

by MT staff
Last Updated: 07 Feb 2018

All businesses have a purpose. Under company law, the default purpose of a limited company is to benefit its shareholders, while having regard to wider stakeholder considerations. Increasingly, however, many companies feel that this description focuses too much on profit and fails to fully capture their true purpose.

The benefits of being a purposeful business are now common knowledge and range from dramatically increased profits, to huge improvements in staff wellbeing and customer loyalty. Just look at purpose advocates such as Unilever or Ben & Jerry’s.

'Purpose is crucial in business because it enables entrepreneurs to build companies that truly reflect their vision, values and ethics', comments Mark Norbury, CEO at UnLtd, the foundation for social entrepreneurs. 'For some entrepreneurs, this means putting a social or environmental purpose as the core driver of their business. For others, it means delivering social impact alongside commercial goals.'

2017 saw many businesses trying to become ‘purpose-driven’ and yet, despite this, not all are experiencing the benefits they had hoped for. Many of them invested considerable sums in launching their new purposes through high-profile marketing campaigns, or in redesigning their websites to incorporate it. So what went wrong?

Firstly, consumers are no fools. The impact of the internet on consumer-corporate relations is well documented and has meant that consumers are quicker than ever to spot when they’re being sold to, and can recognise when businesses do not mean what they say. This is particularly evident when it comes to purpose. New research conducted by Message House for UnLtd has shown that almost two thirds (61%) of consumers have called out brands for not ‘walking the talk’ and failing to back-up their purpose with action.

Today’s purpose-savvy consumers are not only able to recognise when businesses do not put their money where their mouth is, but they also let it govern where they shop: a trend that is particularly evident among the one of the most influential consumer groups - millennials. 73% of UK consumers admitted to being more likely to buy from or engage with truly purpose-driven brands, with this figure rising even higher to 81% among 18-34 years olds.

So how can businesses truly embed purpose in the heart of their business and prove that it is not, as 40% of consumers believe, just marketing or spin? Simply publishing a company’s purpose on the website is not enough to convince customers, with less than a third (30%) believing that this is an indicator of a brand taking their purpose seriously. As few as 29% and 28% respectively saw the value of adding a purpose exclusively to the company’s physical product or including it in its marketing materials. On the other hand, making purpose legally binding came joint top in a list of methods for proving that a business is serious about purpose, with over half of consumers (54%) favouring this option.

Norbury continues: 'This new research makes crystal clear that purpose is about so much more than marketing. It needs to be embedded in the very heart of a business.'

However, the government’s 2016 Mission-Led Business Review suggested that many founders, entrepreneurs and business leaders lack the knowledge required to effectively embed purpose within the DNA of their companies.

'Embedding purpose within a company’s constitution is often felt to be an intimidating task for many business founders, owners and advisers,' comments Luke Fletcher, partner at law firm Bates Wells Braithwaite (BWB).

Purposely, a new government-funded tool, provides one solution to this challenge. Developed by UnLtd in partnership with BWB and with strategic support from the Department for Digital, Culture, Media & Sport (DCMS), Purposely offers founders and entrepreneurs the chance to simply embed their purpose within their company’s governing articles, making them legally-binding and ensuring that they have a tangible impact on how the company operates. By making it easier for businesses to have a legal commitment to social purpose, companies will be able to redefine what success looks like beyond profit and create a duty for directors to act in line with this purpose for years to come.

'There is huge potential for businesses to play a significant role in society by broadening prosperity and tackling inequality,' says Tracey Crouch MP, Minister for Sport and Civil Society. 'As the Mission-Led Business Review showed, many business leaders recognise this but are often unaware that company law already allows them to commit to a purpose beyond profit and build this into their governing documents. This is why the launch of Purposely is so important. It offers business owners a simple and authentic way to take the first step in putting purpose at the heart of their company.'

'Purposely makes embedding purpose within a company’s constitution easy by providing a tailored version of a company’s Articles that sets out each business’ own unique commitment to purpose - which should help it stay true to its purpose over time,' adds Fletcher.

The government-funded tool takes the pressure off busy business leaders by asking them a series of questions about their business, before providing a set of modified company articles based on their answers. These articles can be personalised as much or as little as wanted, and can be updated at Companies House for no charge.

Matt Haworth, co-founder of Reason Digital, comments: 'We changed our articles so we could embed the values of the organisation in its governance. This has helped us steer decision-making in the business, including turning down work that doesn’t fit with our values while remaining profitable.'

Norbury summarises: 'Using Purposely will offer businesses several commercial advantages in the modern age - increasing trust in consumers, enabling businesses to recruit better talent, and helping founders to secure their vision and legacy in their organisation’s DNA.'

For more information on Purposely, UnLtd or its partners, or to embed purpose within your business, visit getpurpose.ly

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