Businesses must value purpose over profit to succeed in future
Business cannot afford to ignore purpose-led consumption anymore, according to a new study. The majority of consumers now expect companies to take a stand on current and broadly relevant issues such as sustainability, transparency and fair employment practices – if they are to retain their customers.
To be ‘purpose-led’, an organisation needs to stand for something it believes in, going beyond profit and looking to positively impact society – something becoming increasingly popular to consumers. However, on the back of three decades of dog-eat-dog Gordon Gecko-esque capitalism, being purpose-led as opposed to being purely profit-motivated remains a hard sell in the business world. Countless times, corporate leaders have been told that consumers are more willing to hold them accountable for their ethical short-comings, and yet board rooms and shareholders alike have largely only paid lip-service to the idea of customers voting with their wallets.
Recent research from Bain & Company showed the extent of this rift with regards to sustainability in particular. 81% of companies say that sustainability is more important today than it was five years ago, while 85% say that it will be more important still in another five years. Despite this, just 4% of corporate sustainability changes succeed, while 47% fail, thanks to a mixture of factors, including management being unwilling to lead on the matter, or profits and sustainability goals clashing.
At the same time, those who take a leading role in trying to push for purpose-led goals taking precedent over profitability often put themselves at loggerheads with other senior members of an organisation. This was something which Sacha Romanovitch encountered during her troubled spell as the CEO of Grant Thornton UK. Having moved to reposition its focus to “profits with purpose”, she was accused by 15 Partners and Directors at the firm of pursuing a “socialist agenda”, further alleging that under her stewardship Grant Thornton had “no focus on profitability”, and was “out of control”. She was eventually ousted from her role.
Purpose for profit
While businesses feel a lot more comfortable simply talking about purpose-led work and continuing with their standard business practices tied to profits and growth, a new report may well give them food for thought. Purpose could become an aspect of business which can no longer be neglected, as it will damage a firm’s ability to make profit, according to Accenture Strategy’s most recent Global Consumer Pulse Research piece. A global survey of nearly 30,000 consumers in 35 countries found that 62% want companies to take a stand on issues such as sustainability, transparency and fair employment practices.
'Talking the talk' without 'walking the walk' may no longer be an option, either. The report found that 66% of consumers think transparency is one of a brand’s most attractive qualities, so, if a firm is saying it has set goals to tackle its carbon footprint, for example, it had best have the data to back its claims up. Furthermore, recent Accenture Strategy research found that a breach in trust adversely will see its competitiveness take a hit. The direct impact on future revenue by trust events conservatively stood at $180 billion for 7,000 companies analysed, or an approximate loss of $4 billion for a $30 billion company.
Other top factors consumers listed saw 66% say a brand should demonstrate “it does what it says it will do and delivers on its promises.” This was closely followed by 65% stating the way a company treats its employees can determine if they spend money on that brand. This was exemplified in the UK in 2015 when Pizza Express and a number of other casual dining chains were exposed for their controversial tipping policy – keeping a portion of every tip paid by card to the staff – and subsequently saw sales tank. Following union pressure and public support, the policy was reversed, but not without significant reputational damage.
Further down the list but still commanding a significant portion of responses, cultural, social and political stances were also noted as important by consumers. 50% of respondents noted that standing up for societal and cultural issues they believe in, or supporting and acting upon causes, were both something which would incline them to back a business with their custom.
This can be seen with the famous recent Christmas advert from Iceland, which saw the supermarket tackle the issue of the palm oil trade, and its impact on the rainforests of Borneo. An advert featuring a cartoon orangutan declared Iceland would no longer sell own-brand products that use palm oil, and while the Greenpeace-supported animation was banned from television by Clearcast for being too closely associated with a ‘political’ organisation, the film went viral online. Among the business outcomes for Iceland, the campaign helped boost sales of mince pies (one of the products to go palm oil free) by 11% year on year.
Political stances
Following on from this, a significant minority of 37% said they favour brands which “take a political stance on issues close to my heart.” The potential for this group of consumers was illustrated by an initially divisive campaign by UK cosmetics producer Lush. On May 31st 2018, Lush set out in-store displays in a number of locations with “Police have crossed the line” printed on mocked-up police tape. The displays criticised the British policing practice of going ‘undercover’ to monitor environmental and left-wing activist groups. A number of notorious cases even saw police start families with those they were spying on.
The campaign was met by a great deal of bluster from the British press and political commentators, who suggested Lush was ‘anti-police’, and branding the campaign disgraceful. Calls for a boycott went out as a storm of social media posts claimed Lush had lost various customers for life. This may or may not have been the case, but if it was, Lush gained a good deal more customers from its actions than it lost, as when the campaign ended a few weeks later in June, Lush’s sales were up by 13%, even among the carnage of the UK’s sustained high street crunch of 2018.
Concluding their piece, authors Rachel Barton, Masataka Ishikawa, Kevin Quiring and Bill Theofilou stated, “By standing for something bigger than what they sell, tuning into customers’ beliefs and taking decisive action, companies have the chance to recast their customer relationships and connect with consumers on a deeper level. Those that successfully activate a purpose-led brand will put the traditional view of ‘customer as buyer’ to bed forever. They will, instead, focus on creating a community of loyal, engaged and valuable brand stakeholders – all working together to usher in the next era of engagement and competitiveness.”
