Milton Friedman, the grandmaster of modern economic doctrine, wrote in 1970, “ ….the social responsibility of business is to increase its profits.” This view of corporate purpose rigorously held true for generations of industry leaders, who shaped governance policy and corporate actions with a vigilant eye on the needs of shareholders.
Today, the definition of corporate purpose has evolved, because business itself has evolved.
The evolution—and necessity—of purpose
Shaped by new pressures moral sensibilities—not to mention rapidly changing social, technological, and economic forces— the notion of purpose has deepened and expanded.
In a complex world full of ever-escalating challenges (environmental, worker demands, sluggish markets, etc.), businesses that want to succeed need a navigation tool and a core sense of themselves. This will help them to inform strategy, direct key business decisions, and keep their organizations aligned across silos and geographic regions.
From adapting and managing change more effectively to recovering more quickly after a crisis, the benefits of corporate purpose are manifold. To appreciate the power of purpose and its ability to elevate business achievement, one need only refer to the top 100 brands on Interbrand’s Best Global Brands ranking—all of which have purpose embedded in their DNA.
The advantage of purpose in the Age of You
Untethered from the past’s conventional wisdom and responsive to the demands on the horizon, a new generation of leadership is not only redefining purpose, but is also leveraging it to their advantage.
In a Darwinian struggle for survival—and quest for brand immortality—every advantage counts. But how can a more enlightened definition of purpose help?
To appreciate why purpose has become increasingly important, it helps to understand that we are on the cusp of a new era. Two tectonic shifts, driven by the rise of digital technology and changing consumer expectations, are catalyzing rapid change and pushing new levels of responsibility onto brands—whether they want it or not: the Age of You and the embrace of Corporate Citizenship.
In a world where consumers can Google any business, easily read news headlines related to an unfavorable incident, sign online petitions, and broadcast their opinions to entire networks of friends in a matter of minutes, companies have to take transparency, accountability, and reputation seriously—now more than ever before,. In this sense, Corporate Citizenship and the Age of You are two sides of the same coin.
Both performance and purpose determine reputation and, today, nearly all companies are expected to deliver on profit and ethics—that goes for the public, and increasingly for shareholders as well. Companies that deliver on purpose are not only more trusted, but are also seen as role models—leaders.
Leading by example in the Age of You
As we shift from the Age of Experience to the Age of You, brands that get the importance of trust, intelligence, transparency, access, and mobility are going to come out way ahead in the years to come. Vast data sets must be mined for insight and points where dialogue can begin. The frequency of and immense opportunities for communication require higher degrees of internal clarity and commitment to the brand to ensure consistency across organizations, reduce risk, and enable speed to market. Further, with over one billion people (and growing) worldwide on social media, two-way conversations, advocacy, influence, and engagement are the new rules for brand building.
And, in a world where brand experiences will be increasingly self-directed, self-defined, and self-managed by consumers who want to personalize, customize, and co-create, brands will have a new role. They can influence; they can shape values; they can make a positive impact. But to do that, brands will need to be anchored to an ethos that connects consumers on highly individualized journeys to a universal sense of purpose.
If companies must evolve to augment and cater to individuality, then Corporate Citizenship becomes the criteria by which brand choice is exercised. It is the key to building trust, a driver of preference, and an important differentiator. But to come across credibly in a global marketplace where evidence of sustainability and social responsibility is sought and easily found, companies must define their “noble purpose.” Rather than being a mere philosophical exercise, there is, in fact, a real payoff.
Be the brand people want to support
Increasingly, customers seek out and reward companies and partners that connect to both universal and personal values, drive positive behavior, and reinforce social activism. This is particularly true of the millennial generation.
This fact alone is a leading indicator that the power of “you,” fueled by passion for social and environmental issues, will continue to alter the business landscape, drive innovative business models, reinvent lethargic categories, and redefine corporate culture across all sectors.
An examination of recruitment statistics is eye-opening in this regard. For example, according to SustainableBrands.com, 70 percent of millennial job seekers have said that a firm’s community image and sustainable activities are an important determinate in job selection.
In terms of purchasing decisions, from the U.S. to the Asia-Pacific region, consumers around the world are putting their money where their hearts are when it comes to supporting brands that demonstrate purpose. According to a 2014 study by Nielsen, 55 percent of global online consumers across 60 countries say they are willing to pay more for products and services provided by companies that are committed to positive social and environmental impact.
So, as the millennial generation gears up to become the next leading force in the world, and people across the globe continue to consider environmental and social responsibility as factors that influence purchasing decisions, Corporate Citizenship will no longer be a “nice to have,” but a foundational building block of business strategy, expressed through the language, actions, and behaviors of brands.
While Milton Freidman’s call to maximize value will remain relevant, given the need for any organization to thrive financially, a clear sense of purpose—a distinct, powerful, and inspiring worldview—will play a larger role in a brand’s success than ever before. In today’s world, a purpose defined solely around profit is not wrong; it’s just inadequate.
The times we’re entering demand more. And those who answer the call to Corporate Citizenship and who reinvigorate their sense of purpose will not only make a positive impact on the world, but will also unlock a key strategic tool—one that will guide them when making important business decisions and one that will help them weather any storms that may lie ahead.
Caitlin Farrow, a Client Services Manager at Interbrand Canada, and Erica Velis, an Editor on Interbrand’s Global Marketing team also contributed to this piece.