EY: Corporate purpose crucial in uncertain global economy
The majority of businesses believe that having a well-integrated corporate purpose, rather than maximising shareholder value, holds the key to succeeding in the uncertain global climate, according to new research from EY.
The report found that only 15% of companies believe their main role is to maximise shareholder value, in comparison to 73% which believe it is to embrace a strong corporate purpose. Findings were based on a survey of almost 1,500 global leaders from businesses across the world, with respondents from 500 businesses with annual revenues of $2.5bn or more.
While the report doesn't explicitly reference recent political events such as Brexit or President Trump’s rise to the White House, it does assert that corporate responsibility is key to avoid the “destabilising” impacts of “seismic economic and political shifts”.
The survey revealed that 97% of companies that deeply integrate a broader sense of purpose into their operations report a good or great deal of incremental value from doing so. Some of the main benefits for respondents included greater customer loyalty, preserved brand value and reputation, staff retention, and production innovation.
“Our research shows the real advantages companies gain when going on an authentic purpose journey,” EY Beacon Institute global lead Valerie Keller said. “The data also busts the myth of purpose versus profit. 75% of purposeful companies involved in our survey tell us that the integration of purpose creates value in the short-term, as well as over the long run.
“They also report that being purposeful gives them greater agility to innovate in the face of disruption and uncertainty. But you have to walk the talk in your strategy, products and services, and customer and employee experiences. A purpose patina of words without action runs the risk of unmet stakeholder expectations, decreased trust and missed opportunities.”
The report found that purpose means different things to different companies. One-third of those surveyed characterised their company’s purpose as bringing value to customers, while 15% said it was about boosting their share price. Meanwhile, two-fifths said their firm’s purpose is aimed at creating value for multiple stakeholders.
According to the research, two-thirds of executives are profoundly rethinking business purpose as a result of the disrupted environment, and 52% of those are moving in the direction of this wider concept of purpose.
“All the disruption geopolitically, economically and technologically is a catalyst for a new evolution in business,” Keller said. “Those most able to thrive in this new world are focused on their impact on the humans they touch – the customers, the employees and the wider society.”
The report identified several steps that can help companies turn purpose rhetoric into business reality. EY insists that businesses should; clearly articulate a purpose responds to the needs of stakeholders; embed purpose into strategy and operations; constantly evaluate the journey and accelerate the process by ensuring it is owned by employees.
The report echoes the thoughts of sustainable business expert Philippe Joubert, who recently told edie that boardroom bosses need to consider the fundamental "purpose of the business" to ensure long-term sustainability, especially in an uncertain international political climate.