Purpose, ESG & Profitability

Objective

A new balance is required to combine the pursuit of company results, world climate, ethical business conduct, human dignity, diversity, health, and freedom. The objective is to align business practices, framework conditions and laws in such a way that the interplay between Purpose, ESG & Profitability generates an optimized value for company shareholders, customers, employees, business partners, society and the world as a whole. This can be achieved in a socio-economically sustainable and ethical market economy.

Background

Purpose is a company’s, individual’s or society’s reason for being and thus its intrinsic motivation, basis of success, happiness and enthusiasm.

According to the Enacting Purpose Initiative, Report #2, July 2021 (a multi-institution partnership between the University of Oxford, the University of California Berkeley, BCG BrightHouse, EOS at Federated Hermes and the British Academy) “Increasingly, stakeholders are asking companies to articulate and operationalize a corporate purpose that accounts for their impact on society and the environment.”

Analyzing the performance of more than 2,000 U.S. companies over 21 years, Harvard Business Review, George Serafeim, found “that those firms that improved on material ESG issues significantly outperformed their competitors.” (HBR, Social-Impact Efforts That Create Real Value, Sep/Oct 2020)

According to Boston Consulting Group Bright House, May 3, 2022, corporate purpose is “about enhancing the performance of your top and bottom lines by unlocking growth and profits; attracting, retaining, and energizing employees; achieving social impact; and inspiring customers…

• Over the past 15 years, purpose-driven organizations have grown 10% faster than the market…
• Over the past 12 years, brands with a strong sense of purpose have seen their value increase by 175%, on average, compared to the median growth rate of 86%.”

In their podcast 'The search for purpose at work', June 3, 2021, Mc Kinsey, Naina Dhingra, Partner Mc Kinsey New York, found that

• “nearly seven out of ten employees are reflecting on their purpose because of COVID-19…
• about 70 percent of people say they define their purpose through work…
• employees who say that they live their purpose at work are
• six and a half times more likely to report higher resilience…
• four times more likely to report better health
• six times more likely to want to stay at the company and
• one and a half times more likely to go above and beyond to make their company successful…
• employees are five and a half times more likely to say they’re fulfilling their purpose at work if that purpose is aligned with their company’s.”

The combined purpose of a company, its employees, customers and society rests at the intersection of their reasons for being, their unique capabilities and needs. If this combined purpose is achieved, the company’s targets are optimally accomplished, employees are enthusiastic and fulfilled, the societal needs are met – at lowest possible cost for the benefit of all.

On the other hand the company’s purpose has to be credible, otherwise the company won’t succeed, employees will be leaving. 

According to the Deloitte’s Milennial Survey 2021 in 2021 only 47% of millennials said business is a “force for good” compared to 76% in 2017. This “may have been affected by widespread data breaches, a growing understanding of how personal data was being used by companies, harmful disinformation being promoted by social media and some traditional media companies. They also may have been influenced by other perceived failures on the part of business, such as not having enough positive impact on society and the environment.”

“Today, about four in 10 millennials say they’ve started or stopped consumer relationships based on the balance companies have achieved between “doing good” and making money, and more than half have done the same due to the environmental impact of certain products or services.”

In the professional world, human dignity is of particular importance, discrimination, white-collar crime, bullying and bossing are associated with high social costs and lack of purpose. There is no white-collar crime, no discrimination, no bullying without violating human dignity and purpose. Even a single case can destroy companies, employees and families, it can cost society and the state billions of euros, jobs and reputation. 

Discrimination finds its expression in the hashtags #MeToo and #BlackLifesMatter, in the second German Leadership Positions Act or Equal Pay Day. Where the retirement age is far above the age at which a job can still be found, where low full-time employment of women goes hand in hand with a low birth rate and low representation in top positions, where age, gender, origin, career, unemployment, previous self-employment, over- or underqualification, etc. make it impossible to find a job, purpose and human dignity are at stake.

Economic crime can, unfortunately, be found in many cases across the globe, be it the European cum-ex transactions 2007-2011, the Diesel Gate scandal 2008-2015, the German WireCard insolvency 2020 or the 2018 US Theranos insolvency, where the CEO was charged 2022 with two counts of conspiracy to commit wire fraud and nine counts of wire fraud, ranging from defrauding investors to doctors and patients. 

Based on a longitudinal MIDUS study published on PubMed.gov on May 8, 2014 Patrick L Hill and Nicholas A Turiano found in their study “Purpose in life as a predictor of mortality across adulthood” that people who demonstrate a sense of purpose in their lives have a 15% lower risk of death compared with those who said they were more or less aimless.

This makes a new equilibrium for all stakeholders, reasonable business practices, framework conditions and laws all the more important. A socio-economically sustainable, ethical market economy that integrates Purpose, ESG & Profitability is the answer to the search for success, happiness, motivation and responsible, sustainable use of resources.

You want to be part of this development? Please contact me.