A purpose-led business in a capitalist society: the shift from shareholder to stakeholder satisfaction

Recently there has been an increase in businesses priding themselves as being purpose-led organisations. If you are in the process of applying for graduate jobs or liaising with employers through various extra-curricular roles, you might have noticed an emphasis on businesses stating they follow a purpose-led strategy, therefore creating value for both shareholders and stakeholders.

Purpose-led practice refers to a concept that focuses on ensuring an organisation stands for something it believes in, going beyond profit and positively impacting society. A business merely stating they want to positively ‘change the world’, is not enough to be labelled as truly purpose-led. A purpose is different to a business’s mission statement: it must be clear, coherent and at the absolute core of any organisation, considering the needs of customers, employees, business partners, the government and the community.

For as long as we can remember, the ultimate purpose of a business was primarily focused on commercial gain and implementing successful business strategies to allow for maximum profit. Over the last several decades, this has been commonly accepted as the prime goal of any corporation. However, the increasing need for environmental protection and consideration of social and cultural factors to satisfy the needs of stakeholders as opposed to shareholders suggests capitalism as we know it is being re-defined. CEO of Duke Energy believes ‘the true value of a business can only be measured in relation to its impact on its wide array of stakeholders, not just earnings per share’.

Incorporating environmental, social and governance factors (ESG) into a business strategy evidence commitment to the conservation of the natural world, consideration of people and employees and the respect for responsible business. Although these non-financial aspects are not mandatory to financial reporting, companies are increasingly referring to them within annual or sustainability reports, with the intention to be more attractive to potential investors. If businesses have a clear purpose, it allows investors to analyse and identify material risks whilst predicting the long-term value. We could perhaps go further and say that businesses that remain in the ‘profit at all costs’ mentality will rapidly decline to the benefit of these new purpose-driven businesses.

Last year, the Business Roundtable, consisting of some 200 top US companies such as Amazon, Apple and JP Morgan, committed to a company strategy for the benefit of all stakeholders. Darren Walker, President of the Ford Foundation, claimed that ‘it is more critical than ever to focus on long-term value’. President and CEO of Progressive Corporation Tricia Griffith additionally claimed: ‘CEO’s work to generate profits and return value to shareholders, but the best-run companies do more. They put their customers first and invest in their employees and communities’.

The shift from shareholder to stakeholder interest is relevant to every business within every industry. We have seen PwC, Deloitte, law firms including Pinsent Masons, technology firms including Accenture and supermarkets such as Tesco adopt a purpose-led approach with profit now an aim that has lost the superiority it once had.

If we as a global community aim to make a positive, lasting and long-term impact on the world, it is important to understand what it means to be purpose-led in a capitalist society. ‘If the old economy makes a change, then that’s how you change the world’, sustainable business expert Roeland Dikker Hupkes.

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