Podcast transcript: How can purpose help create value from vision?

17 min approx | 19 Nov 2018

Juliette Foster

Hello and welcome to The Better Question, our series of podcasts that answer the questions that will help you lead your business through this transformative age.

I am your host, Juliette Foster, and in today’s episode, we’ll examine the evolving role of business in society. We’ll ask the better question, “How can purpose help create value from vision ?”.

In recent years, a new idea — or ideal — of successful business has emerged: that of a purpose-led company. More and more CEOs are taking a stand to say that there’s more to their businesses than profit — it’s about striving to fulfill a long-term purpose that benefits employees, customers, society and the planet — as well as shareholders. But how do you truly embed purpose throughout the organization? How do you make it authentic? And can purpose translate into commercial success?

I’m joined at EY’s annual Entrepreneur Of The Year Forum™ in Monaco by three passionate proponents of purpose-led business.

We have Tijn van Elderan, CEO of Brabantia, a family-owned household products business. Tijn is the EY 2018 Entrepreneur Of The Year™ in the Netherlands.

Simon Rogerson is cofounder of Octopus Group, a fund management business focused on financial services, energy and health care. Simon is the EY 2018 Entrepreneur Of The Year™ in the UK and Ireland.

And Valerie Keller is global leader of the EY Beacon Institute, which aims to inspire, equip and advocate for purpose-led businesses around the world.

I began by asking Valerie, “What is driving so many CEOs to reconsider the purpose of their business right now?”.

Valerie Keller 

We did some research last year, where we talked to over 1,500 global executives of big companies around the world and what we found was really interesting there — they were saying that all the disruption that we're facing globally and them as businesses, whatever their markets were, was driving a profound rethink of the purpose of the corporation. And then you could ask, “What is that? In what direction was it going?” And what we saw was more than two-thirds of them were moving from a smaller conception of purpose as profit — like we're here to make some money, give our time, make some stuff, sell some stuff — purpose as a result of things. And now, we see a [diversion in] that direction of travel — more than half were saying that we're of the notion of starting to think of purpose with a capital “P,” like purpose that really means something, that is human-centric, societal serving, the buzz word , multi stakeholder , that is there to serve employees and the customers, and so on.

Juliette Foster

Tijn, how do you define Brabantia’s approach to purpose ?

Tijn van Elderan

I always say economy , ecology and ethics. We're a company that is built on reliability; on trust, basically. Brands are about trust. And therefore, you need to be reliable. But you also need to be flexible, you need to find out what your customers want and try to adapt. And we have a third, very basic, pillar — we say, we just want to do the right thing and that sounds “ wishy washy ”, but it's just our way of doing things. We were a very modest family business from the south of the Netherlands and we’ve had to shed that cloak of modesty and step up, lead and show that we are doing the right thing. And this has basically been what we've added to our business over the last five, six years. We are showing what we're doing, we have this path to 100% recyclability that goes through our whole organization.

Juliette Foster

Simon, what about Octopus Group? When you look at financial services, it does have this reputation of being pretty dogged in what it wants — especially when it comes to profit. And, frankly, the idea of pursuing benefits for humanity doesn’t seem compatible, does it?

Simon Rogerson

That's the weird thing, that's the opportunity. If I said to a normal person, “Tell me the five things that are most important in your life,” British people would be too polite to use the word and they wouldn't say money, but financial well-being, it changes your life, it's going to change the school you send your children to, it changes the age you retire. It really matters to people. Increasingly people might say, the environment, the planet matters, their health matters — it's no surprise; and they are the three sectors we operate in. We operate in financial services, we operate in energy and decarbonization of the world, and we operate in health care, specifically health care infrastructure.

Now, when you get out of bed in the morning saying, “That's our reason for existing, we want to change these things for the better,” it's quite easy to take people on that journey. If you ask most men or women on the street, “What do you think of the financial services companies you interact with?” The usual response is, “You can't stand them; they're diabolical; wrong product; wrong time; over complicated ; jargon; they still think they're the adult in the relationship, treating the customer like a child.” None of that's okay. You'll wake up one day and you won't have any of those customers anymore. These companies don't have a conscience, they don't do the right thing and they’re having the wrong conversations around the board table. If they're genuinely purpose-driven, wake up!

Juliette Foster

There's no disputing your commitment to purpose and doing the right thing, but the challenge is making sure that it goes beyond the board room and right down into every inch of the company — so, how do you do that?

Valerie Keller 

I'll pick on EY for a minute. We have an amazing purpose — building a better working world. That's incredible. There's a difference between saying, “We're building a better working world, okay? Now we do some philanthropy.” versus saying, “Now, how do we bring the core of our services and our capabilities to serve people, human lives and our planet?” Right? And that means being a purpose-driven organization — it flows through, commercially, everything that you do, versus this being something that's a separate initiative on the side, such as philanthropies, CSR, PR, HR. And that (idea) goes to, really, the essence of just remembering that. Then you're making these decisions about how you spend time or money, and what products, services and so on, from that core place of care.

Simon Rogerson

So, for me, it's all down to the people — the people you hire, the culture of the organization. The culture is just a collection of what everybody working there makes it feel like and seem like. We've got 1,500 people, I spend more than 50% of time hiring people and interviewing people, because it's fundamental to your DNA. It's why you get out of bed in the morning. Are you on board, are you part of the mission? You have to try and remove all the bits that make it difficult.

It's much easier to be purpose —driven as a private organization if you're led by the entrepreneur who had the idea in the first place, because they're not going to change. Quoted businesses have it pretty tough. So, the average holding period for a quoted fund manager is less than 12 months — you can't build or run a purpose-led organization if you're stressed about quarterly earnings or 12 monthly targets. You end up focused on the bottom line. So being private, having the ability to be flexible, to go into new sectors and to do the right thing, you have to start with the right ingredients. You have to have people, you have to communicate really openly and you have to bring it (purpose) to life for them.

Tijn van Elderan

I heard a quote once, it said, “Giving a good example is not the most important thing in leadership, it is the only thing.” We have a responsibility as leaders, to lead the way. That's what leaders do and that means making the tough decisions. All the easy decisions, the 80/20 decisions need to be taken by people themselves. The tough decisions need to be made by us and that is showing which way we're going.

Juliette Foster

As Simon said, it’s actually easier for an entrepreneur-led company to focus that organization on the purpose that they are so passionate about. But what about in larger companies, what happens there?

Valerie Keller

Larger companies, I think, are just starting to wake up to this. And so, when you see large signals like Black Rock's CEO Larry Fink sending out a letter as an advisory piece, that says, “Social purpose drives long-term value,” — those kinds of things are starting to become important for the large corporations. It gives the leaders in those organizations the courage of their convictions — to say, as you were saying, “We are here, we can be purpose-driven as large publicly traded corporations.” And I've been working quite a lot with one of, what we would call, these beacons of 21st century business — Unilever, which traditionally was a consumer soaps , products and consumer goods business. They've taken a very public stand by saying, “We're here to help make sustainable living commonplace, we want to be purpose-led, we want to be future-fit for the world,” and so on. And ultimately, it goes to what you were saying, that they take a stand publicly and that's important, right? — to be able to say, “Here's who we are, here's what we believe in and, for us, it's the only way to go forward, this drives our profitability and it drives our growth.”

Juliette Foster

Well, Unilever certainly believes that purpose can create a competitive edge, but has that been your experience Tijn?

Tijn van Elderan

Not yet. In hiring people, yes, absolutely.

Valerie Keller

I was about to say, it gives you a competitive edge for hiring.

Tijn van Elderan

Yes, absolutely. And funny thing about this platform EY gives us is it creates the possibility to tell our story. And if we get to tell our story, all of a sudden, applications for specific jobs go from 30 to 180, so that's amazing. So, you get to pick better people. But, in consumer purchases, I don't see that yet. Although having said that, we have a couple of initiatives. Where I am seeing it, so maybe yes.

We work together with WeForest, for example. WeForest is an organization that makes earth a little cooler, they say they're going to solve the problem by planting trees, so for every outdoor rotary we sell, they plant a tree. We've planted one and a half million trees by now. And we saw, this is a win-win-win situation for everybody, I have to say win-win-win-win-win situation, because when WeForest wins, the people who get to plant the trees win, we win — because we grow, our customers win, and the organization and consumers win — because they get to do good things. We do the same thing for the ocean clean up. So, I'm going to rephrase what I said, yes, we're seeing the impact already.

Simon Rogerson

I think customers always want to feel like they’re part of something — it's natural, it's in our beings as humans — “I want to feel like I’m part of something, I want to feel connected, that's what makes me tick.” Companies increasingly have a conscience, they're going to have to do the right thing — either because they genuinely care about it or because their customers will shame them into doing the right thing. So, I think the world's changed and it's very evident to us in both fund management and the energy business. There's a new normal emerging and that's about purpose, it's about connecting with them.

Juliette Foster

So when an organization’s purpose guides decisions taken by people throughout the company — including hiring decisions — and when it is truly embodied by the firm’s leadership, it seems the bottom line often benefits. But what is even more important is whether companies can create that vital connection with the stakeholder groups they are trying to impact — whether their purpose is meaningful, inspiring, and above all, authentic.

Valerie Keller

I think it's about being purposeful, not perfect. Human beings are not perfect. I can wake up and say, “I'm not eating chocolate today” and by 10 o'clock, I've had a Kit-kat. What I mean to say is, we do things right? So, own up to it; yes, and just say, “We're trying our best, we're not going to be perfect in every way.” I do think that one of the things that organizations are also finding is that if you say, “We're a purpose-driven organization,” — even if you've got that directed toward, let's say, financial services, or sustainability, people still expect you to behave differently. It's not just saying, “Well, your purpose is about making sustainable living,” but actually, then you can get away with treating your employees, suppliers and so on differently. There's just kind of a rising tide of water, where people are expecting corporations and businesses to behave in a different way, whether you've put something on your masthead or your coffee cups or not. And, I think, that's one of the things that says that you're on a purpose journey as a company — whether you know it or not. The zeitgeist has shifted.

Simon Rogerson

I think that's really interesting. I think the big shift is — where, maybe 10 or 20 years ago, or maybe some companies still today — particularly some really large companies — they'll stand there, behind their great big wall, grab their megaphone and they'll start shouting about what their purpose is. It’s irrelevant. It doesn't matter what you shout about actually because the wall's disappeared. I can spend hundreds of millions of dollars on a big advertising campaign that people aren't listening to anymore. They would say, “I don't trust you, I'm not listening.” What I really want to hear about is — what your experience was, because you're more believable, because you’re people and I think the old world that says, “I'm the corporate, I'm the adult, you're all children, I'll treat you as such,” doesn't exist. It's a level playing field, it will come from the customer. So, organizations, whether they're purpose-driven or not, they are going to find out it's all about — “Are you behaving?” Just imagine, if these companies were people, you would not be friends with 99.9% of them.

Tijn van Elderan

I like that analogy.

Simon Rogerson

They just don't behave the right way. If you had friends and your friends said, here are my values and this is what I care about, that's the reason you're friends with them. If they suddenly start behaving in a totally different way, you wouldn't be friends with them anymore. And I think now, that's the reality, that's going to be one of the biggest shifts in the corporate landscape for the next decade — the fact that reality is now in the hands of the customer — “You behave like that, I'm not dealing with you anymore.”

Tijn van Elderan

And it all comes down to one thing, that's this horrible word called authenticity.

Simon Rogerson

Yes, totally agree.

Tijn van Elderan

If you are congruent, your behavior and what you say, that's the only thing. And so, if you make a mistake, own up to it.

Valerie Keller

I think that's right, integrity is wholeness. It's matching what you say and what you do. And part of being whole is by saying, “Yes, we had an aspiration, we didn't quite meet it and we're going to fix it, and thank you very much.”

Juliette Foster

So, when it comes down to it, does purpose increase the financial value of a business?

Simon Rogerson

In this new world, where actually the power's gone to the customer, it's the only way to build a valuable business. If you want to take a long-term view, which we absolutely do, we want to build a long-term successful sustainable business, then you have to do the right thing. Because if you don't do the right thing, the customers will find out and they'll react exactly as they should and they'll run away from you. So for me, it's the only way to build a valuable business. So, people are focused on the bottom line and the short term, they might make lots of money next year, the year after and the year after, but eventually, the new normal will emerge in all these industries. It's going to happen and these organizations won't know what to do. Because the reality of being able to take advantage of people, obfuscate things, overcomplicate it in jargon and make it seem like it's a world they can't quite connect with is just going out the window.

Tijn van Elderan

There is no other way in. Is it going to create value right now? I don't know. Sometimes, it doesn't; sometimes, it does. Sometimes, it appeals to people, so that you can sell more and sometimes, it doesn't — but it does give you the obligation to think about what it will be and face those challenges. So, I think the total cost of ownership will be part of that.

Valerie Keller

That's exactly right. I think it's very clear in the world that we face right now. So the question is not, do you drive value from values? Of course you do. Is there going to be some potential tensions in the short term? Absolutely. But if you draw the same parallels, if you have friends who are just constantly optimizing for the short term, for selfish gratification and for motives, they're not your friends for very long, right? So, it's a simple way of thinking about some things and I think, a lot of times, we make it really complex. We put really weird terminology on things and we forget that, fundamentally, we're human beings, trying to live meaningful lives, and who want to do it in ways that create some sense of connection and belonging. And if you take that same exact mindset that these guys have said, then yes, you will get the value.

Juliette Foster

What do you think the ultimate impact will be on the world and business, if purpose-led companies really do become the norm?

Valerie Keller

In a disrupted world, where everything is changing — everything from the geopolitical system, the way that digital and transformation is completely changing our lives and what it's going to mean in terms of work, the boundaries of the corporation and so on — I'm an optimist, but I should say that it's not going to be easy by any means. But, let's just be really clear, we need to get there. Our planet has incredible challenges. People talk about the Sustainable Development Goals (SDGs) as if they are this United Nations thing. But no, the UN doesn't have these SDGs. We, as a planet, have these incredible challenges that are facing us; as a planet and as a human civilization. But those are actually incredible opportunities … I have hope that if we align toward saying, “How can we help tackle some of humanity's greatest challenges and use those as beacons?” then, I think that we'll get some of the profits and the growth, and the things that we think that we need.

Juliette Foster (in studio )

That’s almost it for today. It seems clear that the marriage between profit and purpose can be a fruitful union. But what’s more important is that if you aren’t integrating purpose in a significant and tangible way into your business, your competitors certainly will, and your customers could follow.

As ever, asking a better question often raises new questions for you to consider.

• Is your company’s purpose authentic, ambitious and inspiring, and is it integrated into your company’s DNA?
• Is it integral to your employees’ day-to-day experiences, and does it influence the decisions they make? How about you — does it influence the decisions you make?
• What are the human, societal or environmental challenges that your company could help to address by applying your capabilities to them?

To download the research on this topic from the EY Beacon Institute, go to ey.com, where you can also search for the answers to many other better questions. To hear more episodes of The Better Question, subscribe to the full podcast series.

The better the question, the better the answer, the better the world works.
Until next time, goodbye.

 

Disclaimer: The views of third parties set out in this publication are not necessarily the views of the global EY organization or its member firms. Moreover, they should be seen in the context of the time they were made.