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Why purpose should be at the heart of business

Portrait of Nam Soon Liew
Nam Soon Liew

EY Asean Regional Managing Partner; EY Singapore and Brunei Managing Partner

6 minute read 21 Feb 2023
Related topics
Entrepreneurship
Private business
Sustainability
Sustainable Impact Hub
CEO agenda

Pursuing profitability alone is not enough for success as more stakeholders expect companies to align their purpose with sustainability

In brief

  • Stakeholders increasingly expect companies’ purposes to address environmental, social and governance (ESG) issues.
  • Companies need to articulate an authentic purpose that supports ESG goals to help drive long-term growth.
  • By seeking common ground in their purposes, they can also create better collaborations within industries and ecosystems.

Entrepreneurship in today’s disruptive world is an especially tough endeavor that demands foresight, courage and conviction, with most entrepreneurs starting from the premise of wanting to do something better. The experience of running the EY Entrepreneur Of The Year (EOY) awards for over 20 years has shown that many leading entrepreneurs are not just rising to the challenges of entrepreneurship, but also embodying a sense of purpose beyond demonstrating profitability.

The 2022 EY EOY winners have inspired the community with their pursuit of purposeful growth in various ways. Examples include uplifting traditional food and beverage operators, improving accessibility to health care and financial services and challenging conventional perceptions of the waste management industry.

To be clear, purpose-driven entrepreneurship is not about building not-for-profit enterprises. In fact, such entrepreneurs seek to build a profitable business driven by a clear purpose that is authentic and consistent with business actions. In other words, their purpose is the foundation on which their company’s reputation and performance are built. Embodying this quality are the six EY EOY winners for 2022.

“What is admirable about the entrepreneurs behind these businesses is that besides focusing their efforts to ‘do well’ for their customers, partners and investors, they are also prioritising the need to ‘do good’ by making a positive impact on their communities,” said Pol de Win, Senior Managing Director and Head of Global Sales and Origination at Singapore Exchange Limited (SGX), which is a partner of the EOY Singapore awards.

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Purpose and profit not at odds

Executives in EY studies said their pursuit of purpose delivers the greatest value in areas that are arguably most critical to them. For example, those in the life sciences and diversified industrial products industries said their purpose drives value by helping to develop innovative new products. Those in oil and gas and mining and metals companies said their purpose provides most value in helping them identify and reduce risks. Consumer products companies see purpose as fundamental to building greater customer loyalty.

 

Indeed, the EY Future Consumer Index in November 2022 showed a dramatic shift in consumer values, where people are less motivated by financial rewards and increasingly confer status on sustainable behaviors rather than wealth. Consumer brand preferences are now driven by an alignment of the customer’s values and the brand’s purpose — a new game-changing “P” in addition to the four Ps of product, price, place and promotion.

 

Further, the COVID-19 pandemic has reinforced the importance of environmental, social and governance (ESG) issues. Investors are placing a dual emphasis on financial and nonfinancial metrics. They also consider companies that perform well on ESG to be less risky and better positioned for the long term. A corporate purpose that drives and underpins ESG goals is, therefore, instrumental in attracting the finance, trust and confidence necessary to grow the business.

Purpose-led transformations

Business leaders are facing a barrage of competing pressures and undertaking transformation strategies to future-proof their organizations.

“For entrepreneurs, uncertainties often present opportunities that allow them to take stock of the current environment and refine their business models,” Pol said. “Many are prioritizing the transition to more sustainable and long-term-oriented models while at the same time, finding adequate avenues for growth.”

“Amid the constantly evolving business landscape, we have seen how some companies have adapted, digitalized and innovated to build operational resilience and stay competitive,” he noted.

Pol added that it is critical for companies to consider diversification and collaborative opportunities to stay competitive. Like many other businesses, SGX Group recognizes the significance of partnering with stakeholders and other parties to create a more vibrant ecosystem.

Companies can also harness a strong sense of purpose to promote and create better collaborations. This involves assessing the potential for collaboration within industries and ecosystems by seeking common ground in their purposes.

Importantly, purpose is key to rallying internal teams in any transformation. Many transformations underperform because companies fail to engage employees and harness their collective energy. A research collaboration between EY teams and the University of Oxford in 2021 highlighted human factors as a root cause of transformation failure. Having a purpose provides strategic clarity for employees when addressing complexity. It also serves as a lens to view the impetus for change, putting potential short-term challenges into perspective by considering longer-term gains. It taps into the intrinsic human need to be part of something greater than us and can be the glue that integrates diverse teams in new ways.

 

 

The corporate purpose plays a key role in transformations by providing strategic clarity for employees when addressing complexity and a broader perspective of the impetus for change that considers longer-term gains.

 

 

Making purpose real

The company’s purpose needs to be authentic to the business. Business leaders must also be able to articulate that purpose to customers, employees and other stakeholders in communications and more importantly, in actions. By doing so, they can expect strong stakeholder buy-in and loyal employees who are similarly motivated, invigorating the business to create long-term value. When it comes to purpose, the job is never complete and should be at the heart of any business that desires long-term sustainability.

We thank Pol de Win, Senior Managing Director and Head of Global Sales and Origination, Singapore Exchange Limited, for contributing to this article.

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.

Summary

With stakeholders increasingly expecting companies to take sustainable actions, businesses need to articulate an authentic purpose that is aligned with such expectations. This is crucial to help drive effective transformations and realize long-term value. Companies seeking common ground in their purposes can better collaborate within industries and ecosystems.

About this article

Portrait of Nam Soon Liew
Nam Soon Liew
EY Asean Regional Managing Partner; EY Singapore and Brunei Managing Partner
Passionate about driving economic opportunity, diversity and inclusion. Advocates digital technology transformation for value creation.
Related topics
Entrepreneurship
Private business
Sustainability
Sustainable Impact Hub
CEO agenda

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