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So who foots the bill for the corporate purpose narrative?

Juan Luis Manfredi

In our research on corporate purpose as a compass for business decision-making, we were concerned that such a trendy concept, washed up on our shores astride fashions from the Anglo-Saxon world like that of the “activist CEO”, might ultimately be reduced to superfluous or cosmetic activities, without any real impact on the managerial mission and corporate function. Or worse still, that it would not be genuinely taken on board or internalised in companies’ cost structure as an essential investment. 

A senior executive in the financial sector warned about this risk in one of our meetings: “If firms talk about the cost of purpose it’s because they don’t believe in it. When it’s not in their core, they see it as a cost for whitewashing their decisions.” Therefore, it is fundamental to analyse the value of purpose in economic terms and ask how executives analyse and quantify it in accounting terms. The approach we took in the questionnaire used in our research anticipated the answer: Who will foot the bill for the purpose narrative? 

If a company’s approach to purpose is connected to the value proposition of what it does, then we shouldn’t be talking about cost

Top management in Spanish companies are well capable of distinguishing, in this field, between cost and investment, between approving additional items and investing in the transformation of operations and business. Purpose is the compass of genuine value creation when the customer, the investor and society are satisfied with a company’s behaviour and results – and not just its economic gains. One senior manager in the agri-food sector was in favour of incorporating purpose into strategic decision-making with a clear message: “If a company’s approach to purpose is connected to the value proposition of what it does, then we shouldn’t be talking about cost.” 

In their accountability to their various stakeholders, it is transformative managers who need to articulate the mechanisms that internalise the commitment to purpose in business strategy, define monitoring KPIs and guide decisions about investments or wage policies. Shareholders and investors, consumers, civil society, institutions and their network of suppliers, as well as their own employees, expect them to do so. 

We highlight three key elements in the current context: 

  1. Purpose is action plus narrative. It is as important to communicate corporate purpose as it is to make decisions in its name. Strategic communication is fundamental. Getting the right narrative across to each interest group solidifies commitment to purpose. One senior executive from the industrial sector singled out three key elements of management: “Our context understands our interests and projects because we’re predictable when it comes to regulatory compliance, accountability and governance.” Communication adds value to commitment and change when these are natural attributes in company management and not a sham. 
     
  2. Corporate purpose is set against an institutional backdrop. At present this is defined by Agenda 2030 and the European programmes, notably the NextGenerationEU funds. A senior manager with experience in international markets explains the link that exists between the strategic goals set by the global institutional agenda and personal executive development: “Each organisation can identify [in those macro-strategic goals] which lines are relevant to its enterprise or sector, easily aligning goals and personal concerns, and that generates a real opportunity for shared governance.” Another top executive highlighted the business opportunities involved in inserting corporate purpose into the big issues of the moment: “Opportunities appear when you identify your company’s purpose with the challenges faced by society and you turn the latter into strategic priorities related to your core business and your competitive advantage in the market where you operate.” 
     
  3. Purpose should emanate from people because talent is the big competitive advantage. A company’s sense of mission needs to emanate from within, from the people who make up the corporate project, not as a bogus addition made at the whim of passing fashions. An energy sector executive put forward a working formula: “commitment and KPIs”. And he added that “when commitment shows in corporate culture and performance metrics, then purpose serves to change the organisation.” Many emphasise that the generation gap is not as big as is often thought, but nevertheless, “we’re finding young talent with sustainability demands in their heads, with a very activist approach, and we’ve got to know how to channel these demands.” 

These different strands come together to turn purpose into a management activity and facilitate a transformative leadership style with formal decisions (metrics, talent, structures, rules, pay) and informal ones (corporate culture, values, lifestyles). This is a time of changes and long-term perspectives, of refocusing investments and encouraging shared value creation. But with a sense of practicality and geared to expectations, with careful thought about what strategic projects pervade the management committee. And issues like climate change, equality and diversity, public governance, commitment to fighting corruption and work-life balance should figure on the menu of options. 

Purpose has come to stay in public discussion. And the company must unite

The experience of embracing corporate purpose has a cost: it means making decisions and putting some things before others. But investing time, energy and resources is always positive, agree most of the executives we interviewed. In the Spanish market, top management has long been sensitive to change. And the mindset with which we are emerging from the pandemic has heightened that perception. “Anyone who wants to listen to social demands about sustainability, governance and environmental responsibility will feel a lot of pressure,” said one executive. Purpose has come to stay in public discussion. And the company must unite. And lead. 

* This article is the result of a collaboration between the professor at UCLM Juan Luis Manfredi and Borja Bergareche Sainz de los Terreros, who was the director of Digital Communications at KREAB and Chief Innovation Officer at Vocento. The article forms part of the research project “Transformative managers in the digital age: the compass of purpose” (Kreab), which explores the impact of the transformation agenda on organisational leadership and analyses how CEOs and managers in Spain interpret it. Specifically, more than 20 top executives of companies in the Spanish market have been interviewed about civic “activism”, purpose and the economic cost of these measures. 

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