In 1990’s Corporate Social Responsibility (CSR) came to prominence. This development was an antidote to dominant sentiments of corporate profiteering that reined till that time… “Corporates would provide for the wellbeing of masses-that is, higher corporate profits will result in higher profits for shareholders resulting in more wealth for the society.”
Despite the waves and waves of CSR, it did not alleviate corporate profiteering. The expansion of corporate presence continued-and that of profit taking.
Later, in 1994, John Elkington said that businesses should not solely be focused on profits alone. Instead they should also think of the communities at large as well as of the planet. With this in mind Elkington introduced the “Triple Bottom Line” (TBL or 3BL) concept -People, Planet and Profits.
Elkington was driven to give ‘structure’ to the “Sustainable Development” concept highlighted by the Brundtland Commission that was previously dissolved in December 1987. Elkington was looking to put Brundtland Commission’s concept of “Sustainable Development” in a ‘more integrated way.’
Professor Colin Mayer defines Purpose Driven Organizations:
“To produce profitable solutions to the problems of people and planet, and not to profit from producing problems for people or planet.”
“TBL agenda focuses on not just the economic value that they add, but also on the environmental and social values that they add – or destroy” says Elkington.
To spin TBL around, Elkington focused on seven drivers –Markets, Values, Transparency, Life-cycle technology, Partnerships, Time, and Corporate governance.
Today, more than 25 years later, initial excitement around TBL has faded. It has not ‘taken off’ as expected and in fact, resulted in some disappointment. Why?
Unlike financial performance, it is difficult to quantify the social and environmental contributions of a company in a straightforward manner. It is also not clear how to integrate these measurements with each other. Another issue is, even if some metrics are present to measure ‘people’ and ‘planet’ aspects, how can one still compare one firm’s people and planet activities with another firms? For instance, one company may give assistance to an elder care home in the form of food and clothing as part of its ‘people’ aspect while another firm would arrange water supply facilities to a community that struggles to receive a steady water supply. Can the ‘values’ of these two activities be compared? It can only be compared if there is a common unit of measure for them but there is no such unit. Also TBL was largely ignored by the academic sector -despite initial expectations for wide academic use of it.
The results appear to be dismal for TBL though it is still seen by many companies as worthwhile to follow.
Post TBL and later on, many similar concepts surfaced – Creative Capitalism (Bill Gates -2008 – to use corporate profits to reduce poverty), Shared-Value Capitalism (2011 – improving economic and social wellbeing of communities), and Conscious Capitalism (2014- elevate humanity) to name a few.
Still, not all was lost for TBL. Despite its gradual fading to the background, it resulted in spurring another concept that is now widely talked of today-the Purpose Driven Organization (PDO).
Henderson & Van den Steen define Purpose (2015):
“..a concrete goal or objective for the firm that reaches beyond profit maximization.”
A company’s mission says “what” a company does, but a corporate purpose explains “why” a company engages in a certain type of organizational behavior.
Corporate Survey’s show higher job performances and stronger organizational commitments are benefits of adhering to a ‘purpose.’
The Purpose statement should be crafted well (Eg: “Making sustainable living commonplace”- Unilever, “We work hard every day to make American Express the world’s most respected service brand.”). The organization needs to show its consumers and employees that it takes its purpose seriously by activity.
Why is Purpose important for an organization now more than ever?
In the words of Edelman:
“In this increasingly purpose driven world, firms are revisiting, refining and sometimes redefining their organizational purpose in the context of their societal and environmental impact. According to the annual Edelman trust barometer, belief-driven buyers are critical when choosing, switching, avoiding or boycotting brands. Additionally, studies have shown that purpose-driven companies often witness higher market share gains and grow faster than their competitors.”
Still, the most critical reason for being purpose driven may not be evident from any of the above. In fact, it comes from a well-known place.
The 2020 Consumer Culture Report (by 5WPR): “83% of millennials feel strongly the brands they buy from should align with their values..”
In that, ‘Purpose’ is now in the epicenter of businesses…the marketplace.
