These days, purpose is becoming increasingly mainstream. You’ll find it sprinkled throughout your social media feed and making headlines at the Cannes Lions International Festival of Creativity. Leaders at companies, global brands, nonprofits, and everyone in between are asking that important question: what is a purpose-driven company? What is a purpose-driven business? And what does purpose look like in practice?
It helps to start with a clear, shared definition of purpose and what it means to be a purpose-driven company. Purpose is an organization’s aspirational reason for being, beyond profits alone. It’s why an organization matters to people. “Companies can do more than just make money, they can serve others,” says Salesforce CEO Marc Benioff. “The business of business is improving the state of the world.”
A purpose-driven company stands for and takes action on something bigger than its products and services. Purpose can be an organizational strategy and a roadmap to remain competitive in a fast-changing economy. According to PwC, 79% of business leaders believe that purpose is central to success. Despite this, less than half of employees know what their organization stands for and what makes it different.
So, how do organizations pursue purpose successfully? It starts with articulating a clear, authentic, and long-term purpose — something that is true today, and that guides the organization into the future.
What’s next? Here are a few examples of what purpose-driven companies do that set them apart.
A purpose-driven company is one that focuses on making a positive impact on the world beyond just making profits. This type of company operates with a clear sense of why it exists and how it can serve people and the planet. Purpose-driven companies are becoming more and more critical as consumers employees, and investors look to support businesses that align with their values. But what exactly makes a purpose-driven company and why does adopting a purpose matter? Let’s explore this important topic.
Defining a Purpose-Driven Company
A purpose-driven company has a clearly defined reason for being that goes beyond making money Its core purpose answers the question How do we positively contribute to the world?
Some key characteristics of purpose-driven companies include:
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Mission-driven The company’s purpose is embedded in its business model and strategies It’s not just about maximizing shareholder returns, but pursuing a mission
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Values-led: The company’s values inform its decisions and shape its culture. Things like integrity, sustainability, and community impact are baked into operations.
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Stakeholder focus: These companies balance the needs of shareholders with those of employees, customers, community, and environment.
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Long-term view: Purpose-driven firms take a long-term perspective on business performance rather than focusing solely on quarterly returns.
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Agent of change: They aim to drive positive change in their industry and community through their business practices.
Leading purpose-driven companies like Patagonia, Ben & Jerry’s, and Seventh Generation have built their brands around social and environmental impact. But the purpose economy is expanding as more businesses commit to stakeholder capitalism.
The Benefits of Adopting a Purpose
Research shows that operating with a sense of purpose provides tangible benefits for companies, including:
Stronger Culture and Employee Engagement
A shared purpose and mission foster a strong organizational culture. Employees feel connected to something bigger than themselves or profits. Purpose creates meaning and engagement in their work. In fact, one study found that purpose-oriented companies have 30% higher levels of innovation and 40% higher levels of retention.
Enhanced Consumer Loyalty
Today’s consumers crave brand authenticity and gravitate towards companies with a soul. Companies like TOMS and Warby Parker integrate social impact into their business models. This helps attract and retain loyal customer bases.
Improved Financial Performance
While critics argue that purpose dampens profits, studies show that it actually enhances financial performance over the long-term. Purpose-driven companies experience higher market share gains and grow faster than competitors.
Driving Industry Change
Leading purpose-driven companies don’t just make internal changes, they influence their broader ecosystem. As Harvard professor Rebecca Henderson notes, these firms act as “engines of social innovation”, creating lasting change in their industries.
Why Purpose Matters More Than Ever
Here are some key reasons why purpose matters so much in today’s landscape:
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Societal crises: Issues like climate change, inequality, and lack of access to healthcare demonstrate the need for businesses to step up beyond profits.
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Conscious consumers: People increasingly make buying decisions based on company values and purpose. They reward purpose-driven brands.
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War for talent: Millennial and Gen Z talent want to work for employers with a purpose. This helps attract and retain top talent.
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Investor pressure: Major institutional investors like Blackrock now analyze purpose and ESG factors when making investment decisions. They recognize that purpose drives performance.
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Competitive differentiation: A strong purpose helps differentiate companies in a crowded marketplace full of generic claims. It sets purpose-driven brands apart.
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Future-proofing: Having a clear purpose equips companies to dynamically evolve and thrive in times of change. Purpose is a North Star guiding decisions.
The takeaway is that purpose matters now more than ever. Purpose-driven companies will be best positioned to succeed in the 21st century economy.
How to Build a Purpose-Driven Company
Transforming into a purpose-led business is a process. Here are some best practices:
1. Define Your Purpose
Anchor your business around a meaningful purpose that explains your reason for being. Let this shape your vision and strategy.
2. Communicate Constantly
Keep purpose front and center in internal and external messaging to embed it into company culture.
3. Walk the Talk
Make purpose part of decision-making at all levels. Leaders must role model purpose-driven behavior.
4. Empower Employees
Rally your team around purpose by connecting individual roles to something bigger. Help them find meaning.
5. Track Progress
Establish KPIs to monitor your progress delivering on purpose. Review what’s working and what’s not.
6. Integrate into Operations
Build purpose into processes and systems to hardwire it across the organization. Make it part of ‘how we do business’.
7. Co-Create with Stakeholders
Engage employees, customers, and community to co-create solutions that bring your purpose to life.
8. Communicate Impact
Share stories of your purpose in action. Celebrate wins internally and report progress to external stakeholders.
Purpose in Action
Let’s look at a few real-world examples of leading purpose-driven companies:
Patagonia makes durable outdoor apparel and invests in environmental causes. Its famous ‘Don’t Buy This Jacket’ ad campaign encouraged people not to over-consume.
Ben & Jerry’s integrates social justice into its brand. The ice cream maker has taken bold stances on issues like racial equity and climate action.
IKEA aims to “create a better everyday life for the many people.” The company has invested in renewable energy and pioneered more sustainable products.
Airbnb provides both economic empowerment for hosts and unique travel experiences that foster human connection. This purpose permeates its offerings.
Natura is a Brazilian cosmetics company seeking to make sustainable beauty products that advance Amazon conservation. They partner with local communities.
Lego aims to “inspire and develop the builders of tomorrow.” The company’s purpose is reflected in its investments in learning through play.
These examples demonstrate how purpose can be embedded convincingly into both product and practices.
Final Thoughts
The purpose economy is here, and conscious consumers and talent are flocking to purpose-driven companies. Leaders today have an opportunity to redefine success in business and positively impact society.
As Harvard Business School Professor Rebecca Henderson says, “If we can harness the power of business as an engine of innovation, we can make real progress on even the most serious world problems.” The future will belong to the purpose-driven.
Purpose-driven companies innovate
Organizational purpose can drive innovation and create a competitive advantage. IBM’s business purpose is to “make a connected world smarter.” It harnesses that purpose to drive profitable innovation through programs like Smarter Planet, which in its first year grew to be the focus of a quarter of the company’s research.
IBM connects purpose-driven innovation to the market through its Smarter Cities challenge, which invites governments to submit thorny environmental, social, or infrastructural challenges. The company harnesses its expertise and technology to create solutions. It’s reached more than 100 cities so far. Stockholm saw a 22% reduction in traffic congestion and a $92M annual gain in revenue; Bolzano realized a 30% savings in services for its aging population; Malta reduced water consumption by 15% and energy use by 25%.
This isn’t disinterested philanthropy. Revenue associated with Smarter Cities solutions increased 50%, and the Smarter Planet program as a whole has driven more than $7 billion in revenue, effectively creating a strong competitive advantage for the company. Those who are aware of the program are two-to-three times more likely to consider partnering with IBM.
This aligns with research that shows that 68% of executives believe purpose gives companies the agility to innovate in times of disruption and 59% believe purpose can drive transformational change. That’s particularly true of big picture organizational purpose.
Yet even evolving traditional philanthropy programs to a broader focus on social purpose can deliver meaningful results. For example, My Special Aflac Duck is a social robot that helps kids cope with cancer. It’s a good example of social innovation. With four patents pending, life-like movement and emotions, and a Bluetooth-enabled app, the duck uses interactive technology and play to help children on their cancer journey.
Designed through 18 months of child-centered research with partner Sproutel, My Special Aflac Duck is the recipient of more than 20 awards. In less than one year, the program resulted in 15% U.S. awareness of My Special Aflac Duck. Among those who know of the purpose program, 100% are more likely to buy an Aflac product.
In June 2019, the Cannes Lions Festival of Creativity awarded My Special Aflac Duck a Silver Lion for Corporate , Communications and Reputation Management and a second Silver Lion for Use of Technology that “pushes the boundaries of digital innovation.” A student works on a coding challenge at Computer Science Education Week with Salesforce employees in Dublin, Ireland.
Purpose-driven companies integrate purpose into business strategy
Purpose can be a way to set organizational strategy and guide decision making to maximize positive impact. This is increasingly important now, at a time when companies are being challenged to make tough choices and corporate social responsibility is top of mind.
Take CVS Health. In 2014, what was then called CVS Pharmacy became the first U.S. drugstore chain to stop selling tobacco products.
Public ideas about health are changing rapidly as a result of technology, medical research, and preventive and wellness services. CVS realized that tobacco didn’t align with its purpose: “Helping people on their path to better health.” CVS didn’t just remove tobacco from its stores; it launched several programs to help smokers quit. The move resulted in 95 million fewer cigarette packs sold and a 4% increase in nicotine patch purchases.
While CVS lost $2 billion in annual cigarette sales in the first year of its new policy, its pharmacy sales jumped. Eliminating tobacco from its shelves was an important step toward credibly rebranding the company from CVS Pharmacy to CVS Health.
These changes resulted in a 10% increase in revenue, notably via growth in pharmacy benefits management — a business play that might not have been possible without its renewed focus on purpose.
Living its purpose also led CVS to a $69 billion merger with Aetna and significant stock gains. It’s true that CVS isn’t perfect. The company still sells products with potentially questionable chemicals, sugary foods, and alcohol. Yet, purpose is a journey. CVS is using purpose and a strong sense of its own corporate social responsibility as a “north star” to guide its business strategy — which it brings to life through a cross-functional approach.
For example, when it was time to make decisions about how to remove tobacco from stores, CVS assembled a team from finance, merchandising, marketing, corporate social responsibility, retail store operations, and inventory. Any area of the company that would be directly impacted had a seat at the table, connecting purpose and strategy to the people working in the stores.
“We need all our colleagues to connect with our purpose,” Boone explained on the Purpose 360 podcast. “Employees in our stores, in our mail rooms, and in finance — they should all be able to see how their work is helping people on their path to better health.”
What is a Purpose-driven Brand?
What is a purpose-driven company?
Purpose-driven companies exist to effect change. While internal change initially occurs inside the organization, it eventually spreads externally through a process known as the wheel of change. The positive, self-sustaining impact one firm has on an industry is a powerful force in tackling the world’s biggest challenges.
Why should you work at a purpose-driven company?
Working at a purpose-driven organization can allow you to complete impactful work that aligns with a company’s ideals. Learning more about purpose-driven companies and their benefits can help you determine if you’d like to pursue a purpose-driven opportunity or integrate some aspects of a purpose-driven identity into your current role.
What are the advantages of a purpose-driven business?
Here are some of the advantages you may experience as part of a purpose-driven business: The work within a purpose-driven company may be impactful. In some cases, companies can integrate purpose into regular policies, allowing you to make a difference as you complete daily work.
Are purpose-driven companies sustainable?
There are several reasons why purpose-driven companies aren’t just sustainable but industry leaders. On top of fostering company culture, financial success, and industry change, they promote cooperation and long-term sustainability in business.
