Purpose pays – the evidence is clear

Mike Tuffrey

 

Posted in: Briefing Comment, Corporate Reputation, Speaking Out, Strategy

Purpose pays – the evidence is clear

June 28, 2018

The number of purpose-led businesses is growing, says Mike Tuffrey, and the evidence of pay-back for business and society is growing too.

News breaks this week that the smoothie drinks company, innocent, has become a B Corp.  With its iconic products on most supermarket shelves, this feels like a breakthrough moment for the B Corp movement in the UK.  Innocent joins a roster of some 150 British firms – including Cook, Pukka Herbs, Divine Chocolate and (probably the largest) Danone UK – and some 2500 worldwide.

But as innocent is part of Coca-Cola, pointed out a sceptical colleague in the office, how can they be a B Corp?  The technical answer lies in the nature of the certification process, although the challenge confirms that this is now seen as a proxy for an all round ‘good’ company.

In summary, you can get the accolade if you meet three tests.  Details vary in different jurisdictions, here’s the UK procedure.  First, written into your legal governing documents is an ‘object’ – or corporate purpose – to have a material positive impact on society and the environment, as well as to promote the success of the business for the benefit of its members.  So shareholder value is not the supreme consideration but one among other stakeholder interests that the board addresses in running the business.  Second, you need to meet a performance requirement, as assessed by B Lab, the brains behind the process.  Third, you need to go public, sign a declaration, disclose details about the business – and of course pay your fee.

So yes, a subsidiary of a large multinational can be a B Corp, if the twin purpose is ring-fenced and if satisfactory performance standards are met.  Ben & Jerry’s, part of mighty Unilever, has been a B Corp since 2012, the first wholly-owned subsidiary to be certified. In fact, the good folks at B Lab are currently exploring how to expand the assessment methodology so that large multinationals can get certified in their own right. (Full disclosure: I’ve been giving them a helping hand.)

Most attention focuses on the performance impact assessment side, and of course that’s really important.  It allows for the external certification – which comes with the right to use the logo that is especially helpful if put on-pack for consumers wanting to know about the company behind the brand.  The definition of what constitutes good practice is a moving target, with expectations growing and the bar raising over time. The minimum score is 80 points out of possible 200.

However, what’s also needed is to codify the twin purpose of the business and embedding it into management processes, activity and reporting.  The evidence shows that benefit corporations outperform the norm. That pay-back extends to any mission-orientated business, however incorporated.

That’s a finding confirmed last year when the Big Innovation Centre convened the Purposeful Company Task Force co-chaired by Clare Chapman and Will Hutton.  Their findings identified empirical evidence that ‘purposefulness’ has beneficial effects across the spectrum of business outcomes.  They even tried to quantify it, concluding that performance improvement could be worth up to 6 to 7% a year, or up to £130 billion a year in increased stock market capitalisation if applied across British business as a whole.

And it is echoed by evidence from employee-owned businesses.  The Ownership Effect Inquiry – convened by Cass Business School and Manchester Business School – reports this week “an irrefutable consistency of outcomes…. businesses confirm increased performance and unlocking exceptional levels of discretionary effort as a direct consequence of employees becoming owners”.

I’ve written before about purpose – here two years ago about Uber, barely out of the news since – and here about tentative steps by the UK government to look at mission-led businesses and again more recently here about investors getting in on the act too.

And I rather suspect this won’t be the last time.  The point is simply that being clear about our purpose – and making that inclusive, long term orientated and embedded – and you’re likely to do better – with or without a logo to prove it.

 

Mike Tuffrey is Co-founding Director of Corporate Citizenship.

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