What’s on the minds of business leaders at the World Economic Forum’s annual meeting in Davos, Switzerland?
The need for brands to embrace purpose and values has been a recurring theme at this annual event that captures the executive zeitgeist. Speaker after speaker has challenged business leaders to look beyond profits as a measure of success and make their companies more purpose driven, and thought leaders have released studies driving home the same theme. Here are but a few examples:
A Green New Deal
On January 23, Jesper Brodin, CEO of IKEA, discussed the need for a European “Green New Deal” along with two European Union prime ministers, Kyriakos Mitsotakis of Greece and Mark Rutte of the Netherlands, as well as Frans Timmermans, the European Commission’s Executive Vice-President for the European Green Deal. They discussed how businesses and government bodies need to collaborate to change the global economy to respond to the specter of climate change.
They focused on the aims of the Green New Deal, which puts forth a goal of getting the European Union climate-neutral by 2050. They agreed that addressing climate change is “one of the few issues where nobody doubts we have to work on a continental scale.”
Jesper Brodin showed how embracing this kind of ambitious change is possible by being a purpose-led company. For example, IKEA offers cost-effective and climate-friendly products such LED light bulbs – just one subtle way purpose can define how a business operates.
A Call for Responsible Leadership
Mariah Levin, head of the Forum of Young Global Leaders, World Economic Forum, gave a passionate call for a different kind of leadership in the 2020s and beyond. She shared new research that defines the traits that business leaders must possess in order to be in sync with the values of shareholders, customers, and employees. The research says that that leaders must have:
“Mission & Purpose: Advancing common goals by inspiring a shared vision of sustainable prosperity for the organization and its stakeholders.”
I think it’s worth quoting her words more extensively:
Rising leaders understand the importance of being responsive to stakeholder needs, communicating a clear mission and encouraging honesty. They also believe firmly that organizations should only grow if they also aim to improve societal outcomes; in the case of private-sector companies, this means a radical acceptance of responsibility not only to profit, but also to communities, workers and the global commons. This type of company privileges the power of its employees, customers and outsiders in inspiring loyalty, and recognizes its obligations to these groups. Rising leaders create and want to be part of “inspired companies” and organizations.
These are inspiring and challenging words.
Typically, CEOs focus on short-term growth objectives, measured by metrics such as profit margins. For example, PwC’s 23rd Annual Global CEO survey, released at Davos, asked executives around the world to identify the biggest threats to their companies’ growth. Issues such as over-regulation and trade conflicts loomed large. But Mariah Levin suggests that in the near future, as CEOs become more attuned to changing shareholder, employee, and customer values, purpose-driven topics such as climate change will become more critical near-term hot-button issues as opposed to long-term problems.
We’re already seeing many signs of a change in priorities occurring as evidenced by investment fund BlackRock shifting billions into more sustainable investment options – something I discuss in a recently published blog post. As BlackRock CEO Larry Fink noted in his annual letter to shareholders, BlackRock needs to align its purpose around sustainability to be responsive to investor values.
Reaching for a Higher Purpose
In a week when thought leaders were carpet bombing the world with new studies, the 2020 Global Trends in Reputation study from the Reputation Institute stood out. The study, released in conjunction with Davos, concluded that delivering on corporate purpose is “the most important thing businesses can do to raise their stature with consumers, particularly if relayed in an emotional way that transcends the products and services they sell.”
The study took into account the opinions of more than 200 senior-level reputation leaders representing 25 industries in companies across North America, EMEA, Asia Pacific, and Latin America. Reputation Institute CEO Kylie Wright-Ford said, “Dated business values are out for 2020 and for the foreseeable future . . . Organizations are realizing that with a strong purpose and shared values, they’re able to reduce their reputational risks across the board as higher purpose drives higher levels of overall public support.”
What jumps out at me here is how being purpose led delivers business value by creating a stronger tie with customers. Being purpose-led goes beyond “doing what’s right.” Rallying a company around purpose means aligning a business with your customers (“Companies need to deliver on a corporate brand purpose and embrace cultural values, at an emotional level that transcends the products and services they sell”).
I’d add that defining purpose also makes your business more aligned with your people and shareholders, too. As I discuss in a new Forbes column, purpose is one of the three keys to creating a future-proof brand foundation aligned with the needs of employees, customers, and shareholders.
Valerie Keller, the co-founder and CEO of Imagine (which helps businesses collaborate to work toward the UN Global Goals) really took purpose to another level. She challenged businesses to think beyond the purpose of their own company and consider how more impactful they can be by collaborating with companies that share like values and purposes.
During a panel discussion, “From Profits to Purpose: Why Companies Have a Responsibility Beyond Their Bottom Line,” she said:
We’re now seeing another evolution: a new breed of companies who are not just purpose driven themselves, but are innovating and collaborating. Sustainability is now business hygiene, and individual companies can’t do it alone, they have to be able to collaborate. The new frontier of business is with those who are leading on the transformation of their industry, otherwise we have 1,000 ‘North Stars’ and the fleet is not going to get across the ocean in time.
For most businesses, defining their own purpose is challenging enough. But Valerie Keller is setting a higher standard. And, it’s not an unreasonable one. Look at how Procter & Gamble, Unilever, and other big consumer packaged goods companies have locked arms to join the Loop initiative. Loop, founded by TerraCycle, makes it possible for consumers to buy products in renewable packaging, resulting in less waste over the long run. The only way for Loop to succeed is for large companies such as P&G to cooperate with competitors in agreeing on a common approach for sourcing and supplying renewable packaging.
A Call to Action
The ideas springing from Davos inspire me and also excite me as my new book, How to Lead a Values-Based Professional Services Firm, becomes available. This book challenges one industry – professional services – to set aside a focus on profits and embrace a new standard of leadership based on purpose, values, and story. Although the book focuses on the $13 trillion professional services industry, I think its lessons apply everywhere. For more information about the book, check out this site. Meanwhile, keep up on Davos developments long after the event is over by following the Davos website – it’s a gold mine of ideas.