Corporate Purpose: A Primer for Marketing & Communications

Insights for What’s Ahead

Consumers increasingly factor a company’s purpose into their purchase decisions. Purpose is most evident to consumers when it is central to a company’s brand and reputation, as it is, for example, at Unilever, Patagonia, and Nike.

Having a clear, stated purpose is often a hiring advantage, particularly among younger employees. It can also serve as a polestar for desired behaviors and as the basis for reward and recognition programs.

Purpose should be revisited periodically. Ideally, a company’s stated purpose should be evergreen, but the reality is that as stakeholder and societal expectations shift, purpose must keep pace.

The number of companies that identify as “purpose driven” has increased exponentially in the last decade. We expect that trend to continue, and for more companies to signify their commitment to multiple stakeholders with a statement of corporate purpose.

What is purpose?

Purpose is a key element in the corporate narrative—the story a company continually tells to its various constituencies. It is, in short, why the company exists. While different organizations have different ideas of what constitutes “purpose,” The Conference Board offers this simple description:

Purpose is why the company does what it does.^[1]

Purpose may become linked to the larger enterprise of sustaining capitalism itself as companies increasingly embrace “stakeholder capitalism”—the movement to broaden corporate responsibility toward constituencies beyond shareholders/owners.^[2] And this approach, as The Conference Board noted in 2017, is essential to long-term value creation:

Adopting a long-term perspective leads naturally to a multistakeholder approach since companies cannot prosper over the longer term without taking appropriate care of their customers, employees, suppliers, the environment, and the communities in which they do business.^[3]

What is a statement of corporate purpose?

An SCP is an official public document that succinctly captures the “why” of a corporate entity. The document typically undergoes an internal vetting and review process prior to being published. It is usually incorporated into a company’s annual report or larger sustainability report, and may be included in its regulatory filings.

How is that different from a mission statement?

Purpose (“why the company does what it does”) is closely related but not identical to mission (“what the company does and for whom”). Related constructs within the corporate narrative are vision (“what the company wishes to become or achieve”) and values (“the desired culture of the company and how it does things.”)^[4]

In theory, purpose and mission are distinct. In practice, however, companies don’t always draw such a fine distinction—sometimes to the point of using the terms interchangeably. But it is nonetheless helpful for the C-suite to ask and answer the what (mission), how (values), why (purpose), and goal (vision); together, they should present a cohesive and compelling corporate narrative.

How is purpose related to sustainability, corporate social responsibility, and ESG?

While there are no universally accepted definitions of sustainability and CSR, and while the list of environmental, social & governance (ESG) issues is constantly evolving, these terms capture different aspects of stakeholder capitalism. While purpose is sometimes related to these, in that a company exists to address a social or environmental need, purpose statements contained ESG-related language in only 35 percent of the companies that participated in a recent study from The Conference Board;^[5] the balance discussed a more generic purpose like “Building a better future.”

How many companies have a statement of corporate purpose?

As of the end of 2020, 288 (24.0 percent) of the S&P Global 1200^[6] companies had statements of purpose. A subgroup of 61 (5.1 percent) self-identified as purpose driven.^[7]

What is the trend?

Between 2015 and 2020, the number of companies with SCPs increased by 3.6X; those identifying as purpose-driven increased by 15.3X.^[8] We expect this rapidly growing trend to continue; it accompanies a long-term trend toward increased transparency and accountability for corporations.

This shift began in the US with the trust-busting of the early 20th century and accelerated after the global crisis that was the Great Depression, with the creation of the modern financial regulatory framework in the 1930s. Various financial scandals, culminating in the Great Recession of 2008–2009, shook public trust in the corporation’s ability to properly regulate and run itself. The rise of social media, along with the global pandemic that began in 2020, has fast-tracked this trend, leading to significant spikes in calls for corporate action on a range of issues, led by diversity, equity & inclusion.

The shift from shareholder to stakeholder capitalism^[9]—in which companies consider a broader set of stakeholders and nonfinancial benefits—continues apace.

What is the role of corporate marketing and communications?

The corporate narrative is core to most branding, positioning, and reputation management activities. Corporate marketers and communicators are best positioned to derive and define the company purpose (if it is not already in place) and to write and continually update the company narrative to keep it meaningful and relevant. Indeed, purpose is often positioned organizationally within marketing or communications, whose teams lead these efforts. At food safety company Ecolab, for example, “the chief marketing officer is responsible for the company’s purpose, mission, and values.”^[10] Further, a recent study by The Conference Board on how companies organize sustainability for integration into the business finds that in the US, heads of sustainability report to the CMO more often than to any other executive except the CEO.^[11]

This sea change seems to present a renewed brief to marketing and communications professionals, who are well positioned to address this opportunity. They can step up to provide content, awareness, training, and guidance for both internal and external communications, and for both traditional and digital/social media.

Marketing leaders can contribute in several significant ways:

• Continually monitor consumer/customer views and expectations, both through traditional methods and through social media monitoring
• Bring customer views to the CEO/C-suite and act as the customer’s advocate
• Monitor the ever-changing landscape of purpose and other ESG-related issues
• Help to develop products and services with purpose-related objectives in mind

Communications leaders are more than just chief spokespeople. They are increasingly becoming strategic advisers within companies, including to senior leaders. Their enhanced leadership has become more strategic in several ways:

• They help the business prioritize the most important stakeholder groups, both internally and externally, and identify how to communicate most effectively with each group.
• They help senior leaders to become better storytellers by focusing on authenticity, transparency, and inspiration. This aid is crucial given that stakeholders, including employees, prefer a human voice to generic “executive” messages.
• They help make senior executives more comfortable operating in a relatively freewheeling environment. They increase the tolerance for risk or missteps when executives must react in real time to comments by all kinds of individuals and groups rather than just delivering pre-scripted messages.

How do consumers feel about purpose?

There’s growing evidence that a significant proportion of consumers factor a company’s purpose into their purchase decisions, along with product features and price. Purpose is most evident to consumers when it is central to a company’s brand and reputation, as it is, for example, at Unilever, Patagonia, and Nike.

The widely followed Edelman Trust Barometer reported a dramatic upswing in positive consumer attitudes toward business during the global pandemic. Across the world’s 14 largest economies, 60 percent of those polled now believe that “Our country will not be able to overcome our challenges without business’ involvement.” This was more than double the 27 percent who believed that before the pandemic.^[12]

Corporate communications are generally in sync with this trend. The newly launched “Asia Purpose Monitor” from The Conference Board found that fully 23 percent of large company social media communications are purpose related. Despite that relatively high volume, in certain geographic markets and industrial sectors, an even greater public appetite for communications on certain purpose-related topics was identified.^[13]

Perhaps this gap is due to the fact that, as the Wall Street Journal recently put it, “It’s a tricky time to be a CEO without a cause.”^[14]The burgeoning demand for relevant communications is playing out against a backdrop of the social media microscope that keeps organizations continually under close scrutiny, combined with the megaphone that makes all opinions—even outlying or unfounded ones—heard instantaneously worldwide. CEOs may be neither prepared for, nor even especially interested in, taking on this newly expanded role. And the need is not just for greater communications, but also for actions to match.

How do employees feel about purpose?

Among employees—now seen as the most important stakeholder group (over customers, communities, and shareholders) for achieving a company’s long-term success—79 percent expect their employer to take at least one action on each of several pressing societal issues.^[15]

Having a clear, stated purpose is often a hiring advantage, particularly among younger employees. It can also serve as a polestar for desired behaviors, and as the basis for reward and recognition programs.

Does purpose affect financial performance?

Rigorous research has consistently identified positive correlations between company practices and financial performance. A massive “study of studies” covering about 2,200 primary studies done since the 1970s revealed that 90 percent found a nonnegative correlation between ESG and corporate financial performance.^[16] While it may be overreach to say that ESG “causes” better financial performance, this meta-analysis helps to dispel the persistent myth that a systematic financial penalty accrues to ESG-related activities. “Do good—but first, do well” seems to be the prevailing rule of thumb.

A more recent study compared the financial performance of two groups of companies, divided into high purpose and low purpose based on consumer perceptions of the companies’ brands. In each of 10 major financial performance metrics studied, the high-purpose companies outperformed the low-purpose companies, often by a wide margin. In total shareholder return, for example, the high-purpose groups delivered an 18.7 percentage point advantage over the low-purpose companies.^[17]

Much of the original interest in ESG came from institutional investors. More recently, the enthusiasm has spread to retail investors, who can now choose among roughly 7,500 mutual funds and exchange-traded funds worldwide that claim to be ESG based.^[18] We expect that such investors would weigh a clearly stated purpose favorably. Impact investors—those who specifically focus on companies that are making a positive difference in areas such as health and the environment—would also naturally pay close attention to the SCP.

Are statements of corporate purpose just for large, established companies?

Not anymore. Newer for-profit companies like Allbirds, Warby Parker, and Chobani have their purpose built into their core value proposition and operations. In that sense, they could even be considered hybrid or dual-purpose organizations, focusing on both financial and societal goals.

Are statements of corporate purpose just for profit-making companies?

No. While the purpose of nonprofits and government agencies is typically already an integral part of their mission, directors serving on nonprofit boards may find it helpful to have the what, how, (where), why, and what the nonprofit hopes to achieve formally spelled out in an SCP.

Are statements of corporate purpose required?

A purpose statement may be required as part of an initial corporate filing, especially for tax-advantaged and/or “benefit” corporations. While a few companies include SCPs as part of ongoing regulatory filings, in general they do so voluntarily. The growing shift from shareholder to stakeholder capitalism means companies are ever more attuned to what employees, customers, investors, and society at large expect from them—and these stakeholders may now expect companies to maintain their “social license to operate” by identifying what purpose they serve other than profit making. In turn, companies expect to extract reputational and financial benefits from disclosing their purpose.

Are statements of corporate purpose binding, enforced, or audited?

None of these. Currently there is virtually no rigorous accountability for either purpose statements themselves (“the talk”) or for how they are enacted in practice (“the walk.”) Even at US benefit corporations, which are legally required to have a public purpose, “lack of oversight enables inappropriate firms to become and remain benefit firms.”^[19]

How do we get started on creating a statement of corporate purpose?

A structured process works best, consisting of two key aspects:

1. Internal engagement Create a team with representation from marketing, internal communications, investor relations, human resources, strategy, senior leadership, and any other key players. Getting the C-suite, and even the board of directors, involved will enhance credibility and provide needed access to people and resources.
2. External engagement Gather structured input from each of the constituencies to be addressed in the purpose statement (e.g., customers, employees, suppliers, investors).

Should purpose be revisited periodically?

Purpose should be designed with a long time frame in mind. It should be broad enough to accommodate and support occasional necessary changes in business goals and strategies. However, when things in the business environment change disruptively, purpose may need reshaping. For example, Philip Morris International, though long known as a cigarette company, committed in 2016 “to deliver a smoke-free future” by a shift toward products less harmful than cigarettes.^[20]

Timing can be critical here. British Petroleum’s 2001 positioning shift to the environment-friendly “Beyond Petroleum,” while well intentioned, proved premature—and the company suffered financially. More recently it has rallied under its renewed purpose of “reimagining energy for the people and our planet.”^[21]

Acknowledgments

Thanks to Denise Dahlhoff, Thomas Singer, David Hoffman, Ivan Pollard, Paul Washington, Chuck Mitchell, and Steve Odland of The Conference Board for your helpful reviews and support.

Tim Wood Powell is a Senior Fellow in The Conference Board Marketing & Communications Center. He is also president of The Knowledge Agency®, a New York City–based management consulting and research firm. His latest book is “The Value of Knowledge: The Economics of Enterprise Knowledge and Intelligence.”