The purpose in companies is profitable
Purposeful companies double their market value four times faster than others and also record a return on capital greater than 5.9%. However, the purpose has a positive impact that goes far beyond the companies' income statement, since it also generates many other benefits.
2020 has been a year of unprecedented challenges that has highlighted the vulnerabilities of globalization and capitalism as we know it. Even in the midst of the crisis, companies are reviewing their role in society and their strategies to see how, instead of returning to normality and Business as Usual, can be part of the solution and contribute to global efforts to rebuild a more sustainable and resilient economy in the post-COVID-19 era.
In this uncertain landscape, business purpose has become increasingly important and, over time, it has gone from being a beautiful and inspiring phrase to a requirement for success
If you're wondering why purpose is now omnipresent and has established itself as a global trend, here you'll find the answers you're looking for.
The purpose is cost-effective
The purpose is a strategic lever for generating value and its profitability is more than proven. The recently published study Return on Purpose The Fortuna Advisors and CEO Investor Forum shows, among others, that companies with a defined and integrated purpose, whose focus is on maximizing their financial results and on common well-being, achieve better performance, a higher market valuation and create more value for the shareholder compared to the rest.
Purposeful companies double their market value four times faster than others and also record a return on capital greater than 5.9%. However, the purpose has a positive impact that goes far beyond the companies' income statement, since it also generates many other benefits.
Improves reputation and legitimacy to operate
”Without a purpose, no company, neither public nor private, can achieve its full potential... To thrive over time, each company must not only deliver financial results, but also show how it makes a positive contribution to society” he wrote Larry Fink, CEO of BlackRock, in one of his letters.
By publicly declaring its purpose, a company demonstrates its commitment and the benefits it brings to its stakeholders and to society as a whole, and this clearly enhances its reputation. Therefore, those companies that define and activate their purpose, significantly reduce the risk of a corporate scandal that will erode your license to operate. And this is even more important in today's digital age where everything we do or, worse, what we don't do, is in the public domain thanks to the Internet.
Attract, Retain and Motivate Talent
Attracting, retaining and motivating talent is very difficult and, in some sectors, more so than in others. Business purpose is a differentiating element that can be beneficial for these three aspects since, from the point of view of Human Resources management, it constitutes a true strategy of employer branding.
82% of employees think purpose is important. This fact is significant especially in recruitment processes and for younger people whose greatest aspiration is to carry out their work in organizations that contribute to the well-being of society and the planet. In the case of employees already hired from purposeful companies, we know that they feel more motivated and their sense of belonging is stronger, which is why turnover levels decrease significantly.
Build customer loyalty
The purpose emphasizes the unique and distinctive contribution that the company makes to the big problems we face. For that reason, it has the potential to generate stronger relationships with its customers who tend to be more attracted to companies that convey authenticity and that they consider to be worthy of their trust. According to a survey conducted by Porter Novelli In 2019, consumers declare that, when a company acts guided by its purpose, they are more likely to: buy its products and services (86%) trust it (86%) and to be more loyal (83%).
Investor interest increases
Investors are increasingly integrating ESG criteria into their decisions and are interested in the social and environmental performance of companies. The Global Impact Investing Network (GIIN) in its latest report shows that in just three years the global impact investment market has increased sevenfold, reaching a volume of 715 billion euros. Without a doubt, companies whose purpose is integrated into the Core of the business and that maximize their positive impact, are better positioned vis-a-vis investors and are able to finance their debt at a lower interest rate than their competitors.
Encourage innovation
A McKinsey study revealed that purposeful companies tend to redesign products and services and seek innovative solutions that use fewer natural resources, that meet specific needs or that involve improved operational efficiency or cost savings. Purpose, social and environmental sustainability and innovation are strongly related and are mutually dependent.
If you found it interesting and you want to know more about how to define and activate the purpose in your company to lead the transition to a impact economy, do not hesitate to contact us at info@transcendent.es Or consult our blog.
