The Oxford Word of the Year 2019 was climate emergency – and for good reason.
Floods, fires and growing anxiety over the future of our planet have mobilized millions around the world to protest about the lack of action by governments and big businesses and to turn the spotlight on them. Greta Thunberg became one of the most recognizable faces globally, and school children joined regular climate strikes across the globe.
There are plenty of climate deniers who say changing weather patterns have nothing to do with human activity. But even if you choose to ignore the science, it’s more difficult to ignore the money.
And money is talking very loudly right now.
Larry Fink, CEO and Chairman of BlackRock, Inc
Larry Fink, CEO and Chairman of BlackRock, Inc, has now published a series of letters stating that companies no longer have a responsibility only to their shareholders, but also to employees, customers, and the communities in which they operate.
And when the man who heads up $1.7trillion in active funds speaks, people listen. But the reality is that while Mr Fink may be setting BlackRock on a new path, he is doing it in response to market indicators. And indeed, he acknowledges that in his annual CEO letter.
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“Indeed, the public expectations of your company have never been greater. Society is demanding that companies, both public and private, serve a social purpose. To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society.”
In his letter earlier this year he reinforced the message:
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“Purpose is not a mere tagline or marketing campaign; it is a company’s fundamental reason for being – what it does every day to create value for its stakeholders. Purpose is not the sole pursuit of profits but the animating force for achieving them.”
He also pointed out the fact that companies which fulfill their purpose and responsibilities to stakeholders reap rewards over the long-term. This is becoming increasingly important as millennials – who today represent 35 percent of the workforce – express new expectations of the companies they work for, buy from, and invest in.
In other words, if your company doesn’t have a purpose and live by it, you will not be able to hire and retain staff, you won’t be able to sell to the public and you won’t raise investment from them.
This has been backed up by many other studies including a study of over 13,400 Millennials by Deloitte. Deloitte found that Millennials’ opinions about business continue to diminish, in part due to views that businesses focus solely on their own agendas rather than considering the consequences for society.
The study found:
Just 55% percent said business has a positive impact on society, down from 61 percent in 2018.
49% would, if they had a choice, quit their current jobs in the next two years.
Millennials and Gen Zs, in general, will patronize and support companies that align with their values.
Many spoke about supporting businesses that make a positive impact on society.
Many said they will not hesitate to lessen or end a consumer relationship when they disagree with a company’s business practices, values or political leanings.
They are more attracted to making a positive impact in their communities or society at large (46 percent) than in having children and starting families (39 percent).
A separate study from Accenture found that nearly two-thirds (63%) of global consumers prefer to purchase products and services from companies that stand for a purpose that reflects their own values and beliefs. And they will actively avoid companies that don’t.
According to Accenture research, 62% of consumers want companies to take a stand on the social, cultural, environmental and political issues that they care about the most.
And most significantly, nearly half (47%) stopped doing business with a company in response to a moment of brand disappointment.
While the changing public mood presents many challenges for companies, it also presents many opportunities. Unilever, for example, discovered that its purpose-led, Sustainable Living Brands are growing 69% faster than the rest of the business and delivering 75% of the company’s growth.
Unilever’s Sustainable Living Plan for its brands is driving growth and sales
In fact, when companies or brands link to a purpose, 80% of them outperformed the market.
All of this indicates that it is not good for a company’s balance sheet if it is merely driven by profit. It will lose customers, and struggle to retain staff.
Soon it will not only be unusual for a company not to have a purpose, but it will be impossible not to because their survival and growth will depend on it.
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