Accenture’s ‘Future of Work 2022’ survey found that 52 percent of CEOs see purpose more as a talent branding tool than a real catalyst for change. As a result, they run the risk that employees become cynical about the veracity of their public commitments, which has damaging flow-on effects.

The same study found that only 30 percent of employees see a link between their work and their company’s broader purpose; therefore the other 70 percent have a more transactional relationship with their employer.

With purpose increasingly recognized as the engine room for success, CEOs who ignore it do so at their peril.

Companies embedding a sense of purpose in their work culture are six times more likely to have high engagement and retention rates compared to those that don’t, according to research by The Josh Bersin Company.

It begs the question: Why isn’t every company grasping this opportunity? The answer lies in mixed understandings of business purpose as a concept and how it drives the creation of deeper commercial value.

What is business purpose?

The role of purpose in business has historically been associated with charitable giving, sponsorships and employee volunteering, or with the management of ESG risks. This is misleading, and these activities shouldn’t be confused with business purpose, which has much more bottom line significance.

Purpose speaks to the benefits the company intends to create for customers and the communities it serves through its core business.

From my work with Carolyn Butler-Madden, we define business purpose as: “The value you aim to add to society in a financially sustainable way – through and beyond your products and services.”

Adding value and financial sustainability go hand-in-hand, and Bendigo Bank captures this in its philosophy of ‘seeking to feed into prosperity and not off of it’.

Purpose isn’t ESG

An ESG agenda acts as a safeguard for a broad range of risk factors, such as public attitudes toward greenhouse gas emissions, modern slavery and diversity and inclusion. In contrast, the purpose of a business hones in on its primary area of positive impact.

The logistics company, Brambles, has the purpose of ‘delivering life’s essentials every day’ because that’s what it does well in its core business, whereas its ESG agenda is a checklist to ensure it is acting responsibly in the delivery of that purpose.

In short, purpose is about value creation and ESG is about risk management.

Purpose drives profits

A 2019 study published in the Harvard Business Review examined 28 high-performing companies that had compound annual growth rates of 30 percent or more in the previous five years. They found that purpose was central to their ability to overcome declining growth and profitability.

Many of them had moved purpose from the periphery to the core of their strategy, helping them to stay relevant in a rapidly changing world and deepening ties with important stakeholders to their business.

AIA Australia is a life insurer helping customers ‘live healthier, longer and better lives’, and it draws on its purpose as a powerful lens for innovation.

Their Vitality program focuses on improving the health and wellbeing of their customers, resulting in improved clinical outcomes, reduced healthcare costs, lower hospital admissions, increased productivity at work and lower mortality rates.

AIA is adding value to its customers’ lives and improving its own bottom line performance through purpose-led innovation.

Mars Petcare, the global leader in the pet food industry redefined its purpose as ‘a better world for pets’ when embarking on an expansion into pet health – a major shift from products into services for a 75-year old company that included the acquisition of veterinary services in North America and Europe.

Such transformations aren’t without risk and commentators point to the clarity of their purpose as a significant factor in their success.

Purpose promotes productivity

Purpose is a powerful common goal for employees to rally around. It keeps everyone focused on what’s important, with the added bonus that it makes life simpler and easier because of that clarity.

It’s also catering to the needs of employees who are seeking more meaning in their work, and reassuring them that they don’t have to trade off their personal values in the pursuit of business goals.

When implemented successfully, purpose unlocks human and relational capital, and leadership is critical in achieving it.

Purpose-driven leadership matters

Elevating purpose from the not-so-serious to the serious starts with ‘who’, and that’s the leadership team. Their first task is to form a common understanding of purpose and the opportunity it presents.

A note of caution, though: Crafting a purpose statement might feel good, but it only has value if it’s embedded in the business and people feel emotionally connected to it.

Carolyn Butler-Madden and I have been profiling purpose-driven leaders, and one of our subjects is the head of sustainability at a major property group. While they are passionate about social and environmental issues, they say that a greater sense of fulfillment comes from their ability to “turn the corporate machinery in the right direction”.

They engage with senior leaders across the group to cocreate the purpose they aspire to, to set priorities and help translate it into both strategies and an operational program of work.

Purpose is a journey

Regarding purpose purely as a talent attraction tool does little to bolster work culture, nor does it improve the employee attraction, retention and leadership development attributes of the business.

Non-executive director, Christine Holman, says, “Doing purpose well is not a one year or three year project, it is a journey for companies that will continue to evolve over time.”

Former chair of IAG, Elizabeth Bryan says, “If you’re confused about your purpose, it’s hard to do anything. It requires authenticity, passion and commitment to instill a renewed purpose across an organization, and don’t bother trying if you’re not prepared to give it 100 percent.”

Pursuing purpose is an exciting, rewarding and fulfilling journey that creates a legacy for everyone involved.