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RAPPORT

The state of the debate on purpose in business

EY Beacon Institute

  Mounting evidence suggests that a growing number of employees, customers, investors and governments care almost as much about a company’s motivations as its actions — and executives are taking notice. After decades during which the dominant dogma focused on maximizing shareholder value, many CEOs and their teams are now trying to achieve more. They still do all the things business leaders have always done — serve customers, manage employees and produce results for investors — but a growing number are pursuing these actions in the context of a larger, overarching purpose. They are seeking to create value with and for the many stakeholders their business touches — and the physical environment in which they operate.

In preparing this report, it became evident that, whether they recognize it expressly or not, most companies already have a clear purpose. Though the word may have fallen out of common usage in the business sense for several decades, we found many examples of corporate purpose dating back to the 1940s or well before. Its reemergence marks perhaps both the impact of new forces and the desire to develop a more agile, yet comprehensive, response to the demands business faces today.

What we mean by purpose

In the absence of a universal definition of purpose in a business context, at Beacon, our working definition of purpose is an aspirational reason for being that is grounded in humanity and inspires a call to action. However it is worded, the underlying concept is that by acting on this purpose, companies can create more value for their shareholders and society over the long term than by pursuing purely financial goals or a narrowly defined self-interest.

This report’s objective and approach
This State of the Debate report presents the latest thinking about the importance of purpose in business today. In it, we discuss why executives are now looking at purpose as an important strategic
tool and how a strong purpose can help an organization develop the capabilities and resilience necessary for continuous growth and transformation. However, we also explore the reasons that so many companies can clearly articulate a compelling purpose but have yet to make it an integral part of their strategy, business model, culture or operating model.

This report presents insights from two types of sources: first, a review of more than 150 books, and academic and mainstream business articles on purpose and related topics published since 1995; and second, interviews with leading experts and practitioners who have observed or worked with companies that were transforming their business through purpose.

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