Purpose is replacing profit generation as the reason companies exist. Social purpose in business is becoming a global business trend.
Questions abound regarding this new reality: How do boards ensure their corporate purpose is future-fit? How do they provide oversight of their corporate purpose? How do directors ensure the purpose is driving corporate strategy and culture and how do they know if the purpose is effectively and authentically implemented? What is driving the corporate purpose trend and why?
Answers to these questions are all found in this report I authored for Governance Professionals of Canada (GPC), based on the first Canada-wide dialogue on this topic, at GPC’s 2020 national corporate governance summit.
In these times, to be effective stewards of their organizations, boards and their governance advisors need to be clear on what it means to have a corporate purpose. Overseeing the corporate purpose is the board’s pre-eminent role, the directors of which need to be engaged in defining why an organization exists and ensuring the purpose is implemented.
Over the past decade boards have been asked to adopt first CSR Governance, then ESG Governance and now Purpose Governance.
There is no doubt that purpose governance is rapidly rising as a focus for boards and executives, driven by COVID19 and other issues such as systemic racism and growing inequality. For example, KPMG’s CEO 2020 CEO Outlook shows that three-quarters of Canadian CEOs feel they need to re-evaluate their company’s purpose as a result of COVID19. Nearly two-thirds of CEOs said their principal objective is to embed purpose into everything they do to create long-term value for all stakeholders. Almost three-quarters recognize the public wants them to take a lead in addressing global issues, and more than three-quarters believe they have a personal responsibility to be a leader for change on societal issues. Canadian CEOs are aware of these issues and the need to respond. As they express these ideas with their boards, it is expected to put further attention on purpose and purpose governance.
Check out this Purpose Governance report to read how:
- “Profit purpose” is on the wane while “social purpose” is on the rise
- Social purpose reflects an evolution from corporate social responsibility approaches that address risks, to an approach of having a social purpose as the societal reason a company exists
- Once the board adopts or affirms the corporate purpose, it needs to ensure it is embedded in the corporate strategy and culture and in the overall governance mandate; this requires updating governance documents
- Governance professionals have a central role to play in raising purpose governance with boards and executives, and in ensuring leaders are kept abreast of emerging governance best practices
- Boards set the tone at the top for delivering on the purpose, and need values, guardrails, and a decision-lens to ensure it is executed properly
Resources such as the Social Purpose Institute and the upcoming ISO 37000 corporate governance standard are available to help boards and companies with this work.
There is no time to waste. Boards and the executives and advisors they hire need to have proficiency in Purpose Governance which will put their organizations on a viable path that creates value for the company and the society on which it depends.
