The "Enacting Purpose Initiative" for directors to embed purpose-led initiatives

More and more companies are publishing “purpose” statements and developing “purpose-led” business strategies, but there is still no concrete, shared definition of corporate purpose or what it means for day-to-day business operations. According to Andrew Edgecliffe-Johnson, Billy Nauman and Carmen Germaine of the Financial Times, “[i]t is a year today since the Business Roundtable came out with its stakeholder friendly statement on the purpose of a corporation. […] [I]t’s fair to say that ‘purpose’ has remained a slippery concept even as it has risen up the corporate agenda.”

The Enacting Purpose Initiative (EPI) — a partnership between the University of Oxford, the University of California-Berkeley, Brighthouse (a BCG company), Federated Hermes, WLRK and the British Academ — launched this week to provide guidance to boards of directors on embedding purpose and acting on it. The goal of its SCORE (Simplify, Connect, Own, Reward and Exemplify) framework is to support corporate leaders as they work to define their organization’s purpose in a way that is robust, meaningful and able to be governed at the board level. The initiative also shares practical guidance on implementing each element of the framework and examples from companies. Per the EPI, “[b]y following the guidance included in this report, we argue that boards and senior executives will be better able to put purpose intent into practice, demonstrating how purpose informs strategic choices and delivers value for a range of stakeholders.”

The framework with designed with inputs from a variety of stakeholders across Europe, including senior leadership of companies, banks and investors and government organizations, as well as academic research. It focuses on large corporations across the UK and continental Europe.

Key Takeaways

The report shares four key takeaways for board directors:

1. Building back better requires refocusing on corporate purpose: The global COVID-19 pandemic “presents an opportunity for organisations and their boards to rebuild on stronger foundations. As with the environmental movement, external catalysts can turn a steady and growing drumbeat into a dramatic ‘new norm.’” Stakeholders will increasingly expect companies to build purpose into their business as they rebuild post-pandemic and “[d]oing this well requires collaborative stewardship between boards of directors, senior management and investors.”
2. Purpose is a strategic tool: Embedding purpose across a company is a way to center company decision-making on the issues that matter both to the business and to stakeholders: “It is a key driver informing strategic choices, helping directors make the critical trade-offs and decisions that are required to fulfil their board responsibilities. This is purpose as strategy as opposed to purpose as culture.”
3. Definitions are key: Without specificity, concepts like corporate purpose, values, mission and vision can fail to make meaningful change within a business. The report offers an interpretation of these core terms:
   
4. “Purpose articulates why an organisation exists. It sets out the issues that an organisation seeks to solve.”
5. “Values articulate how the organisation behaves. Values capture the way an organisation intends to operate, underpinning corporate culture. “
6. “Mission sets out what the organisation does. It captures the day to day activities of the organisation.”
7. “Vision describes where the organisation intends to have impact. It describes the outcome that the organisation wants to see from the successful delivery of its stated purpose. Put simply, vision captures what success looks like.”

Source: Enacting Purpose Initiative, Enacting Purpose Within the Modern Corporation: A Framework for Boards of Directors (August 2020)

4. Enacting purpose requires a concrete, action-driven framework: The EPI’s SCORE framework “offers five mechanisms that facilitate the translation of purpose intent into purpose action”:

• SIMPLIFY: “Make your purpose simple and convincing, with shared frames of reference. Complicated strategies fail. Leaders need to work carefully to simplify the complexity involved in enacting business activity. Purpose is no different. It needs to be simple enough to be understood by the entire organisational workforce, the wider supply chain and other connected stakeholders. A statement of purpose should be precise, not vague or woolly. It should establish what and whose problems the organisation seeks to solve and it should be convincing about why the organisation is particularly well-suited to addressing them.”
• CONNECT: “Once it has been simply and clearly articulated, corporate purpose must drive what the organisation does – its strategy and capital allocation decisions. Strategy is about choices that are made and choices that are consciously rejected after serious deliberation. For purpose to be enacted with authenticity, it has to be the reference point for such decisions. Internally, boards need to make sure that purpose translates into what everyone in the organisation does, because unless purpose statements translate into actions they are meaningless. Externally, the board should ensure that the organisation’s purpose connects with partner organisations throughout its supply chain and customer markets.”
• OWN: “Ownership of purpose starts with the board. It has to put in place appropriate structures, control systems and processes for enacting purpose. This goes well beyond formal committee structures such as risk, compliance and ethics committees. It has to be embraced by everyone in the organisation from the board to the shop floor. The purpose also has to be accepted and supported by the organisation’s shareholders if it is to have any credibility.”
• REWARD: “The board has to define measures of performance that evaluate the success of the organisation in delivering on its purpose. It should build a group-wide performance measurement system that aligns the organisation’s incentives and rewards with promotion of purposeful behaviour. For the majority of management, financial measures remain the most significant elements of compensation and promotion. It is important that these correctly reflect the success of the company in delivering on its purpose. The financial measures should be combined with material non-financial metrics that record the success of the organisation in a balanced way, delivering benefits to all its stakeholders including its shareholders.”
• EXEMPLIFY: “A key role of leadership is to bring organisational purpose to life through communication and narrative strategies. Done well, these build a sense of shared identity around a common purpose that inspires those working in the organisation to believe that they are contributing as a team to something that is meaningful and fulfilling. The narratives should be vivid and uplifting but also authentic in conveying honestly and openly the challenges and failures as well as the successes. They should reveal a willingness of the leadership to accept personal sacrifices in bearing their share of the costs of failure as well as the rewards of success.”

“Garment workers desperately need assurance: they are the weakest and most vulnerablegroup in the supply chain, and yet they are the ones presently footing the bill. While the industry as a whole is facing economic challenges, workers are facing personal poverty and destitution long before the brands or employers feel significant hardship. … The current crisis shines a light on a deeply flawed supply chain model that is rooted in the concentration of corporate power at the expense of workers. The severity of this crisis could have been averted if living wages had been paid, and social protection mechanisms had been implemented. The only way to reverse the catastrophic loss to workers’ livelihoods and prevent a crisis like this from ever happening again is for brands to take immediate and lasting action.”                      

Source: Enacting Purpose Initiative, Enacting Purpose Within the Modern Corporation: A Framework for Boards of Directors (August 2020)

“To deliver value for different stakeholders, purpose has to be more than a marketing slogan or a vague set of values. It has to become an organising principle, the reason why an organisation exists. Boards of directors across all sectors today face a growing drumbeat of calls from multiple stakeholders including customers, employees and suppliers for a clearer explanation of their organisational purpose. Recent calls for better articulation of purpose from global investment management firms together with specific commitments on purpose by asset owners, are accelerating this momentum and elevating it to a critical board issue.”                      

Rupert Younger, Colin Mayer, and Robert G. Eccles, Saïd Business School at the University of Oxford, Enacting Purpose Initiative, Enacting Purpose Within the Modern Corporation: A Framework for Boards of Directors (August 2020)

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