In Denmark, the concept of corporate purpose has emerged as a cornerstone of good corporate governance. Companies approach this task differently, but generally their purpose statements exhibit a high level of quality, establishing a clear connection between their purpose and their activities, as well as their future aspirations.
Traditionally, Purpose 1.0 revolved around “The purpose is the product.” For example, Jyske Bank’s purpose is to operate as a bank – in accordance with fair business practices, good banking principles, and the bank’s values and standards. Others have moved towards Purpose 2.0 – being there for the sake of customers. Bavarian Nordic’s purpose, for instance, is to improve and save lives through innovative vaccines. Some have even elevated their vision to Purpose 3.0, aiming to create value not only for customers and shareholders but for society as a whole. This is evident in Tryg’s purpose, which aims to “contribute to a safe and sustainable future and create long-term value for our customers, our employees, our shareholders, and society as a whole.”
The overarching idea behind the broad purpose statement of Purpose 3.0 is that the company seeks to make a positive difference overall. Persons like Paul Polman, former CEO of Unilever and a role model in the realm of purpose-driven business, advocate for companies to strive to be “net positive” in all their stakeholder relationships. The goal is to ensure that the positive impact made for customers and investors does not come at the expense of other stakeholders. However, there is a risk of the company getting lost in its altruism. Unilever’s stated purpose, for example, is to make sustainable living commonplace, but it’s not easy to see how this relates to increasing sales of Hellmann’s mayonnaise, one of the company’s brands.
Despite the challenges, articulating a meaningful purpose in a conglomerate is essential to ensure a clear connection between purpose and the company’s current and future endeavours.
Purpose as Compass
There are, of course, companies within the C25 that are still grappling with their purpose descriptions, which is understandable given that the idea is still relatively new. Many may also harbour a degree of cynicism towards concepts like mission, vision, values, and now purpose, which largely overlap. Nonetheless, in a time of confusion with various, sometimes conflicting demands on corporate governance, purpose can serve as the compass companies need.
In a study of purpose among the 600 largest European companies, it was found that 15% have a product purpose, 23% have a customer purpose, and 15% have a purely sustainability purpose. 16% have a product + purpose, where they explain how their products can benefit sustainably. However, many companies (28%) simply use their corporate purpose as a marketing slogan.
Product purpose or sustainability purpose?
When it comes to assessing financial performance, companies with a product purpose tend to perform the best, indicating that successful companies are often aligned with their core business. On the other hand, companies performing poorly financially are more likely to declare a sustainability goal. Companies with sustainability purposes perform well on ESG but poorly on CO2 emissions. One interpretation is “purpose washing” combined with greenwashing – using sustainability goals and ESG to divert attention from operational weaknesses and poor climate efforts.
Corporate purpose is still a work in progress, expressed differently in various types of companies. This is completely as expected during a transitional period. Role models like Novo Nordisk, which aims to combat diabetes and other chronic diseases, or A.P. Moller-Maersk, which seeks to unite the world through logistics, demonstrate that purpose can make a positive difference in practice.