Can Purpose Survive?

Since the onset of the pandemic, business and society have collided like never before. Whether you call it stakeholder capitalism or corporate purpose, there’s no doubt that brands have significantly increased their commitments to their communities. America’s 50 biggest public companies committed almost $50 billion to address racial inequity after George Floyd’s murder, and as of January, nearly 40% of the Fortune 500 are active in climate-based initiatives.

But these commitments coincided with strong economic growth. The S&P 500 doubled from March 2020 to January 2022. As such, the surge in demands from talent, consumers, and regulators alike made supporting social issues an easy business decision.

As we stare down the end of 2022 and what lies ahead, much has changed. As of publishing, the S&P has fallen over 20% since January with inflation on the rise. Politically, partisan vitriol and even violence are rising around the world with divided government and gridlock likely in the U.S. Meanwhile, geopolitically, the world feels more unstable than it has in generations. These forces have transformed even once-safe harbors like ESG into partisan minefields. The result is that every brand is cutting costs and re-evaluating which are essential investments.

Year-to-date losses from S&P 500 exceed 20% (Data from https://www.spglobal.com/spdji/en/indices/equity/sp-500/#overviewhttps://www.spglobal.com/spdji/en/indices/equity/sp-500/#overview)

Can our commitment to corporate purpose survive? I believe the answer is yes, but not from the altruism of rare courageous leaders. Across sectors, purpose investments will only survive if business leaders successfully demonstrate their short-term business ROI. Fortunately, our evolving environment presents three critical opportunities to do this with both precision and impact.

1. Avoid harmful regulation: As we approach divided government at home and tension abroad, governments will shift from legislation to regulation as their primary tools. Many of these regulators have been waiting for a free hand. The reality is that most governments can only manage a few targets at once as will usually start with the easiest targets. Purpose activities, and the allies they can cultivate, can help you stay off the top of the list. Progress can be measured in reputational shift among target audiences as well as the brand value of the validators.
2. Navigate divergent state legislative environments: State governments are fast becoming a pain point for brands. Not only can they move quickly as they are often controlled by one party, but they are doing so in vastly different directions! Most commentary about state and local issues concerns avoiding partisan social issues like PAC contributions and January 6th or the Roe decision. But the real opportunity - and how to actually build relationships at the local level - is your investments and engagement in their communities. These local programs need to be huge to have an outsized impact for communities and local legislators. Again, progress can be measured with local reputional shifts as well as the strength of these relationships.
3. Keep the best talent: There will always be a war for the best talent. In fact, it is the rise in employee costs that has put brands under such financial pressure today. We’ve all seen research on the importance of purpose not just for talent recruitment, but for retention. Yet, we rarely do the math.  The cost of both attrition and additional compensation can be directly tied to brand affinity and purpose. Brands that are talent magnets will have both lower attrition and be forced to pay less of a premium to attract new talent. Both of these metrics are easily calculated in partnership with HR and usually amount to a figure an order of magnitude larger than a brands communications budget.   

In all of these cases, the onus is on business leaders to demonstrate the ROI of purpose programs before the worst of the financial pressure hits. To do this, we must go beyond antiquated anecdotal arguments. Boards and CFOs need quantitative metrics in each of these areas. Fortunately for purpose initiatives, that is now possible.