Social purpose is an emerging buzzword among business practitioners. The concept has been so widely used that now it seems like a magic bullet for economic growth and profitability. But how is it that purpose-led organizations often fail to deliver on their value creation promise?
A 2017 survey by EY and Sustainable Brands found that “although the language of purpose is embedded in the corporate culture, challenges remain in the activation of purpose. Particularly in aligning purpose with business strategy, developing internal acumen and obtaining executive support and resources”.
According to the study, the key obstacles to social purpose activation are more executive than financial: 1) no clear alignment between the stated purpose and business strategy 2) insufficient executive leadership and 3) lack of sustainability acumen within the business. The notion that managers only see corporate purpose as a means to communicate Corporate Social Responsibility (CSR) in a more elegant way is to blame.
Worse yet, only 6% of respondents, in the study conducted by EY and Sustainable Brands, said that they operate within a sustainable company that creates shared value and where organizational purpose is fully- activated. This insight parallels the argument that companies focus more on developing catchy phrases than on designing good implementation strategies.
The aforementioned survey concludes that “successful purpose activation cannot be achieved purely through messaging or when championed only by a single function. The integration of purpose into decision-making processes and performance metrics is key to achieving business value and creating anauthentic story that resonates with stakeholders, both inside and outside of the organization”.
An article by Omar Rodríguez Vila and Sundar Bharadwaj in the Harvard Business Review sheds light on these social purpose activation issues. They proposed an excellent (yet incomplete) framework to target purpose activation within companies. Claiming that an effective social purpose strategy “creates value by strengthening a brand ́s key attributes or building new adjacencies”. It is argued that through this, negative risk components can be avoided, ultimately protecting buy in from stakeholders.
Rodriguez Vila and Bharadwaj explained that managers must seek social purpose ideas in the intersection between three prominent domains: brand heritage, customer tension and product externalities. While agreeable, a common outcome that is often forgotten, is that product externalities exacerbate customers’tensions.
Rodriguez Vila and Bharadwaj also recommended to take into account brand attributes, business adjacencies, consumer associations and stakeholder acceptance in order to “gauge how the social purpose ideas both generate business value and minimizes the company ́s exposure to risk”. This is a popular and compelling argument, although one must understand it is difficult to find business adjacencies opportunities.
Additionally, the authors explained that competing on social purpose is sure to attract criticism because all social issues have both advocates and detractors. They mentioned three drivers of negative reactions: inconsistency between the brand claim and the company ́s actions, politicization of the claim and suspicion about the firm ́s motives. At this point, I should add that an overlooked key difference between a successful strategy and a PR crisis is inconsistent messaging or bad timing.
Rodriguez Vila and Bharadwaj revealed four ways a brand can create value for a social need: 1) by generating the resources (money, time, talent, relationship and capabilities) required to address a social need 2) by providing choices or products that address a social need 3) by influencing the perspectives on social issues and 4) by improving the conditions necessary to address a social need.
The conclusion of the article is that “managers often have the best intentions when trying to link their brands with social need, but choosing the right one can be difficult and risky and has long term implications”. I fully subscribe to this opinion, not without mentioning that an even greater risk is to adopt a social purpose only for its resonance, as many companies do.
The framework proposed by Rodriguez Vila and Bharadwaj is very helpful indeed, but surely consists of one mayor flaw: it contains no reference, whatsoever, to sustainability as an important part of how an organization activates its social purpose. I believe it is safe to say that in present time, the perceived impact of environmental and social sustainability performance has a profound impact on brand value.