Prof. Elspeth Murray, Director of the Centre for Entrepreneurship, Innovation & Social Impact at Smith School of Business, Queen’s University, explores the current context of slow-down for CSR and sustainability in North America, and shares research that highlights the compelling arguments for companies to remain committed to realizing the full power of purpose despite the political debate.   

Related research: Thought leadership and research at the Centre for Entrepreneurship, Innovation and Social Impact at Smith School of Business

Purpose in Peril: Just a slow-down or a possible U-turn?

The evidence is clear – organisations that conduct business with purpose and go beyond maximizing shareholder returns outperform. Still, many companies continue to miss out on the opportunity to drive financial and societal gains.  

The concept of purpose driven organisations – those interested in creating positive impacts on society, the environment and communities in addition to generating profits and returns for shareholders – has been gaining traction in recent years. Cultural shifts in investor, consumer, and employee expectations have spurred momentum in areas like ESG reporting and B Corp certification. At the same time, governments have been doing their part in many jurisdictions, enacting legislation and changing reporting requirements. 

Unfortunately, the pace has been slow and, in some cases, businesses that have embraced the idea of purpose beyond profit, have done little to move beyond high-level rhetoric to meaningful action. The recent geopolitical upheaval, particularly in the U.S., isn’t helping. A growing wave of criticism is building around purpose-driven initiatives (think ESG and DEI), seemingly pointing us once again towards a mindset of the primacy of profits.

Reconciling the barriers

Are we witnessing the beginning of the end of the shift to more purpose-driven corporations? Or will we see businesses continue to transcend governments-of-the-day and CEO perspectives to balance both purpose and profit? 

The answer to these questions lies in reconciling the barriers – real or perceived – at play, including:

• Concerns about short term profitability driven by pressure from shareholders and other investors to show results in the short term
• Perceived lack of tangible benefits and/or the ability to capture these benefits in metrics
• Leadership resistance to change
• A lack of awareness or understanding of what purpose-driven really means, and illustrative cases of how it can be done 
• Not being market driven and the shift in values and beliefs present among post baby-boomer consumers 
• Deeply rooted beliefs that financial performance will suffer despite evidence to the contrary
• Fears of appearing disingenuous or lacking in authenticity in the pursuit of purpose – so-called green washing.

Research points the way for companies to remain committed to CSR and sustainability purpose

The research at the Centre for Entrepreneurship, Innovation and Social Impact at Smith School of Business is centred on helping organisations overcome these barriers by equipping them with insights and data on the mega forces shaping the current landscape. 

Core Business Imperative:  

There are business advantages to embracing a more purpose-driven approach. A McKinsey survey indicates that products that make environmental, social, and governance (ESG) – related claims have achieved disproportionate growth compared to products without such claims. On the operational side, at CPG giant Unilever, the company has reduced costs by over €1 billion by reducing waste and enhancing energy as well as water efficiency. 

Consumer Demand: 

Numerous recent studies are pointing to consumers who not only say they care about sustainability but are buying accordingly, despite challenging economic times. For example, a 2024 PwC study revealed 80% of consumers are willing to pay an average 10% premium for sustainable products.  

Shift in Values and Culture: 

Purpose matters a lot to Gen Z and Millennials who will make up 75% of the workforce in 2025 and who are a powerful group of consumers. At Dutch pension fund ABP portfolio managers are accountable for assessing every investment in the context of risk, return, costs and ESG. Twenty per cent of ABP employees are Millennials, who expect sustainability to be integrated into daily operations. Employees of purpose-driven organizations have also been shown to be more resilient, innovative, and loyal

Investor Demand: 

Investors are also ‘voting’ for purpose with their wallets. We are tracking five sub-forces and following the money. Asset managers are embracing purpose, including Blackrock, despite dropping ESG terminology. The financial risks associated with climate change (e.g. extreme weather events) are increasingly being recognized by investors and financial institution. Investors are seeing financial returns from firms that improve on material ESG issues. Investor perspectives are changing, with 50% of global asset owners implementing or evaluating ESG considerations in their investment strategy. Institutional investors and investment consultants are integrating ESG factors as a matter of fiduciary duty. And growing shareholder activism – individual and collectives – are lobbying the largest greenhouse emitters to address climate change at the board level.  

Regulatory and Stakeholder Pressures:

Governments and stakeholder activist groups are applying pressure to companies and their directors to do better for the environment and society. The legal profession is responding, with one firm opining that there is an increased risk of liability, citing various changing regulations in Europe such as the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD). There are also positive non-regulatory moves afoot in North America such as the Business Roundtable whose members – 181 U.S. CEOs – signed on to an expanded view of the Purpose of a Corporation and one that included leading their organizations for the benefit of all stakeholders, not just shareholders.  

Purpose-Driven Results:

There is a growing list of exemplar organizations and cases in point, that have proven not only that purpose-driven does lead to outperformance but have also shown how to affect this shift.  One such case is Unilever, a global Consumer Packaged Goods firm.  Under the leadership of CEO Paul Polman, the organization has achieved remarkable results. Most interestingly, according to Unilever, purpose-driven brands contribute to almost 75% of the company’s growth and are growing 69% than the rest of the business.  

Realizing the full power of purpose

Now, knowing all this, what will it take for businesses to realize the full power of purpose? A Harvard Business Review interview with Polman in 2012 captured three areas of focus and illustrates what it takes to lead with purpose beyond profit – belief, a focus on long-term results, and investor management. As Polman states:

“First of all, you have to accept that our job isn’t just about creating shareholder wealth.  A myopic view of driving shareholder wealth at the expense of everything else will not create a company that’s built to last. Second, you need to attract a shareholder base that supports your strategy – not the other way around. So, we actively seek one that is aligned with our longer-term strategy.”

The confluence of the mega forces at play create reason for optimism that the momentum for purpose beyond profits will continue. The evidence is clear – purpose-driven is a great path forward.  But we need more Paul Polmans leading our businesses – leaders who not only believe purpose-driven is the right thing to do, that it’s the smart thing to do, but that it can be done. We need investors to continue to use their cash to signal and require change. And we need consumers and citizens to expect and demand more from businesses. 

Professor Elspeth Murray

Useful Links:

• Link up with Prof. Elspeth Murray on LinkedIn
• Read a related article: Profit with Purpose: Innovations from the Global South
• Discover Smith School of Business
• Apply to study at Smith MBA.

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