Business purpose

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Business purpose refers to the wider, long-term goals of a commercial enterprise. It expresses the corporate's reason for existing, its particular commitment with respect to the surrounding world. A business purpose statement serves as an affirmative reminder of the company's core identity to employees, customers, and other stakeholders; a common ground hopefully enabling them to focus on their particular tasks while feeling what they do is part of a wider, socially valued endeavor. [1] [2] [3] [4] Alongside established normative, purpose is a fundamental component of business ethics and is closely related to corporate statements such as vision, mission, and values. [5] [6] A simplifying, although debatable view, contends that business purpose may exist in one of two forms: current purpose, or mission; and future purpose, or vision. [7] The term has gained wide media attention in recent times. [8] [9]

Contents

History

Aristotle contemplated the importance of business ethics and business purpose in his Nicomachean Ethics, where he describes the moral and intellectual traits accompanying virtuous human behavior in society. Also in his Politics, where he discerns between "productive knowledge" and the political abilities required for "good wealth" acquisition. [10] Other classic philosophers cited for dealing with matters relevant to the purpose of business are Kierkegaard, David Hume, and Nietzsche. [11]

Ideas on the purpose of business have evolved and undergone deep revision in the present era. Early modern discussion on business purpose doctrine took place in mid-20th century in the context of its relevance to tax-saving provisions in the US Internal Revenue Code. [12] In 1964, American businessman Frederick Kappel published a volume containing a selection from his speeches dealing with the theme and its relation to performance. [13] The advent of social responsibility theories in the 1960's brought about demands for businesses to widen the scope of their beneficiaries to include actors beyond the owners themselves, and for companies to share with the state the economic burden of attending social needs in the communities related to their areas of operation. [14] [15]

A plethora of books covering the importance of corporate purpose have been published in recent times, among them Purpose: The Starting Point of Great Companies by Nikos Mourkogiannis in 2006, Start with Why by Simon Sinek in 2009, Conscious Capitalism by John Mackey and Rajendra Sisodia in 2014, Grow the Pie by Alex Edmans in 2020, Good is the new Cool by Afdhel Aziz in 2021, and Deep Purpose by Ranjay Gulati in 2022. In their book Net Positive Paul Polman and Andrew Winston provide many examples of purpose-driven organizations, including Unilever of which Polman was CEO from 2009 to 2019. Schreuder (2022) sketches the evolution of corporate social responsibility over the last four decades from Do No Harm to Net Positive or even Max Positive and provides the case of Royal DSM as illustration. [16]

Further reading

Related Research Articles

Business ethics is a form of applied ethics or professional ethics, that examines ethical principles and moral or ethical problems that can arise in a business environment. It applies to all aspects of business conduct and is relevant to the conduct of individuals and entire organizations. These ethics originate from individuals, organizational statements or the legal system. These norms, values, ethical, and unethical practices are the principles that guide a business.

<span class="mw-page-title-main">Corporate social responsibility</span> Form of corporate self-regulation aimed at contributing to social or charitable goals

Corporate social responsibility (CSR) or corporate social impact is a form of international private business self-regulation which aims to contribute to societal goals of a philanthropic, activist, or charitable nature by engaging in, with, or supporting professional service volunteering through pro bono programs, community development, administering monetary grants to non-profit organizations for the public benefit, or to conduct ethically oriented business and investment practices. While once it was possible to describe CSR as an internal organizational policy or a corporate ethic strategy similar to what is now known today as Environmental, Social, Governance (ESG); that time has passed as various companies have pledged to go beyond that or have been mandated or incentivized by governments to have a better impact on the surrounding community. In addition national and international standards, laws, and business models have been developed to facilitate and incentivize this phenomenon. Various organizations have used their authority to push it beyond individual or even industry-wide initiatives. In contrast, it has been considered a form of corporate self-regulation for some time, over the last decade or so it has moved considerably from voluntary decisions at the level of individual organizations to mandatory schemes at regional, national, and international levels. Moreover, scholars and firms are using the term "creating shared value", an extension of corporate social responsibility, to explain ways of doing business in a socially responsible way while making profits.

<span class="mw-page-title-main">World Business Council for Sustainable Development</span>

The World Business Council for Sustainable Development (WBCSD) is a CEO-led organization of over 200 international companies. The council is also connected to 60 national and regional business councils and partner organizations.

In a corporation, a stakeholder is a member of "groups without whose support the organization would cease to exist", as defined in the first usage of the word in a 1963 internal memorandum at the Stanford Research Institute. The theory was later developed and championed by R. Edward Freeman in the 1980s. Since then it has gained wide acceptance in business practice and in theorizing relating to strategic management, corporate governance, business purpose and corporate social responsibility (CSR). The definition of corporate responsibilities through a classification of stakeholders to consider has been criticized as creating a false dichotomy between the "shareholder model" and the "stakeholders model" or a false analogy of the obligations towards shareholders and other interested parties.

<span class="mw-page-title-main">Social responsibility</span> Ethical framework

Social responsibility is an ethical framework in which a person works and cooperates with other people and organizations for the benefit of the community.

Shareholder value is a business term, sometimes phrased as shareholder value maximization. It became prominent during the 1980s and 1990s along with the management principle value-based management or "managing for value".

<span class="mw-page-title-main">Stakeholder theory</span> Management and ethical theory that considers multiple constituencies

The stakeholder theory is a theory of organizational management and business ethics that accounts for multiple constituencies impacted by business entities like employees, suppliers, local communities, creditors, and others. It addresses morals and values in managing an organization, such as those related to corporate social responsibility, market economy, and social contract theory.

Corporate behaviour is the actions of a company or group who are acting as a single body. It defines the company's ethical strategies and describes the image of the company. Studies on corporate behaviour show the link between corporate communication and the formation of its identity.

Corporate communication(s) is a set of activities involved in managing and orchestrating all internal and external communications aimed at creating a favourable point of view among stakeholders on which the company depends. It is the messages issued by a corporate organization, body or institute to its audiences, such as employees, media, channel partners and the general public. Organizations aim to communicate the same message to all its stakeholders, to transmit coherence, credibility and ethics.

A mission statement is a short statement of why an organization exists, what its overall goal is, the goal of its operations: what kind of product or service it provides, its primary customers or market, and its geographical region of operation. It may include a short statement of such fundamental matters as the organization's values or philosophies, a business's main competitive advantages, or a desired future state—the "vision". Historically it is associated with Christian religious groups; indeed, for many years, a missionary was assumed to be a person on a specifically religious mission. The word "mission" dates from 1598, originally of Jesuits sending members abroad.

Robert Edward Freeman is an American philosopher and professor of business administration at the Darden School of the University of Virginia, particularly known for his work on stakeholder theory (1984) and on business ethics.

Organizational ethics is the ethics of an organization, and it is how an organization responds to an internal or external stimulus. Organizational ethics is interdependent with the organizational culture. Although it is to both organizational behavior and industrial and organizational psychology as well as business ethics on the micro and macro levels, organizational ethics is neither organizational behavior nor industrial and organizational psychology, nor is it solely business ethics. Organizational ethics express the values of an organization to its employees and/or other entities irrespective of governmental and/or regulatory laws.

<span class="mw-page-title-main">Corporate sustainability</span> Business strategy that focuses on sustainability as a core aspect of the business

Corporate sustainability is an approach aiming to create long-term stakeholder value through the implementation of a business strategy that focuses on the ethical, social, environmental, cultural, and economic dimensions of doing business. The strategies created are intended to foster longevity, transparency, and proper employee development within business organizations. Firms will often express their commitment to corporate sustainability through a statement of Corporate Sustainability Standards (CSS), which are usually policies and measures that aim to meet, or exceed, minimum regulatory requirements.

<span class="mw-page-title-main">Friedman doctrine</span> Theory that the only social responsibility of business is to increase its profits

The Friedman doctrine, also called shareholder theory, is a normative theory of business ethics advanced by economist Milton Friedman which holds that the social responsibility of business is to increase its profits. This shareholder primacy approach views shareholders as the economic engine of the organization and the only group to which the firm is socially responsible. As such, the goal of the firm is to increase its profits and maximize returns to shareholders. Friedman argues that the shareholders can then decide for themselves what social initiatives to take part in, rather than have an executive whom the shareholders appointed explicitly for business purposes decide such matters for them.

<span class="mw-page-title-main">Paul Polman</span> Dutch businessman (born 1956)

Paulus Gerardus Josephus Maria Polman, is a Dutch businessman and author. He was the chief executive officer (CEO) of the British/Dutch consumer goods company Unilever. Polman is also the author of Net Positive: How Courageous Companies Thrive by Giving More Than They Take.

A Corporate Social Entrepreneur (CSE) is someone who attempts to advance a social agenda in addition to a formal job role as part of a corporation. It is possible for CSEs to work in organizational contexts that are favourable to corporate social responsibility but this is not always the case. CSEs focus on developing both social capital and economic capital, and their formal job role may not always align with corporate social responsibility. Furthermore, a person in a non-executive or managerial position can still be considered a CSE.

Conscious business enterprises and people are those that choose to follow a business strategy, in which they seek to benefit both human beings and the environment.

Sustainable capitalism is a conceptual form of capitalism based upon sustainable practices that seek to preserve humanity and the planet, while reducing externalities and bearing a resemblance of capitalist economic policy. A capitalistic economy must expand to survive and find new markets to support this expansion. Capitalist systems are often destructive to the environment as well as certain individuals without access to proper representation. However, sustainability provides quite the opposite; it implies not only a continuation, but a replenishing of resources. Sustainability is often thought of to be related to environmentalism, and sustainable capitalism applies sustainable principles to economic governance and social aspects of capitalism as well.

Alex Edmans is a British academic and economist who is professor of finance at London Business School and the current Mercers' School Memorial Professor of Business at Gresham College. Since 2017 he has been the managing editor of the Review of Finance. He gave the TED talk What to Trust in a Post-Truth World, on confirmation bias and the importance of being discerning with evidence. In 2021 he was named professor of the Year by Poets & Quants.

Purpose: The Starting Point of Great Companies, is a book by Nikos Mourkogiannis originally published in 2006, which has been reviewed in US national media, and repeatedly cited in corporate culture books and academic journals. The volume consists of one introduction and 11 chapters covering exemplified discussions on notions that the author regards as important with respect to the purpose of business: innovation, excellence, commitment to customers, competitiveness and leadership. The text is preceded by a foreword by the late Harvard Law Professor Roger Fisher. The book was published by St. Martin's Griffin, N.Y.

References

  1. ↑ Vallance, Elizabeth (1995). Business ethics at work. Cambridge [England]: Cambridge University Press. ISBN   0-521-40535-1. OCLC   31045995.
  2. ↑ Mayer, Colin (2021). "The Future of the Corporation and the Economics of Purpose". Journal of Management Studies. 58 (3): 887–901. doi:10.1111/joms.12660. ISSN   0022-2380. S2CID   226329929.
  3. ↑ Conger, Jay A. (1991-01-01). "Inspiring others: the language of leadership". Academy of Management Perspectives. 5 (1): 31–45. doi:10.5465/ame.1991.4274713. ISSN   1558-9080.
  4. ↑ Ellsworth, Richard R. (2002). Leading with purpose : the new corporate realities. Stanford: Stanford Business Books. ISBN   0-8047-4385-1. OCLC   49775350.
  5. ↑ Salem Khalifa, Azaddin (2012-08-03). "Mission, purpose, and ambition: redefining the mission statement". Journal of Strategy and Management. 5 (3): 236–251. doi:10.1108/17554251211247553. ISSN   1755-425X.
  6. ↑ Kenny, Graham (2014-09-03). "Your Company's Purpose Is Not Its Vision, Mission, or Values". Harvard Business Review. ISSN   0017-8012 . Retrieved 2022-03-07.
  7. ↑ Horwath, Rich. "Discovering Purpose: Developing Mission, Vision & Values" (PDF). strategyskills.com.
  8. ↑ Gunderson, Garrett. "Purpose=Value, Value=Profits". Forbes. Retrieved 2022-08-12.
  9. ↑ "Business Doesn't Need a 'Social Purpose' Revolution". Bloomberg.com. 2022-01-18. Retrieved 2022-08-12.
  10. ↑ Hartman, Edwin M. (2020). Arriving where we started : Aristotle and business ethics. Cham, Switzerland. ISBN   978-3-030-44089-3. OCLC   1204139303.{{cite book}}: CS1 maint: location missing publisher (link)
  11. ↑ Mourkogiannis, Nikos (2006). Purpose : the starting point of great companies. Basingstoke: Palgrave Macmillan. ISBN   978-0-230-60530-5. OCLC   181601151.
  12. ↑ Summers, Robert S. (1961). "A critique of the business-purpose doctrine". Oregon Law Review. 41: Summers, Robert S. "A critique of the business-purpose doctrine." Or. L. Rev. 41 (1961): 38.
  13. ↑ Kappel, Frederick R. (1964). Business Purpose and Performance. Duell, Sloan and Pearce, 1964. Duell, Sloan and Pearce.
  14. ↑ Engel, David L. (1979-11-01). "An Approach to Corporate Social Responsibility". Stanford Law Review. 32 (1): 1–98. doi:10.2307/1228440. JSTOR   1228440.
  15. ↑ Blumberg, Phillip (1972-01-01). "Selected Materials on Corporate Social Responsibility". Faculty Articles and Papers.
  16. ↑ "People, Planet, Profit and Purpose - from PhD to DSM Practice". www.academia.edu.


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