Meeting ESG goals (environmental, social, and governance) is one of the most essential challenges business leaders are facing right now. But it hasn’t always been this way. Historically, businesses haven’t been primed to think ahead when it comes to the wider impact they will have on the world.

This is particularly true for public companies that have shareholders to answer to on a regular basis – in the past, these organizations have counted on retrospective compliance to do the work when only a solid foundation will do.

But stakeholders and activist shareholders now demand more transparency and action; customers and employees are more willing than ever to challenge surface-level mission statements. Companies need to deliver from the ground up, rather than after the fact.

And we can learn from those who are consistently doing so – the purpose champions. Let’s look now at how and why.

Purpose over compliance

One prime example of how proactive purpose wins out over compliance is Oatly. Championing sustainability is an inherent part of the company’s purpose, and that commitment has made Oatly the monumental success it is today, with profits soaring year on year – after high demand saw supermarkets sell out last year, the oat drink giant has increased its output by 1,250%.

And Oatly is far from the only one building its brand around what it gives back as much as what it sells. BrewDog, Patagonia, Ben&Jerrys, AirBnB, even unexpected players like Crocs have shown up to give back to the wider world – in the long and short term.

Our most recent CEO Purpose Report confirms the perks of purpose wholeheartedly. We learned that nine out of ten CEOs who have a purpose statement (87%) say that purpose is integral, driving initiatives across the business; 85% say they measure themselves against their purpose constantly; and 75% even influence potential partners to change behavior so they can work together.

We also learned that four in five CEOS (83%) agree that purpose can guide companies to make decisions that contribute to a sustainable world; and 83% agree that purpose-driven companies are better at navigating a sustainable world than profit-driven companies.

Through purposeful action and profitable results, purpose champions like Oatly and Patagonia offer proof that ESG must become an essential consideration for businesses from the start. So why are so many companies failing to follow suit?

Long-term value

Admittedly, if creating long-term value were easy, everyone would be doing it already. From the data in our past reports, we know that CEOs are under immense pressure to deliver short-term results, and this can come at the expense of long-term thinking.

No wonder ESG concerns get tacked on to the end of projects rather than infused into the very purpose of the business right away.
But that’s where purpose can help. It offers a tool to guide businesses in the long and short term. Oatly, once again, illustrates just how powerful purpose can be as a way of guiding long- and short-term strategy.

“Environmental, social, and corporate governance”, Oatly’s Chief Sustainability Officer, Ashley Allen, told me recently when I interviewed her for a panel in partnership with British American Business, “has always been a vetting process after business decisions. Purpose, on the other hand, is a guide from the very beginning.”

In the same interview, Allen told me about how purpose doesn’t just guide Oatly’s approach to ESG considerations, but was crucial to helping the company focus on serving key stakeholders during the COVID-19 pandemic.

Put simply, the power of purpose has never been about the persuasiveness of a purpose statement – it’s always been about how that statement of intent flourishes into action.

The anchor of purpose

In another recent panel, CEO of The Body Shop, David Boyton exemplified how purpose does more than ESG to guide his company’s environmental policies, saying that The Body Shop has been “determined to show that the anchor of purpose has been keeping us on track.”

But purpose isn’t just about the service your specific business provides. A real champion of business purpose knows that by answering the needs of consumers through purpose, the business also has the opportunity to answer the needs of the global community in a meaningful way – and that purpose will guide them to do this in a way that elevates both the business and the wider community.

The Body Shop’s purpose – “We fight for a fair and more beautiful world” – doesn’t just arrive on the scene when the business has to meet certain criteria. Rather, it sets an internal standard that informs every element of the business.

The feeding loop

Like The Body Shop, Oatly’s purpose expands from environmental sustainability to a deeper emphasis on ethics that colours the way the company treats employees, and how the business responds to uncertainty.

“For us at Oatly, purpose has been the driver since the beginning”, Allen said. She is adamant that because Oatly had a built-in purpose that puts people and the planet over profit, the company was better situated to respond to the pandemic crisis, on both a human and business level.

Effectively, strong purpose creates a feeding loop – the purpose supports the business, which in turn supports the purpose – so that companies see business and growth and environmental and social improvement.

For companies like Oatly and The Body Shop baking sustainability into their purpose, ESG has nothing to do with compliance and everything to do with their business models built to make profits and differences. “Our purpose precedes us”, said Allen. And that’s how it should be.

Cover image source: Jon Tyson