What is holding purpose-driven business back?

When businesses operate in a purpose-driven way, everybody wins. Not only does it lead to a profoundly positive effect on society and the environment, but running a business in a purpose-driven way is increasingly evidenced to make them more successful and sustainable in the long run. Encouragingly, interest in purpose-driven business is growing: customers want to buy from them, potential employees want to work for them, and investors want to invest in them. Moreover, a significant proportion of business leaders also want companies to be purpose-driven. A poll by the British Academy found that 44 percent of senior decision makers in business thought companies should be purpose-driven (the same proportion that thought that the purpose of business was to maximise returns to shareholders). What this paper has revealed, however, is that instead of being supported and encouraged to thrive, many purpose-driven businesses are being held back. There are four core, interconnected reasons why:

1. Identification: It can be difficult to identify purpose-driven businesses,

2. Incorporation: It is not clear how a company can be legally set up in a manner consistent with being purpose-driven,

3. Investment: Purpose-driven companies can find it difficult to get purpose aligned investment, and

4. Impact measurement: It is hard for companies to prove that they are having a positive impact on society and the environment.

We have included separate chapters on identification and measurement because our research has found them to be two crucially important, mutually reinforcing issues. If a company is committed to acting in a purpose-driven way (identification) but has persistently poor outcomes (impact measurement) then there is a concern that the company is not being successful at living out its purpose. Equally, if a company has a positive social and environmental impact, but no intent, then there Executive summary Executive summary 6 What is holding purpose-driven business back? could be concerns that this will not last or that they might, if pushed, game the measurement system, which will always be far from perfect. This paper will be followed by another in early-mid 2021 that will set out the package of systemic reforms that will help tackle these four challenges.

Read the full report here.