Enterprises built on principles: the rise of purpose-led business

“Purpose-led” businesses are increasingly recognizing that they need to look beyond short-term financial goals and be more responsible corporate citizens. So, how can chief digital officers use digital and data for social and environmental good, while driving sustainable profitable growth?

Back in the 1980s, Ai Ries and Jack Trout wrote the seminal book, Positioning: The Battle for Your Mind, to help enterprises define their core purpose. They advocated firms take an “outside in” approach to identifying the opportunistic space for a new product or service in a given market through careful analysis of why customers’ needs are not currently being met by existing competitors to drive profitable growth.

Fast forward to around five years ago, and this idea took on a new twist. People started asking themselves, “Should a company have a purpose beyond profit?” Today, businesses that describe themselves as “purpose-led” have a clear focus on making our world a better place – through the products and services they sell and how they operate – as well as generating a profit. Ranging from start-ups to multinationals, these for-profit companies come from a wide range of industries and seek to continuously improve people’s lives and our environment.

According to Lionel Barber, former editor of the Financial Times newspaper, the philosophy of the purpose-led business is not just a public relations gimmick, it’s a business imperative:

“The liberal capitalist model has delivered peace, prosperity and technological progress for 50 years, dramatically reducing poverty and raising living standards throughout the world. But, in the decade since the global financial crisis, the model has come under strain, particularly the focus on maximizing profits and shareholder value. These principles of good business are necessary but not sufficient. It’s time for a reset.”

Barber suggests that, “The long-term health of free enterprise will depend on delivering profit with purpose.”

Why is purpose important today?

A huge body of evidence shows that a purpose-led business is not just better able to attract and retain employees and customers, but also to catalyze innovation and boost revenue growth and shareholder value.

For example, a 2019 survey by Deloitte suggests that 42% of millennials have initiated or deepened a business relationship because they perceive the company’s products or services to have a positive impact on society and the environment. Meanwhile, around 37% say they’ve decreased or stopped dealing with a company because of its ethical behavior.

42% of millenials choose to support companies that they perceive have a positive impact on the world.

But this is not just a matter of concern for young people. A global survey of 30,000 consumers by Accenture found that nearly two-thirds across all age groups want companies to take a stand on issues like sustainability, transparency and fair employment practices.

The reputational risks of falling short of consumer expectations are significant. Research by Morgan Stanley dating back to 2015 suggests that enterprises with a strong commitment to Corporate Social Responsibility (CSR) outperform their competitors on the global stock markets and are far less scandal prone.

In organizations where purpose is a driver of strategy and decision making, executives report a greater ability to deliver revenue growth and drive successful innovation, according to a 2017 study by EY. It’s a trend that is rapidly gaining momentum. Some 73% of C-level executives who responded to Deloitte’s 2019 CXO Survey said their organizations had adapted or developed products or services over the past year to generate positive societal impact.

A positive change in philosophy

Royal DSM is a good case in point as Dmitri de Vreeze, member of the Managing Board, recently outlined at the CIO Day in the Netherlands. Once known as the Royal Dutch State Mining company, DSM has transformed itself beyond recognition over the last decade. Today it describes itself as a global purpose-led, science-based company specializing in nutrition, health and sustainable living.

“We have a strong belief that, one day, there will be a transition in the world,” said Dimitri de Vreeze, Co-Chief Executive Officer & Chief Operating Officer and Member of the Managing Board of Royal DSM. “Ten years ago, we started to act on this. We realized a focus on profit and contributing to a better world could go hand-in-hand.”

With this aim in mind, DSM launched a series of innovative products that have a measurably better impact on the planet and its people than equivalent mainstream solutions. These “Brighter Living Solutions” now make up nearly two-thirds of the firm’s sales. Products include feed additives that reduce the amount of greenhouse gases that cattle emit, anti-reflective coatings for more effective solar energy panels and technology for 100% recyclable carpets. In 2019, DSM was given the UN (United Nations) Sustainable Development Goals Award for its efforts.

Data-driven approach required

Chief digital officers (CDOs) are under increasing pressure to take a more data-driven approach to monitoring and managing Environmental, Social and Governance (ESG) and innovation.

The topic of CSR has been on boardroom agendas for more than two decades. CSR represents a company’s efforts to have a positive impact on its employees, consumers, the environment and the wider community. It’s a form of self-regulation that many large companies report on annually. ESG measures these activities to arrive at a more precise assessment of a company’s actions.

There is currently no single global standard for ESG reporting, although many companies follow Global Reporting Initiative (GRI) principles. It doesn’t help that dozens of third-party indices and rankings compare companies’ ESG performance using different metrics and methodologies. At best, this results in confusion for businesses, investors and consumers. At worst, it raises suspicions of “greenwashing.”

As a result, the World Economic Forum has recently announced that it’s working with four of the world’s biggest accounting firms and 140 other multinational companies to develop a core set of common metrics for the disclosure of non-financial ESG factors. It will cover key measures, such as greenhouse gas emissions, diversity and employee well-being.

Role of IoT and AI

This will create the need for more advanced ESG data-collection and management solutions. Data needs to be precise, comparable and consistent. IoT sensors, especially when paired with AI, can help meet this goal, while enabling firms to measure and reduce pollution and stimulate new thinking and innovation.

For example, in farming, Orange has developed precision agricultural solutions to minimize the use of water, fertilizer and pesticides, while boosting yields by monitoring crop growth, soil temperature, moisture and mineral levels. In the manufacturing sector, Orange has deployed IoT geo-location tags to ensure employees at a specialty chemicals firm select the right ingredients to mix the batches of chemicals customers have ordered that day. This is helping to reduce manufacturing errors and waste.

Elsewhere in the world, Orange is running a pilot program to help a global beverage firm deliver its products to retail stores and bars throughout congested cities with intelligent route planning that minimizes carbon emissions.

Orange has also partnered with GHD – the global professional services company operating in the engineering, architectural, environmental and construction services sectors – to make mines safer at their end of life through IoT-enabled environmental monitoring.

Digital solutions can also increase corporate accountability and consumer trust, enabling data to be easily audited. For example, blockchain technology is beginning to play a key role in helping consumers trace the provenance of the ingredients or parts that make up their products and ensure they come from sustainable sources.

Co-innovating to address the world’s most urgent problems

Co-innovation is seen as critical in developing digital ESG monitoring and management solutions. For example, Orange Business Services is co-innovating with a number of customers to manage their “energy transition” – the move from fossil-based to zero-carbon-based energy sources – and combat climate change.

Energy transition is characterized by the growth of decentralized, fluctuating renewable energy production and usage, including consumer-to-grid solar power generation and electric vehicle charging applications. In this context, it’s essential to equip the power network with IoT, data analytics and digital solutions to monitor and manage increasing levels of complexity.

Orange Business Services is working with Enedis, the electric grid operator, to connect hundreds of thousands of objects in its distribution network and over 3,000 industrial sites in France. This will enable Enedis to collect energy flow data, monitor electrical substations in real time, automate network self-healing and manage various maintenance tasks on a remote basis.

By striking the right balance between energy production and consumption at a global and local scale, Enedis will be able to overcome these critical challenges associated with the development of renewable energy.

How important is this to Orange?

Orange has set itself robust goals when it comes to triple-line reporting – the triad of people, planet and profits. For example, the Orange Engage 2025 program is a strategic initiative designed to deliver sustainable growth for the company and its customers. The company is on track to achieve net zero carbon emissions by 2040 and meet the following milestones. By 2025:

  • The company will have reduced its CO2 emissions by 30% compared to 2015
  • More than 50% of the Group’s energy will be from renewables (against 18% today)
  • 100% of Orange-branded products, in particular routers, will adhere to an eco-design approach

According to Stéphane Richard, Chairman and CEO of the Orange Group:

“At Orange we are convinced that in the years ahead, strong economic performance will not be possible without exemplary performance on social and environmental issues.”

All the evidence shows that consumers and employees want businesses to be purpose-led, and it delivers results. It’s time to get on board.