COVID-19 has amplified the spotlight on corporate purpose

Before the COVID-19 pandemic struck the world, pressures were intensifying on businesses and other organizations in order that they redefine their purpose and commit to a fairer, more sustainable world.

In his 2018 letter to shareholders, “A Sense of Purpose,” BlackRock CEO Larry Fink asserted: “Society is demanding that companies, both public and private, serve a social purpose. To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society. Companies must benefit all of their stakeholders, including shareholders, employees, customers, and the communities in which they operate.”

Last year, the Business Roundtable, which represents the CEOs of the leading American corporations, revised its position on the purpose of the corporation. The new statement affirms “the essential role corporations can play in improving our society when CEOs are truly committed to meeting the needs of all stakeholders.”

The murder of George Floyd on May 25 by Minneapolis police triggered an international wave of outrage, mourning and protest, often under the banner of Black Lives Matter. In the streets, but also on shop floors and in offices, demonstrators and employees began demanding action towards the end of systemic racism. Corporations faced unprecedented pressure to take a stand. In this instance, the people demanded more than public statements and corporate awareness campaigns. They wanted action from business. A concerted refocus. In short, purpose.

During that same Spring of 2020, the pandemic struck. Cases by the millions. Deaths by the thousands. Elderly people left to die, alone and in pain, in overcrowded hospitals and care centres. In a desperate attempt to put an end to this tragedy, governments locked-down entire nations, bringing economies to a sudden and complete halt.

Businesses found themselves bound in a Gordian knot by a crash in economic activity and the ensuing uncertainty. In many cases, their survival was at stake. At best, they had to simultaneously make difficult business decisions, protect and take care of their employees. Notwithstanding these challenges, many businesses stepped up their commitment to communities and stakeholders. CEOs chose to help, each in their own way. Not only because their customers and employees demanded it but because business leaders knew this was the right thing to do. In many cases, a corporation’s renewed social purpose came to life in front of our very eyes.

All in the timing

Last summer, Navigator launched the Canadian Centre for the Purpose of the Corporation. Some may have wondered about the timing. In fact, the timing was fortuitous. Purpose has never been as important for Canadian businesses as it is now.

Discussion of the purpose of the corporation is not a theoretical debate reserved for university seminars or lecture halls. Exemplified by businesses that manufactured hand sanitizer or personal protective equipment, or kept their employees on board even in the face of profound uncertainty, or helped customers manage financial obligations, purpose is increasingly concrete. In fact, it goes to the heart of what a business is.

The determined shift towards a renewed purpose for corporations is a formidable development. According to a survey commissioned by Navigator, among 3000 respondents, 84% supported the idea that corporations should serve the interests not only of shareholders, but of the environment and all stakeholders, including employees and customers.

Canadians demand that corporations in our times serve a social and environmental purpose, balanced with the push for sufficient earnings to expand and benefit shareholders. This movement is not defined by activists. Employees, customers, investors and governments are counting on the business sector to help Canadian society on the path toward more fairness and greater sustainability.

Of course, this will not be an easy transformation. It raises tough questions, such as:

• How to find the right balance between profit and purpose?
• How should a firm’s renewed purpose align with CSR and ESG commitments?
• How does a business go about refocusing its purpose in a way that preserves time and resources?
• How does a redefined purpose align with boards’ fiduciary obligations?

The Canadian Centre for the Purpose of the Corporation is working with organizations to find the answers to these questions, supported by applied research and the experience of Navigator’s experienced team. In this work, the Centre will help clients take this essential but sensitive turn. The Centre is led by CEO, Brian Gallant, former Premier of New Brunswick and now Senior Adviser at Navigator. Brian is supported by a panel of experts in business, policy, and communications.

After the flood

We all fervently hope a vaccine will be discovered and the COVID-19 pandemic will thankfully wither into a distant if extremely tragic memory.

But the movement towards corporate purpose will endure. Businesses that ignore it, do so at their own peril. The findings of our survey reveal that customers may well simply walk away. Young, talented employees will be harder to recruit and to retain. In the long term, investors will hesitate. Voters will demand legislative action. Regulators will encroach.

In this challenging yet promising context, Navigator and its Canadian Centre for the Purpose of the Corporation will be here to help.