The Future of Business - From Profit to Purpose: From PLC. to B Corp

In the good old days, life was simpler but not necessarily better. These days, people live longer and healthier than at any time in history. They are more highly educated and expect more from life. And in the old days, corporations had a single goal: profit. In Milton Friedman’s words, “The sole purpose of business is to make money for its shareholders” and with this paradigm, he is said to have become the most influential economist of the 20th century.

Again, simpler, but not better. In fact, this isn’t good enough anymore – consumers expect more from companies; they want businesses to demonstrate and fulfill a broader purpose in society.

Low Trust in Business

This appetite for purpose starts with consumers’ low levels of trust in global companies. GlobeScan’s (a global research consultancy) Radar data from 2016 and 2015 shows that consumers do not trust companies to act in the best interests of society, with nearly half saying that they have not much or no trust at all in global companies.

Great Expectations

This lack of trust in companies is accentuated by consumers’ high expectations, revealing a persistent trust gap. People expect companies to articulate how their products/services make the world better, i.e., to demonstrate purpose beyond the transaction of providing goods and services motivated by profit generation.

Expectations are highest in Latin American countries, and also in the UK and USA, with 71 percent of the public in both countries looking to business with anticipation. In some emerging markets such as India and Kenya, expectations are lower. Perhaps in these countries, people are less likely to hold companies to account for this broader business purpose because corruption-free profit generation is seen as an important piece to support their emerging economies.

Corporate leaders

However, the public cannot yet identify corporate leaders on purpose. Nearly three-quarters of consumers in India were unable or unwilling to name a company representing their style and values, along with over half of the respondents in China and a third in the UK and USA. This highlights the challenge that companies face in effectively and authentically communicating about their role in society. Very few companies have mastered the art of engaging consumers en masse in conversations about values, vision and the purpose of business.

Among the consumers that do offer an opinion, in China many people spontaneously mention Asian technology companies such as China Mobile, Haier, Lenovo and Samsung as purposeful companies, ticking the box on both style and values. These companies could arguably be demonstrating their purpose and role in society beyond profit through the role their products play in connecting people. Still, no one company is standing out, and differentiation on the value of purpose is up for grabs. So, despite a strong core of consumers expecting companies to operate in the interest of society, businesses’ purposeful stories are still struggling to penetrate consumer consciousness.

The Opportunity for B Corporations

These findings demonstrate the need for businesses to develop, embed and communicate an authentic purpose, “an explicitly stated and authentic belief that defines how the business creates value for itself and society.”

This is exactly where B Corporations fit in. When a company changes its main purpose from profit to societal benefit, it is disrupting the current capitalist paradigm. A B Corporation is a for-profit company that is obliged to consider the effects of its decisions on society, not just its shareholders, and the positive impacts on society are legally defined goals. In a world where consumers expect more from business, this new paradigm is the future of business.

Wander Meijer is Asia Pacific Director for GlobeScan and an Impact Investor