Purpose branding is heading towards a new chapter - is it an opportunity or a distraction?

Perspectives - August 2021
By Adrian Pring, Strategy Director

Purpose branding is heading towards a new chapter - is it an opportunity of a distraction.

Purpose from superficial to profound…and back again

The relationship between organisations and purpose has frequently lurched between the profound and the superficial. The rise in Corporate Social Responsibility (CSR) in the 1990s led a charge towards a more socially aware corporation but evolved into a communications-led tick-boxing exercise (“our employees contributed 1000s of hours to support good causes”, etc.). While CSR was a thinly veiled afterthought for some, other organisations were being built from the ground up on the foundation of a clear purpose. Social enterprises such as shoe brand Toms, were champions of concepts such as the ‘triple bottom line’, which gave equal footing to social and environmental business metrics alongside the typical monetary ones. This reframing of what an organisation could be left a deep impression on an increasingly informed and empowered consumer in the age of social media.

Enter Simon Sinek, who in his 2009 TED talk, illustrated the ‘Golden Circle’, which implored people and businesses to start with the ‘Why’. The talk was viewed over 55 million times and led to an avalanche of brands toppling over each other to show that they were making the world a better place. For some, their purpose legitimately aligned their brand positioning with their contribution to the world. But for many, purpose manifested in either lofty statements of corporate virtue (Starbucks purrs about inspiring the human spirit one neighbourhood at a time, but gets creative with its local tax responsibilities), feel good slogans (Emirates Airlines’ “Hello Tomorrow” slogan used until 2018, felt uncomfortable next to aviation’s significant contribution to carbon emissions), or opportunistic social activism (State Street Global Advisors’ Fearless Girl statue faced down gender inequality in America’s boardrooms, while they paid female executives significantly less).

All too often, purpose was disconnected from brand, and worse it was frequently and hypocritically divergent from the company’s often profit-driven actions.

It’s no wonder that a 2021 Havas report, found that less than half of brands were seen as trustworthy. Consumers are increasingly cynical as time and again financial and shareholder interests trump purpose, widening the gap between what brands say, versus what businesses do.

The great convergence.

The primary focus of purpose has been to convert customers, rather than attract shareholders. CSR had been the main vehicle for communicating an organisation’s contribution to society, but where CSR struggled to appeal to investors as it seldom connected with business outcomes, ESG (environmental, social and governance) has emerged as a worthy successor. ESG, has managed to demonstrate a clearer link between a company’s wider environmental, social and governance agendas and their financial results.

Strong ESG practices have been shown to positively impact the top-line, reduce costs and boost productivity and motivation among employees. As a result, shareholders are increasingly expecting capital to be deployed not just for the gain of profit, but with ESG agendas accounted for as well. This has paved the way for the role of purpose to shift from consumer to investor; from downstream to upstream. This upstream shift is likely to gain momentum due to two interrelated factors: changing investor demographics and changing shareholder priorities.

Between 2016 and 2020, global sustainable investments grew by 55%.

We are witnessing a great transfer of wealth from baby boomers to millennials. Some estimates indicate that millennials are now poised to inherit US$30 trillion. When you combine this with Morgan Stanley research reporting that “95% of millennials are interested in sustainable investing,” this suggests that a new generation of investor is looking to make their money work in a more purposeful way. Moreover there are indications that purposeful investing is paying off; “40% of ESG and sustainable funds made top-quartile returns in the first half of 2020”, according to Trustnet. This level of performance is no doubt contributing to the growth of sustainable investing; between 2016 and 2020, global sustainable investments grew by 55% to US$35.3 trillion, representing a share of 36% of global assets under management.

The second factor is the shift in shareholder priorities. In June 2019, Norway’s Government Pension Fund Global decided to divest US$13 billion of its fossil fuel investments. This action from the US$1 trillion fund, suggested that major investors were willing to move capital away from businesses who lacked sustainability credentials. While some were looking to divest, others were looking to invest, using their shareholder positions to influence change from the inside. In June, activist investor firm Engine No1 was able to win three seats on the board of ExxonMobil. With a relatively small 0.02% stock holding, it was able to convince major shareholders such as BlackRock and Vanguard that ExxonMobil’s poor financial performance was due to a lack of energy experience on the board and no clear plan for transitioning into renewable energy. 

Companies that fail to consider environmental and social issues are exposing the business to risks.

Engine No1 is joined by Follow This, which similarly is influencing decisions at Chevron and Shell. This kind of activism is not limited to targeting fossil fuel businesses. Arjuna Capital has similarly challenged big tech firms Apple and Amazon by raising gender equality proposals. These investors argue that companies that fail to consider environmental and social issues are exposing the business to risks. This in turn could harm long-term financial performance, threatening investors’ returns. This all amounts to a convergence across both individual and institutional investors; where purposeful, ESG-aware investing has strong potential for delivering healthy returns. 

This convergence is good news for environmental and social progress. As investors shun ‘dirty’ stocks and shareholders force change among corporate behemoths, corporate strategies will themselves be more in tune with ESG goals. Marketers will be in a strong position to truly close the say-do gap, vital to reinvigorating consumer trust in brands. The alignment of consumer sentiment and shareholder priorities will, in theory, reduce cynicism among consumers of business. But it will also raise expectations that businesses will operate with environmental and social needs in mind. Those businesses that fail to do so will be punished from sales floor to boardroom.

Purpose 2.0 – Purposeful brands based on operational truths

The power of purpose comes with great responsibility and marketers will have to judge when and how they pull the purpose lever. Purpose 1.0 was about jumping on the bandwagon of consumer emotions; the world wanted to believe that brands and businesses could do good (even if the operating reality disconnected from the marketing message). But there is a growing sense that business is moving in the right direction. On the face of it, this alignment should result in a new wave of purpose-led branding – Purpose 2.0. Marketers will find themselves newly emboldened to deliver purposeful brands based on operational truths. But if all brands are able to promote the positive impact they’re having, there is a risk that purpose-led branding will become white-noise and ineffective. Expending time, effort and budget on pushing purpose above all else may well be a costly distraction; a path to a virtuous, but unoriginal brand. 

With purposeful branding’s low-hanging fruits plucked, marketers will have to reach higher. 

The best marketers will interrogate the nuances of their offer and how these overlap with the rational and irrational needs, known and unknown desires of the people they serve. Purpose will rediscover its role as a valuable positioning tool, exploring the many ways a brand can be salient, distinctive and credible. If it does, Purpose 2.0 may well serve as an important stepping stone towards a golden era of creativity and original brand thinking.