Defining your company’s corporate purpose

N°310a – Synopsis (8p.) – Vision
Defining your company’s corporate purpose
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More and more companies are choosing to clearly state what they provide to society. But there is nothing anodyne about this approach: it must be at the same time collective and efficient, inspiring and rooted in reality. How can it be steered?

Raison d’être, purpose… Although a company’s mission generally exists in a latent state, it isn’t always explicit, which compels more and more companies to clarify it. As an example, in 2019, the powerful employer organization Business Roundtable redefined its “corporate governance principles” to acknowledge that, in parallel to the pursuit of profits, companies have a responsibility to contribute to society at large. That same year, in France, the PACTE Act enshrined in the civil code a company’s obligation to “take into consideration its activity’s social and environmental challenges”. It also opened up the possibility of including the company’s “purpose” in its articles of incorporation, a step that formalizes its commitment to the general good.

Clarifying a company’s mission presents various advantages. From a strategic point of view, it is a way of setting a course and arbitration criteria. For instance, following a period of unbridled diversification, the Danone group has recentered around its purpose—“Health through nutrition”. This repositioning, which led it to divest from its cookie business, gives it a singularity that distinguishes it from other agri-food giants that could be tempted to launch a takeover bid... Spelling out a company’s purpose can also suggest opportunities for innovation. For example, in line with its mission (“To enable everyone to make the most of their energy and resources, in order to reconcile progress and sustainable development [...]”), Schneider Electric has introduced decarbonation and energy efficiency systems. Finally, internally, a purpose offers an element of response to the search for meaning of its employees.

Nonetheless, making one’s corporate purpose explicit is a binding and fraught process. This purpose needs to reflect a sincere and verifiable commitment, without which the company would be exposed to accusations of “purpose washing”. It must also balance ambition and pragmatism to be mobilizing. Lastly, it must be sufficiently concrete to provide a setting—without being so restrictive that it becomes a straitjacket. In short, finding the right formulation requires a thorough maturation process. Here are our tips for undertaking it.

In this synopsis:
– Educating on the purpose
– Corporate purpose: a vector of meaning and dynamism for the company
– Is your company’s corporate purpose expressed in a credible way?

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