As companies write their purpose statements they need to make sure that all their key stakeholders get an explicit mention and promises that are measurable. Too many still focus on just one group of stakeholders, usually investors, while others that have expanded the scope of their purpose often do not explicitly acknowledge other key stakeholders let alone track key performance metrics that apply to non-financial stakeholders.
Today, businesses around the world are eager to define their reasons for existence and impact on society, and many are working hard to develop a statement of corporate purpose.
As you do this for your company, though, it’s worth going back to the U.S. Business Roundtable’s statement on corporate purpose, which says: “While each of our individual companies serves its own corporate purpose, we share a fundamental commitment to all of our stakeholders.” The statement identifies these stakeholders: customers, employees, suppliers, the communities in which companies operate, and investors.
A company’s purpose needs to have something for all these groups, and what it offers each should be clearly measurable, because measuring something draws attention to it. What’s more your organization will be held accountable by a range of stakeholders, commentators, activists, as well as traditional and social media. If you make big claims in your purpose statement, being able to point to results will give you credibility. As you craft your statement, therefore, I suggest that you:
Identify your key stakeholders.
As a result of the push towards corporate purpose, businesses are broadening the range of stakeholders they regard as “key.” These were once narrowly defined as customers, employees, and shareholders. Now the list more frequently includes suppliers, who have been habitually overlooked by businesses but who, in most industries, are key.
To be sure, purpose statements have expanded in scope in the last few years. As one example, take Woolworths, Australia’s largest supermarket chain with more than 200,000 staff and more than 3,000 stores. A few years ago, it stated: “We are focused on shareholder returns.” It now reads: “To create better experiences together for a better tomorrow.” But with the inclusiveness often comes a certain vagueness.
Ideally a purpose statement will identify all key stakeholders. Take Rio Tinto, the world’s third largest mining company, operating in about 35 countries, with more than 60,000 employees. In his contribution to the latest annual report, Dominic Barton, the incoming chair explicitly recognizes all five groups of stakeholders:
Through our products, people, partnerships and technologies, we aim to help enable a decarbonising world, while maintaining our focus on capital discipline, pursuing growth, and delivering attractive returns to shareholders … Building even stronger relationships with our customers, partners and local communities will be an important part of this journey, and something that I am particularly passionate about. I am also keen to ensure that we create a safe, respectful and inclusive work environment.
You’ll have your own industry language for stakeholders, of course, and you should stick with that, e.g., “clients” or “patients” or “students” instead of customers. Also, not all five categories of stakeholders from the Business Roundtable will be relevant. For example, if you’re a not-for-profit or volunteer organization you probably won’t have shareholders. If you’re a professional service firm, suppliers may only provide incidentals and hence not be key.
Ensure your impact metrics align with stakeholder categories.
It’s not enough to just recognize that you depend on a stakeholder. You have to track what you’re giving them. Many companies, even if they do explicitly recognize all their key stakeholders, don’t actually have metrics for them.
By Rio Tinto’s own admission “the needs of our customers are central to our operational decision making” and “quality relationships with our suppliers are vital to ensure that we remain at the forefront of technological and market developments.” Yet the company’s impact on customers and suppliers aren’t monitored by any of the company’s listed “key performance indicators.” Of the company’s nine key performance metrics, one, “greenhouse gas emissions,” is relevant to stakeholder communities, and there are safety and gender diversity measures for employees. The other six are all financial.
In fact, of the eight large Australian companies I looked at, only one, Woolworths, provided a full house of stakeholder measures. As shown below, they tracked three for each of the Business Roundtable five stakeholder groups. Customer metrics, for example, included a net promoter score, employee metrics included a diversity rating, and communities metrics included a carbon emissions and recycling measures.
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Employees and other stakeholders are looking to organizations to address results beyond narrow corporate financials. This trend is a modern and ever-present phenomenon. The corporate world, represented by the BRT, has realigned to take this into account. It’s time to test your purpose statement and corporate metrics via the questions I’ve applied here.