Purpose-driven Business Models- The move towards building purpose beyond Internet hashtags

“We are finding out quite rapidly that to be successful long term we have to ask: what do we actually give to society to make it better? We’ve made it clear… that it’s our business model, starting from the top.”

This comment by Paul Polman, the previous CEO of Unilever explains his vision for doing business a new way, that will double profits while simultaneously reducing its environmental impact through the Unilever Sustainable Living Plan (USLP).

The new ‘Triple- bottom line’. Image source: Forbes

Does this sound too good to be true, given that it comes from a global corporation that has achieved its scale and profits by angering quite a few stakeholders in the past? Today, many companies and brands are trying to transform exactly this image by building purpose into their day-to-day functioning. Finding a company’s purpose to integrate into its missions and goals has become a new opportunity for market leaders to build social value and impact in their business.

So why is it that in the last decade, the likes of Amazon, Google, Nike and the TATA group are taking this endeavour more seriously and have begun integrating the issues that matter to the masses more centrally to the way they conduct their everyday business? Why has it suddenly become relevant for them to take the views of consumers into consideration after decades of minimal or superficial engagement?

From polite talk … to real talk

Consumer market surveys conducted by Nielsen and Edelman reveal that millennials and Gen-Z consumers care deeply about who earns their hard-earned money, engaging in ‘belief-driven’ buying more than ever before. These consumers will first check if the brand they are buying from sources its materials sustainably, if its labourers are paid minimum wage or whether their shareholders contribute to deforestation. One quick Google search that brings up a recent scandal can convince consumers to boycott a particular company even permanently!

Case in point- We recently came across widespread outrage against the vegan milk brand Oatly, when consumers discovered that the Swedish brand had recently sold 10% of its shares to an investment firm with ties to funding deforestation in the Amazon forest in Brazil. Besides the irony of this happening with a brand that has marketed itself on its sustainable business ethics, it is also a good reflection of how seriously consumers today take brand accountability.

Image source: Edelman global survey (2018)

The easy way out would be relying solely on marketing and advertising campaigns. However, companies are quickly realising that consumers will see through superficial efforts, such as only putting out statements in solidarity with a social cause for brownie points. This is especially relevant if young people are already aware of how these brands contribute to social inequalities through their everyday business. For example, recently when brands started putting up black squares on their Twitter and Instagram pages in support of the Black Lives Matter movement, consumers were quick to point out that their actions speak louder than words- most of these brands continue to discriminate against people of colour in different stages of their value chain.

How are market leaders paving the way? Actions speak louder than words

In India, reputed companies such as Unilever and TATA group are taking huge risks in showcasing their efforts to build purpose into their business ethos by contributing to the conversations on diversity and religious harmony, both of which are ongoing social issues that corporate India has shied away from. In 2019, the detergent company Surf Excel, a brand owned by Unilever, faced public flak but also praise when it released an advertisement celebrating religious diversity during the festival of Holi in 2019.

The popular phrase ‘business as usual’ is beginning to take a new meaning as more and more companies aim to continue business using more sustainable and purpose-driven models. Many companies across sectors, are silently transforming their businesses for the benefit of the communities they work with as well as the employees they rely on for their profits to grow, going beyond the 2% CSR mandate in India.

The message is clear- “Keep up or stay out”

Importantly, the Edelman global survey reveals that Indian consumers rank highest in demanding this cross-sectoral and bottoms-up approach of transformation in brands that they buy from. As more and more young people seek purpose in the way they consume, brands see no other option but to restructure their businesses to avoid facing backlash from both consumers and their own employees. In recent times, they are also realising, sometimes the hard way, that consumers cannot be placated by merely an advertisement or CSR initiative that is used to address the issue only superficially.

In essence, brands have to build purpose into their products and businesses, not only to stay on trend, but also to make sure that they don’t alienate more conscious-driven markets and lose relevance. Consumers will be stingy with corporate praise until they see more transparency in how companies plan on fully committing to the causes they publicly support. This is the new normal.