Purpose and profitability
As world leaders gather in Switzerland for Davos 2020, the World Economic Forum has articulated its definition of one of the most prominent topics of discussion, corporate purpose: “to produce profitable solutions to the problems of people and planet, and not to profit from producing problems for people or planet”.
The definition goes on to clarify that this is about “producing solutions, doing so profitably not just philanthropically, and measuring fair – not fake – profits.”
This is a powerful description for a number of reasons. It rightly justifies the need for profit, and in doing so moves purpose on from the philanthropic definitions of old. The reference to measurement too is important and hits home in a world where ESG investment is accelerating at pace, and the scrutiny on profits has never been greater.
A sector where the WEF definition is of vital importance at this time is professional services. Projected to be worth over $8 billion globally by 2022, professional services has grown steadily over the past five years, and is forecast to accelerate further.
While the growth itself is staggering, factors that have negatively impacted its development include regulatory challenges, labour shortages and, in particular, the recent crises in the accounting industry. In the UK, calls for the breakup of the Big 4 continue, as competition and regulatory reforms attempt to keep pace. From the recent RSM ‘blunder’, to audit issues with Carillion, Thomas Cook and Patisserie Valerie, the need for higher standards and greater accountability is well documented.
So, where does purpose come in? Purpose determines not only how companies impact the communities and environment in which they operate, it must also determine how they behave as corporate citizens. It’s not enough to support external causes that ‘do good’, it’s critical that this doing good starts at home. Some of the recent personnel scandals that continue to engulf the Big 4 demonstrate the need to focus on purpose as a guiding light for the business, ensuring that corporate behaviour adheres to its principles. For purpose to really resonate, it must be baked into the fabric of an organisation. And behaviour change needs to start at the top, influencing employee practice and building authenticity and trust.
As the WEF definition points out, companies need to demonstrate a real, long-standing commitment to solving problems created by them, as we well as problems around them. In doing so they will earn the trust of employees, customers and business partners; giving them true licence to operate.
Getting this right strengthens the employee brand and supports the attraction and retention of the brightest and the best, while repairing and restoring corporate reputation.
Strong examples of businesses shifting their focus to become more purpose-driven exist in other areas of professional services. Financial services companies in particular are working hard to rebuild trust amongst consumers in this way.
It’s difficult to envisage a future for the Big 4 where reinvention doesn’t feature. It won’t be easy. But it’s necessary. Customers select professional services based on reputation, expertise, and essentially on faith that the outcome will deliver powerful results for their business. While accountancy firms await Government audit reform, the task of rebuilding reputations and re-establishing trust has never been greater.
Written by Claire Rudall, Managing Director, Corporate & Business Communications