The Purpose Gap

October 22, 2020

by Wallace Rosenberg UK Purpose Client Lead, PwC United Kingdom

Email +44 (0)7973 499554

Even prior to the coronavirus (COVID-19) pandemic, perceptions of the role of business in society were changing, with greater focus on how organisations impact the world around them - affecting the climate crisis, social mobility and inclusion and equality. In general, we as a society expect more from the commercial organisations we engage with. Businesses need to have a purpose that addresses societal challenges while making profit, rather than exclusively focusing on financial returns to shareholders. This builds trust with employees, communities and society as a whole - driving long-term commercial success. While ‘COVID-19 as a catalyst’ may be becoming a cliche, it’s hard to deny that in this case the pandemic has turbo-charged a steadily-growing trend. Relationships between companies, government and society are under the spotlight in navigating the pandemic and the accompanying economic challenges.

Testing questions

2020 has asked testing questions of the purpose of every organisation. How have they responded to the COVID-19 pandemic? How are they communicating with and supporting their employees and their customers? Have they engaged with the issues around Black Lives Matter, willing to have uncomfortable conversations, while listening with openness and self-reflection? Those organisations facing difficult choices in harsh trading conditions must be able to make decisions that speak to their public values, to maintain trust and credibility with their people and other key stakeholders. Are they battening down the hatches or looking outwards to support society?

It has been a year that has opened a window to how organisations set their priorities, and the types of decisions they make in times of stress. Some have put a raft of measures in place that support customers and people, giving flexibility to customers and suppliers, and at the height of the first phase of the pandemic, even adapting production lines to create vitally needed medical products and protective equipment. But other organisations still articulate a purpose publicly without changing what they do, leading to allegations of virtue-signalling and increasingly tough questions from employees and customers.

Closing the purpose gap

Ultimately, this represents the difference between those organisations that authentically engage with their purpose and those who merely define and talk about it. We call this the ‘purpose gap’, the gap between a company’s ability to talk about purpose and their ability to embed it in the organisation through strategic decision-making and operational activity to make meaningful changes.

This is not just a hypothesis. We conducted an assessment of roughly 500 listed and private companies and identified that 54% have defined a clear and relevant purpose, but only 13% publicly disclose how purpose is embedded in their cultural and operating models. In the months since this analysis, we’ve anecdotally seen the number that define a clear and relevant purpose steadily rise - but embedding it into the heart of the organisation remains a stumbling block for many.

There has been much written about how purpose-driven companies perform better, given improved decision-making, more motivated employees, more engaged customers, and improved investor relations. But to realise the value of purpose, organisations need to ‘bridge the purpose gap’. Of course organisations should have a strong articulation of their purpose - but whilst this is necessary it is not sufficient. Seeing purpose as a branding exercise without meaningful impact or change will be viewed as inauthentic, or even disingenuous, and may actively erode relationships with key stakeholders.

A separate piece of PwC research - the 2020 PwC Purpose Survey - supports this. This survey showed that the majority (58%) of employees would find it demotivating to work for an organisation that talks about purpose but doesn’t take action, while two in five (41%) people say it’s important to buy from organisations with values similar to their own. But if real actions are taken as a result of purpose: different products, different channels to market, different pricing decisions, different ways of working - threading through strategy, operating model and culture: that will be seen as authentic and long-term value will follow.

There’s a long way to go, and the public pressure on businesses to solve society’s challenges isn’t going away, especially during a crisis. Amid calls to rebuild the UK as a more equal and inclusive society, our survey found that 57% of people believe that making society fairer should be part of all organisations’ purpose. With only 13% of large companies meaningfully embedding their purpose in their organisation, this is not just a purpose gap, but a significant opportunity for those that bridge the gap successfully.

by Wallace Rosenberg UK Purpose Client Lead, PwC United Kingdom

Email +44 (0)7973 499554