Corporate Purpose – Does doing the right thing pay?
@ the IERP® Global Conference, October 2022
What are companies for? The trend today is for firms to consider how to serve stakeholders, not just shareholders. Companies should have a wider purpose, and define how they deliver to a wider society. But how can they ensure their ESG policies are adhered to, and that their strategy and purpose are aligned with the values of the corporation? Are governance and strategy intertwined with business purpose? Chaired by Dato’ Stewart Labrooy, INED, UEM Edgenta, this panel discussion invited the views of speakers Tony Chin, immediate Past Chairman, Sumitomo Mitsui; Jennifer Thien, INED, Jadestone Energy; and Jessica Cheam, Board Director, Comfort DelGro.
Comfort DelGro is synonymous with Singapore’s blue taxis but its business extends over Australia and New Zealand as well, involving more than 25,000 people globally, Jessicasaid. However, the company was not responding quickly enough to change, and underwent painful transformation over many years before it realised that it needed to recalibrate its purpose. This led to a re-evaluation of the company’s statement of being just a transporter of goods and people, to becoming a global mobility leader that provides safe, sustainable and affordable options for society. “Today, doing the right thing is the way to operate, and is what stakeholders expect,” she said.
Organisations need to adopt a long-term mindset, and consider the longevity of the business, what its impact is, and how a relevant strategy needs to be formulated. “There are so many issues for management to grapple with,” she said. “But that is the purpose of the business. What is its mission, and how this can be carried through the entire conversation.” Citing the example of waiting for regulators to decide on electric vehicles, she said that it was a big capex commitment for the company, and a year-by-year transition plan needed to be put in place. The company needed to think about how to position itself, how to make investments and how to get buy-in from its stakeholders.
Remarking that SMEs are under-represented on many platforms, Tonysaid that ways had to be found to help them grow, preferably with guidance and funding, as they were always struggling where resources were concerned. “The challenge is that their initial purpose is to survive and make a profit,” he pointed out. “They know they have to do the right thing but they are not in a position to launch themselves fully into doing what the larger companies do.” This becomes imperative as in most countries, SMEs account for the largest percentage of businesses operating in the economy. But for SMEs to actually set their corporate purpose, they need help.
“This help will have to come from larger companies,” he said. “At individual level, they need to be given a chance. They need coaching and handholding. As an example, he quoted a dairy cooperative owned by farmers which actually built a core team from among themselves, despite being very far removed from corporate issues like governance, for instance. “They grew with the funding they got from the business,” he recounted. “Eventually, the company was listed, and the professional team created access to funding…the company became very attractive to investors and was acquired by an overseas corporation. This is an example of how SMEs can succeed provided they have the will, and work hard.”
The regulations established by the government tend to be one-size-fits-all but SMEs need help. He suggested a two-tier system where companies could have a longer timeframe for compliance. In addition, public awareness programmes and workshops could be run, and grants and incentives could be offered as handholding mechanisms for SMEs as they learn the ropes. Jessica said that the board of her organisation was quick to acknowledge that a fast response was necessary when technological disruptions occurred. This resulted in the setting up of a special digitisation committee to provide oversight and formulate the appropriate response strategy.
“One of the key things we grappled with was talent,” she said, remarking that while talent and purpose were critical, organisations were unlikely to get the talent they needed when it was most needed. “The company enjoys good trust and rapport with the public, but it did not move quickly enough to associate their brand correctly. Agreeing with many of the points raised by Tony and Jessica, Jenifer gave an overview of Mars Inc, a company she described as purpose-driven and principled, which, at more than 110 years old, has stood the test of time. “Companies need to stand for more if they truly want to thrive,” she said. “Doing the right thing is really important. You have to stand by your principles.”
Now into its fourth generation, Mars is a family-owned business with iconic brand names such as Snickers, M&Ms and Masterfoods, to name a few. It has a presence in 80 countries but it was not always a large company; founder Frank Mars started by running his business out of his mother’s kitchen. But Mars has become successful because of many reasons; one of these being their consumer-based, purpose-driven approach. “Long before a triple bottom line or stakeholder capitalism was talked about, Mars had already embraced the fact that in order to run a business, you needed to do well to do good,” Thien said. “And you needed to do well by doing good.”
Quoting a memo sent by company head Forrest Mars in 1947 instructing the company to act in a mutual way towards its stakeholders, she said this laid the groundwork for the purpose of the organisation. “Mars always regarded itself as an agricultural company because the company depended on agricultural raw materials to manufacture its products,” she said, adding that the company developed a deep understanding of what it takes to produce its items. Forrest Mars’ heirs took this philosophy further, defining five principles on which the company would be run. This helped them weather many changes in the 1980s and 90s.
It even helped manage the business through serious global issues like child slavery, deforestation, greenhouse gas emissions and water conservation. Mars worked with like-minded suppliers, and changed the way they worked, even committing to using 100% renewable energy. “In 2016, it defined its corporate purpose,” she said. Mars introduced its compass – four quadrants based on strong financial performance, quality business growth, positive societal impact and trusted partners, developing specific measurable metrics under each of these that could be cascaded down to organisations and associates on how to bring the purpose statement to life.
All this did not happen overnight, she stressed. It took years but it could resonate with everyone and also recognised that longer-term commitments are necessary because changing some things takes time. She said that businesses have to be grounded in principles but must go beyond just delivering, to make an impact. “If you are only in the business to deliver the top and bottom line, then it’s a slippery slope,” she concluded. “A lot of businesses do have a purpose but its just stays “on the wall” or ends up as “purpose-washing” that looks good in an annual report or on the website. The hard part is living it.”