Purpose-Driven Business: Powerful Revolution OR Corporate BS?

Jake Strom
Oct 23, 2019 · 7 min read
Credit: Obvious Ventures

In The Purpose Revolution, John Izzo & Jeff Vanderwielen argue that a “revolution of expectation” is happening among employees, consumers and investors. In summary:

  • Employees want competitive salaries & great benefits (no surprise there!) — but ALSO, increasingly, want to feel that their work is making a meaningful difference in the world
  • As consumers, we gravitate towards mission-driven brands that minimize harm to the environment, and actively champion causes we care about
  • A “sea change” of capital is flowing into companies committed Environmental, Social & Corporate Governance (ESG). Brands are “Doing Well” AND “Doing Good” at the same time — and investors are paying attention!

For the most part, I AGREEE with Izzo & Vanderwielen’s core thesis.

As a Founding Member of TOMS Shoes, I experienced first-hand the Power of Giving. In the early days of TOMS, our mission was so clear & compelling that customers became fans & evangelists. Employees worked with inspired passion — not because the company offered the highest salaries or best benefits — but because, collectively, we were creating something special. One of the largest advertisers in the world, AT&T, spent millions of dollars promoting a “TOMS Commercial” because our story was simple, authentic, emotionally-compelling… and (fingers crossed) might convince people to buy cell phone service!

Where I DISAGREE with Izzo & Vanderwielen is how we define what a “purpose-driven” company is.

Sprinkled throughout The Purpose Revolution are anecdotes from mission-driven companies like Patagonia, Seventh Generation, Whole Foods… and Coca Cola?!?

Izzo & Vanderwielen describe Coca Cola as a company with a “long history of sustainability” and “deliberate approach to how its higher purpose plays out in society.” We learn that:

  • In its CSR efforts, Coca Cola prioritizes 3 core focus areas: Water, Women & Well Being — all of which are “essential” to Coke’s long-term business, says company Chairman & former CEO, Muhtar Kent
  • Coke holds itself accountable with measurable goals, action plans, & annual reports. By 2020, for example, Coca Cola aims to improve water efficiency in its manufacturing operations by 25% compared to a 2010 baseline
  • While Coca Cola is NOT a “medicine company,” after connecting with an aide worker on Facebook, the company realized that it could use its Supply Chain to deliver medical supplies to communities in developing countries

Less anyone criticize Coca Cola, Izzo & Vanderwielen add that:

“We can debate the benefits and ills of sugar-based soft drinks, but ask anyone who regularly uses the products and they will tell you that, for them, it is refreshing. So purpose, doesn’t always have to please everyone. But it had better work for the core people you are trying to reach; and with a real commitment to make the world better to pass the credibility test.”

As a thought experiment, re-read the previous quote and replace “sugar-based soft drinks” with “tobacco,” “prescription pain killers,” OR “crack cocaine.” While JUULing may NOT please everyone (including parents, school administrators, or the inhaler’s lungs), it’s certainly enjoyed by a core group of people — and JUUL, bless its heart, believes it’s fulfilling an important mission! Check out this 60-second commercial advocating the benefits of JUUL vs. smoking. Oy vey!

Coca Cola is a vast multinational corporation that, to be fair to company executives, is doing some genuine good in the world. If I lived in a developing country with limited infrastructure, I would be enormously thankful to receive medicine delivered by Coke’s Supply Chain. Similarly, the Arctic polar bears need as many environmental champions as possible. As global citizens concerned about Climate Change, we should applaud Coke for donating $2M to the World Wildlife Federation (Source). Every dollar counts!

BUT, all things being equal, is Coca Cola really a model “purpose-driven” company?

What makes TV shows like The Sopranos & Breaking Bad so compelling is how nuanced the characters are. While a purveyor of crystal meth, Walter White is never 100% “evil” OR 100% “good.” Walter is callous, narcissistic, vindictive — and, sometimes in the same episode, concerned, thoughtful, & admirably brave. Much like our favorite TV characters, companies must be viewed holistically to fully understand their impact on consumers, employees, & the environment.

From this perspective, it’s NOT always clear what qualifies as a “purpose-driven” company. To illustrate the point, consider the following simplistic examples:

  • A large tech company proudly donates 50% of its annual profits to NGOs fighting infectious diseases — BUT turns a blind eye to its Supply Chain, which heavily relies on overseas factories with poor working conditions
  • Passionate about creating high-quality domestic jobs, a Detroit-based entrepreneur opens a state-of-the art factory in an abandoned car plant. The company, which produces single-use plastic bottles, has a near perfect rating on Glassdoor!

Should we praise the tech company for improving the lives of MILLIONS of people? Or vilify the company’s CEO for creating unnecessary hardship for thousands of overseas factory workers?

The world certainly doesn’t need more single-use plastic bottles… but shouldn’t we celebrate companies that treat their employees with dignity & respect, and improve communities with high-quality jobs?

Credit: The Ringer

In August, the Business Roundtable — an organization comprising the CEO’s of Amazon, Apple, Wells Fargo, Chevron & ExxonMobile, among many other leading corporations — made headlines by releasing a new “Statement on the Purpose of a Corporation.”

“While each of our individual companies serves its own corporate purpose,” the document says, “we share a fundamental commitment to all of our stakeholders” including:

  • “Delivering value to our customers”
  • “Investing in our employees”
  • “Dealing fairly and ethically with our suppliers”
  • “Supporting the communities in which we work”
  • “Generating long-term value for shareholders”

The pledge is a BOLD VISION… and if acted upon, would arguably represent one of the most important turning points in American corporate history. But is it total BS?

Members of the B Corp community certainly think so.

On August 25th, 33 B Corp CEOs ran a full-page ad in the The New York Times directly challenging the Business Roundtable. With the bold title “Let’s Get to Work,” the open letter states:

We are part of a community of Certified B Corporations who are walking the walk of stakeholder capitalism. We are successful businesses that meet the highest standards of verified positive impact for our workers, customers, suppliers, communities and the environment.

… We operate a better model of corporate governance… which gives us, and could give you, a way to combat short-termism and the freedom to make decisions to balance profit and purpose.

If, in 2019, Gecko still controlled Teldar Paper, he would almost certainly be a member of the Business Roundtable — and a signatory of the lofty “Statement on the Purpose of a Corporation.” If your driving motivation is making money above all else, at least have the common sense to PRETEND you’re a “purpose-driven” company!

As consumers, investors & community members, expecting perfection from for-profit companies isn’t reasonable. Companies must be evaluated in a holistic manner that accounts for their products/services, supply chain, environmental impact, & company culture.

The most admirable “purpose-driven” companies honestly balance the demands of capitalism with a genuine desire to make the world a better place AND avoid unnecessary collateral damage. If you’re a billion-dollar corporation selling sugary beverages to kids, or an oil & gas company lobbying Congress to drill off the coast of Alaska, please save us the doublespeak and stop pretending to be something you’re not.

In closing, I’ll leave you with this:

Supreme Court Justice Potter Stewart famously wrote that pornography is challenging to define — but “I know it when I see it.”

In a world of corporate jargon & misdirection, Stewart’s common-sense approach seems more prescient than ever.

To all the entrepreneurs using business as a “force for good,” we’re rooting for your success. As consumers, employees & investors, we crave AUTHENTICITY — and we know it when we see it!

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Jake Strom

Written by

Professionally Curious Investor. Founding Member @TOMS. Travel + Epic Adventures + Lifelong Learner

The Startup

Get smarter at building your thing. Follow to join The Startup’s +8 million monthly readers & +787K followers.

Jake Strom

Written by

Professionally Curious Investor. Founding Member @TOMS. Travel + Epic Adventures + Lifelong Learner

The Startup

Get smarter at building your thing. Follow to join The Startup’s +8 million monthly readers & +787K followers.

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