Corporate purpose definition: what is it all about? (2022)

Many people talk about it, often with long explanations and flowery words. But in a nutshell what exactly is a corporate purpose? Corporate purpose does not lend itself to a standard definition. However, the common corporate purpose definitions are largely similar, at best emphasizing different areas of a corporate purpose.

We have compiled an overview of well-known and less well-known explanations and, of course, our own definition. As with any discussion, it is important to clarify the question of corporate purpose beforehand: What are we actually talking about? Is there a common understanding?

Some authors emphasize thesocial and ethical responsibilityof companies in their definitions. In their point of view, companies should show attitude and make a contribution to overcoming the major global challenges. In other definitions, the topics ofidentity and the creation of meaningcome to the fore in view of the changed expectations of employees – also because an overriding sense can explain and drive transformation processes in companies well. Still other authors seevalue creationin the foreground of their definitions, because a brand purpose should not be an end in itself; at the end of the day, a company is also subject to economic constraints. But most authors do not play the different aspects of corporate purpose off against each other. Some even combine all criteria in their definitions.

In our experience, when the topic of brand purpose is discussed in companies, the various corporate divisions also bring different definitions of corporate purpose into the discussion:

  • Marketing often sees corporate purpose as asales argumentwith a view to customers.
  • The HR department is concerned withconveying meaning to employees– it therefore often sees corporate purpose as an important component of employer branding.
  • For communications, purpose is usually a question ofreputation.
  • The investor relations department sees purpose primarily as arequirement demandedby an increasing number of institutional investors. Here, you may think of purpose as a soft expression of a corporationsESG commitment.
  • Top management and the corporate strategy departments often understand purpose as adriver of value creation and transformation processes.

Our holistic corporate purpose definition

“A purpose describeswhy an organization exists. It defineswhat it stands forand to what extent it can make asustainable positive contributionto thevalue-creating coexistenceof business, society and the environment.”

Globeone

Corporate purpose definitions that emphasize social responsibility

“The statement of purpose campaign urges companies to issue a statement of purpose to ensure better, more transparent andmore socially responsiblecorporate governance. The statement is a simple one-page declaration, issued by a company’s board of directors, that clearly articulates the company’s purpose and how to harmonizecommercial successwithsocial accountability and responsibility.”

Eccles & Youmanns (2019): Statement of Purpose Guidance Document

“In its place, the CEOs of Business Roundtable adopted a new Statement on the Purpose of a Corporation declaring that companies should serve not only their shareholders, but also delivervalue to their customers,invest in employees,deal fairly with suppliersandsupport the communitiesin which they operate.”

Business Roundtable (2019): Statement On The Purpose Of A Corporation

“Purpose is the statement of a company’smoral responseto its broadly defined responsibilities, not an amoral plan for exploiting commercial opportunity.”

Bartlett & Ghosal (1994): Beyond Strategy to Purpose

Corporate purpose definitions that emphasize identity and creation of meaning

“Purpose is thereasonfor doing something; theaimto which an action […] is directed.”

Cambridge Dictionary

“Purpose is thereason the company existsnot only materially and economically but also emotionally and spiritually. It is the enterprise’s unifying statement of commitment to customers, employees and the larger world it operates in. If a company’s brand positioning statement appeals to customers’functional and emotional needs, then its purpose statement expresses the company’s soul, defining how it serves Customers, the Organization and the Rest of the World (its COR stakeholders).”

Randall (2016): How Brand Purpose Propels Brand Profits

“Purpose is a definite statement about the difference you are trying to make in the world. It´s yourreason for beingthat goes beyond making money, and it almost always results inmaking more moneythan you ever thought possible.”

Spence (2009): It’s Not What You Sell, It’s What You Stand For: Why Every Extraordinary Business Is Driven by Purpose

“Purposeguides actions,unites employeesand connects organizations to their stakeholders. It orients a company to a guiding ‘North Star,’ broadly influencingstrategy and execution.”

Rosethorn (2019): Becoming Purposeful

“A higher purpose is not about economic exchanges. It reflectssomething more aspirational. It explains how the people involved with an organization aremaking a difference, gives them asense of meaning, and draws their support.”

Quinn & Thakor (2018): Creating a Purpose-Driven Organization

“[…] we propose that a firm’s purpose cancreate value– beyond its social impact – by developing orstrengthening employees’ identity and reputation. […] We define ‘purpose’ as aconcrete goal or objectivefor the firm that reachesbeyond profitmaximization[…]”

Henderson & Van den Steen (2015): Why Do Firms Have ‘Purpose’? The Firm’s Role as a Carrier of Identity and Reputation

Corporate purpose definitions that emphasize value creation

“Purpose is not a mere tagline or marketing campaign; it is a company’sfundamental reason for being– what it does every day tocreate valuefor its stakeholders. Purpose is not the sole pursuit of profits but theanimating forcefor achieving them.”

“Purpose unifies management, employees, and communities. It drivesethical behaviorand creates an essential check on actions that go against the best interests of stakeholders. Purpose guides culture, provides a framework forconsistent decision-making, and, ultimately, helps sustainlong-term financial returnsfor the shareholders of your company.”

Fink (2019): Larry Fink´s 2019 Letter to CEOs: Profit & Purpose

“Corporate purpose is thehigher purposeof a company that goes beyond the sole profit orientation. The purpose is to define and deliver along-term value-creatingpromise, either in the company’s local environment or in the global market environment, that is directly related to the company’s value creation.“

Bruce & Jeromin (2020): Corporate Purpose – das Erfolgskonzept der Zukunft

“The purpose of the corporation must be redefined ascreating shared value, not just profit per se. This will drive the next wave ofinnovationandproductivity growthin the global economy. It will alsoreshape capitalismand its relationship to society, and legitimize business again as a powerful force forpositive change.”

Porter (2011): Creating Shared Value

What the different corporate purpose definitions have in common

If one looks at this collection of different, but overall often quite similar definitions it becomes clear: from the point of view of most authors, a corporate purpose describes the identity of a company. It represents the reason for existence, the big why of a company, its objective. It explains the philosophy behind the business model, the meaningful essence of the company and the guiding maxim for every economic action of the organization. Simply put, purpose is a definitive statement about the difference a company is trying to make in the world.

A purpose statement articulates how a company strives to harmonize commercial success with social accountability and responsibility. This requires the company to recognize and be transparent about its most significant stakeholders. An authentic brand purpose goes beyond having a compelling corporate social responsibility initiative or a shared value strategy for a product or a service. An authentic purpose can be seen across all company’s operations.

The benefits of brand purpose

A company’s purpose has the power to engage and inspire employees, generate customer loyalty, and help businesses chart a course for sustainable, meaningful growth. Because the fact is that the economic system, we have lived by for many decades, is threatening the very basis of life on our home planet. Future-oriented companies are developing into networked organisms that demonstrably also bear responsibility for the common good. Those who shirk their responsibility could soon find themselves very much alone. Because as an employee, you can determine who you advance with your work and how. And as a customer, you can decide who you support – and who you don’t.

A corporate purpose can enable a responsible culture of doing business – with ideas for innovation, newly developed markets and broader target groups. Corporate purpose is a corporate philosophy, a management and steering tool for the entire activities of a company. In summary, most authors understand a corporate purpose as the formulated assumption of responsibility for economic activity in the environment of all stakeholders, users and also non-users of the service provided by the company.

Sources:

Bartlett & Ghosal (1994)
Bruce & Jeromin (2020)
Business Roundtable (2019)
Cambridge-Wörterbuch
Eccles & Youmanns (2019)
Fink (2019)
Globeone
Henderson & Van den Steen (2015)
Porter (2011)
Quinn & Thakor (2018)
Randall (2016)
Rosethorn (2019)
Spence (2009)

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