Contributor, Korn Ferry Institute
Purpose and Profit Aren’t Foes. Really.
Daniel Goleman is a senior consultant at Goleman Consulting Group, author of the best seller Emotional Intelligence, and host of the podcast First Person Plural: Emotional Intelligence and Beyond. He is a regular contributor to Korn Ferry.
We often say that the future belongs to the young. But it’s also true that the present shapes the world they will inherit.
This is especially true when it comes to the environment. A new Harris Poll survey shows that the members of Generation Z—those aged 26 and younger—are more concerned about the environment now than they were a year ago. Last spring, roughly three-quarters said that they were personally concerned about climate change and the environment; this year, that figure rose to 90%.
Meanwhile, views have become more and more polarized on the environmental, social, and governance (ESG) movement. The anti-ESG movement has been urging firms to boycott not only the movement, but also its primary influencer and leading supporter: financier Larry Fink, who founded BlackRock. Some groups have even attempted to redefine the ESG acronym itself as “Everyone’s Suffering Guaranteed.”
Even as 4 in 5 Americans say that environmental- and climate-change issues are personally important and concerning to them, debate continues on the reality of global warming, the degradation caused by fossil fuels, the future of the planet, and the sustainability of our current industries. Some CEOs have responded by saying they will move ahead with ESG, but be less overt in their language. At the 2023 World Economic Forum in Davos, Switzerland, Coca-Cola CEO James Quincey suggested that the backlash against ESG has made it somewhat “toxic” in America. “I’m just going to stop saying ‘ESG,’” he remarked.
Without going too deeply into political divisions in America, it’s clear that part of the debate around the ESG movement is fueled by the belief that purpose and profit are mutually exclusive. While making a giant shift in how we do business isn’t without some level of short-term financial risk, the data shows that purpose-driven organizations often outperform their industry peers over the long term. A Korn Ferry study found that over four years, purpose-driven consumer-products firms grew their sales at an average annual rate that was 6.5% higher than that of their peers. Another study, from the National Bureau of Economic Research, showed that workers who knew they were pursuing social purpose were 24% faster and had 43% less downtime, with no detriment to the quality of their work.
Positioning profit and purpose as opposite sides of the same coin poses a significant risk to our future—both as human beings who depend on natural resources for survival and as business leaders whose job it is to adapt to the emerging needs of the market without forgoing the financial sustainability of their organizations.
In a recent article, Alexa von Tobel, founder and managing partner of Inspired Capital, a $500M+ early-stage venture-capital firm, explained why being finance driven is key to a company’s survival. One of her advice points was to “invest in value.” “Take this opportunity to deeply refocus on building a business of lasting value that delivers superior products to your customers,” she wrote.
So what defines “superior products” these days?
For many consumers, environmental sustainability factors into the equation. Gen Z’s growing environmentalism expresses itself partly through the brands they choose to recognize. In the fourth quarter of 2022, Gen Z placed five automobile companies in the top 20 in brand recognition. Four of them—BMW, Volvo, Cadillac, and MINI—had recently engaged in campaigns around electric vehicles. BMW announced that it would spend $1.7 billion to build EVs in the US; Volvo presented a small SUV EV aimed at Gen Z; Cadillac promoted its new luxury EV line, Celestiq, with its brand ambassador, Lenny Kravitz; and MINI introduced a new white color for its MINI Electric Cooper line, to celebrate International Polar Bear Week.
Seeing purpose and profit not as foes, but as companions, is the key to “lasting value.” This means measuring the efficacy of purpose not through calculating the immediate cost of change, but by looking ahead and thinking about the cost of doing nothing in terms of ESG and instead, staying the same.
Considering how many people are worried about the planet these days, we can expect more and more consumers to use their spending power to shape the world they will inherit.
Co-written by Elizabeth Solomon