Getting Nabbed for ‘Purpose Washing’

On paper, nearly every company has a stated purpose, spelled out in a mission statement that used to be generally ignored. Until now.

In the United Kingdom at least, an increasingly vocal group is taking boards to task over it. A recent survey found that 86% of companies have a purpose statement. That’s the good news. But the findings also show 83% of them haven’t determined what it means on a daily operational basis. According to the group that conducted the survey, Business in the Community, if a firm’s actions don’t reflect that stated purpose, the company can be accused of “purpose washing,” or treating purpose as a public relations tool rather than a set of principles to guide the organization.

Of course, the survey was limited to the UK, but it's likely an issue across the pond in the US too. That would be unfortunate in today’s age, as the so-called purpose movement has taken hold, with everyone from investors to consumers taking an active interest in whether a company’s business is contributing to the greater social good, from gender equality to a cleaner environment. That puts more emphasis on mission statements, which have been around for years without attracting much attention.

“Deeds speak louder than words,” says Lucy P. Marcus, head of Marcus Venture Consulting and an expert on governance who sits on boards for multinational corporations. “The actions cannot be contrary to the mission. It doesn’t need to be complicated.”

Business in the Community, part of the nonprofit Prince of Wales Charities, was created to “champion responsible business.” Its survey of 64 firms found that only a third of them reported having performance-management systems in place to integrate responsible business objectives across the business. “We can, for the first time, measure how much companies are walking the talk in responsible business,” says Amanda Mackenzie, chief executive of Business in the Community.

For the most part, stakeholders put the onus of monitoring purpose on board directors, who they say need to set the organization’s tone and not look the other way when something doesn’t seem right. “If something feels bad, you have to pay attention,” says Marcus. That might mean insisting that the company put in place training programs so that managers know what to do and what not to do.

Though the values behind mission statements are obviously important, some experts oppose creating admirable taglines that are hard to abide by. “If you don’t or can’t live up [to] the values, then the impact is worse than if you had never espoused those values, mission, or purpose in the first place,” says Signe Spencer, a client research partner at the Korn Ferry Institute. “In the long run, or even the medium run, purpose washing is likely to backfire.”

Spencer says some companies manage to avoid these risks by having a brutally honest but straightforward goal. “Some clients I know have done quite well by just frankly saying that their purpose is to increase shareholder value, period,” she says. “As long as your practices and procedures are aligned, it works OK.”