Embedding purpose in business

Embedding purpose in your business

Company founders and business leaders are waking up to the power of purpose. We’re working with Bates Wells Braithwaite (BWB) to design an online tool that limited companies can use to change their articles of association and governance to reflect their social mission. 

A strong sense of collective purpose can drive employee satisfaction, customer loyalty and long-term shareholder value[i]. Entrepreneurs believe that a clear purpose can help their companies to focus, attract clients and differentiate themselves from the competition.[ii]

75%
of entrepreneurs believe having a purpose is very important[ii]
22%
of UK SMEs are ‘mission-led businesses’ with particular social or environmental goals – over 1.2 million enterprises[iii]
60%
of UK adults agree that the most successful brands will be those that make the most positive contribution to society, beyond just providing good services and products[iv]

Purpose can also help founders to build companies that reflect their ethics and values. For some entrepreneurs, this means putting a social or environmental mission at the heart of the business. For others, it means delivering social impact alongside commercial goals.

Evidence shows that purpose is underused

Less than half of company executives say that purpose informs their strategic and operational decision-making[v]. And most entrepreneurs are unaware that company law allows them to embed a purpose in the DNA of their business – in their company articles.

Embedding purpose in this way has a profound impact. It allows founders to fundamentally redefine success for their business. They can put the interests of employees, beneficiaries or other stakeholders on a par with or even ahead of shareholders’ financial interests.

Specifying a purpose alongside or beyond profit places a duty on directors to take decisions in line with that purpose.[vi] It represents an unambiguous commitment and underpins authenticity for internal and external stakeholders. It helps a company to encourage a purposeful culture and behaviour.

The 2016 Mission-Led Business Review recommended that government should raise awareness of the existing legal flexibility to embed purpose, and establish clear ways for entrepreneurs to take advantage of it.

Our solution

In response, we’re working with Bates Wells Braithwaite to design a unique digital tool that will offer a free and credible way for founders to embed purpose into their company articles.

The initiative has the backing of the Government Inclusive Economy Unit and input from Companies House and the Department for Business, Energy and Industrial Strategy, alongside industry partners including the National Enterprise Network, Thomson Reuters Foundation, Message House and Grant Thornton.

What we’ve done so far

Over the last nine months, we have gathered user-insights and carried out market research.

Once they understand that embedding purpose in their company articles is possible, around two-thirds of entrepreneurs see this as a valuable step for a business to take.[i]

Nearly nine in 10 (88%) of entrepreneurs we surveyed said that they would be likely to use a tool like this if they were looking to amend their current articles.

We’re now building a demo version of the tool and will be testing this with users over the next two months.

Entrepreneurs and business owners will be prompted to think about their company’s purpose and how they would like to build it into their organisation. Based on their responses, the tool will present users with amended company articles for them to review and submit to Companies House if they wish.

Who is this for?

Our tool is for founders or owners of private limited companies. It’s aimed at relatively early stage companies – up to three years old – but some will only just be at the point of incorporation and others will be more established.

These founders and owners might be at a significant decision point, such as preparing to take on investment or approaching an exit – or know that they are likely to face a situation like this in the future.

They might be interested in embedding purpose in order to ensure focus, to attract or retain talent, to send a signal to consumers or investors, or to ensure the founder’s legacy.

Across all of the above, users will be given tips on how to define their purpose and guidance on the implications of their decisions. The tool will not constitute legal advice and users will be encouraged to seek this where appropriate.

The tool will also be useful for lawyers, accountants, business advisors and other intermediaries whose clients are interested in embedding purpose.

What comes next?

We will be launching the tool in early 2018, and kicking off an awareness campaign that will drive a broader conversation about purpose.

We invite others to get involved in promoting the tool or supporting the broader campaign – please get in touch to discuss sponsorship opportunities or if you can help us to get the word out in other ways.

Founders interested in a sneak preview of the tool should watch out for demo sessions during Global Entrepreneurship Week in mid-November.

Notes

[i] http://www.biginnovationcentre.com/purposeful-company

[ii] Message House research for UnLtd, September 2017.

[iii]https://www.gov.uk/government/publications/social-enterprise-market-trends-2017 and https://www.gov.uk/government/publications/advisory-panel-to-mission-led-business-review-final-report.

[iv] www.ipsosglobaltrends.com/just-how-much-do-sustainability-and-brand-purpose-matter

[v]/www.ey.com/gl/en/issues/ey-beacon-institute-the-business-case-for-purpose

[vi]S172(2) of the Companies Act states, “Where or to the extent that the purposes of the company consist of or include purposes other than the benefit of its members, subsection (1) has effect as if the reference to promoting the success of the company for the benefit of its members were to achieving those purposes.”

 

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