There has been some talk of investors pushing back against Blackrock – an investment manager that has been a champion of a purpose-driven approach. Is it a harbinger of a larger migration away from brand purpose?

The rise of purpose

In recent years, the concept of brand purpose gained significant traction. Many companies embraced the idea of creating a positive impact on society while pursuing profits. This approach, often referred to as "doing well by doing good," gained traction as consumers, investors, and employees increasingly demanded more from the companies they engaged with.

From shareholders to stakeholders

One big reason for the success of purpose-driven brands was a critical shift in thinking that happened in these organizations. They realized that they no longer could be beholden to only the shareholders. They had to expand their responsibility to all stakeholders. That included customers and prospects, employees, and the communities they served.

When all these stakeholders were taken into consideration, it changed how the organization looked at why it existed. Or, in other words, its purpose. As this became the focus, the brands discovered the boons. Purpose-driven brands enjoyed higher customer loyalty and increased market share as consumers gravitated towards those that aligned with their values. Employees also reported higher job satisfaction and productivity when working for companies with a strong sense of purpose. Purpose-driven organizations were also seen as attractive employers, drawing in top talent and fostering innovation.

The pullback from purpose

Recently we have seen some businesses retreat from a purpose-forward approach with their brands. Even with all the documented advantages of a purpose-driven brand, this pullback is not surprising.

A slowing economy and rising inflation bring pressures to bear that organizations may have not felt in a good long while. Investors clamor for short-term profits. 

When leaders can’t find opportunities for growth in this environment, they look to what they can cut. A purpose-driven approach can foolishly be portrayed as nonessential as organizations look to replace it with easily quantifiable short-term tactics (price reductions and promotions).

These tactics can create a short-term rise in results. But it makes a dangerous trade-off. For example, with customers,  you swap out those who value purpose with a new contingency that is drawn to a price reduction or promotion. As stated before, you may get a spike in results but you may also end up alienating a profitable and loyal customer for a more transient one who is only driven by price and promotion.

Unfortunately, less strategic organizations fall into the trap of making the trade, abandoning the greater potential of purpose in order to mollify investors. 

The fallout

When brands move away from a purpose-driven approach, it can lead to a number of negative repercussions. Employee satisfaction takes a hit and along with it, productivity. Recruiting becomes more challenging – in an already challenging environment. 

With customers, trust is breached. Once that happens, it becomes even more difficult to convince prospects to engage with your brand. Moreover, in an interconnected world where consumers have access to information like never before, companies risk facing public backlash and boycotts if they are perceived as abandoning their purpose-driven approach.

The silver lining

There may be a silver lining to all this. The brands that so easily abandon their purpose-driven approach are the ones that are insincere. They may have seen purpose as an opportunity to attract new business or boost their reputation. Their focus wasn’t on the stakeholders. It was on them. And they never really committed to a purpose-driven approach. 

They need to go. It helps eliminate noise in the market. It helps all of us to more easily recognize those brands that are authentic and committed to a purpose. 

As with any downturn, there is a revealing of character that happens with brands. That’s what makes these interesting times. How will your brand or the brand you manage react? Hopefully, it’s wisely. And with purpose.