Why a strong sense of purpose is good for business
As the Great Resignation wave rippled across the world, India was certainly not spared. The attrition rate in India currently stands at 20%, with the most impacted sectors being the ones that also witnessed the highest salary increases. In fact, voluntary resignation is a key reason for this trend which suggests that employees are looking for a special ‘X factor’ beyond monetary rewards.
Underlying the Great Resignation wave and other workplace trends like Quiet Quitting is a sense of disenchantment with corporations. More than just a transactional relationship with their employers, Indian employees today are looking for a sense of purpose. They aspire to associate with organisation’s that practice stakeholder capitalism, rather than just serving their shareholders.
To attract and retain the best and the brightest, organisations must therefore move away from a profit-at-all-costs approach to embrace a purpose-led business model. While purpose and capitalism may seem to be contradictory ideals, the truth is that a strong corporate purpose is a key to ensuring the financial and social sustainability of businesses in the long run.
Why purpose matters now
Corporate purpose is not only just about talent recruitment and retainment. Increasingly, purpose-driven organisations that are willing to take a stand on what matters are more likely to bring in investors and attract loyal customers.
Case in point, India recently made Environmental Social and Governance (ESG) related disclosures mandatory for its top 1,000 listed companies; and sustainable investments in the country are predicted to reach $125 billion by 2026.
Likewise, Indian consumers are actively seeking out socially responsible brands. In a 2022 survey by Bain & Company, nearly half of Indian respondents shared that they have started buying sustainable products in the past two years, while a whopping 94% were willing to pay a premium for more sustainable products.
The elusive connection between “doing good” and business growth
The business case for building a purpose-led business is crystal clear. Yet, the path toward balancing purpose and profit is often much more elusive.
While we all understand that purpose has a positive impact on employee engagement, customer loyalty, creativity, branding, and more, this may not hold in the immediate term. To truly ‘live’ the corporate purpose, businesses will have to walk away from some deals even if they will have an adverse revenue impact. For instance, a company in children’s products might have to avoid partnerships with brands promoting or selling fast food, cosmetics, tobacco, and alcohol.
Leaders, therefore, have the unenviable job of navigating this paradox of short-term impact and long-term benefits. Organisations will need courageous leaders who are not afraid to take an unpopular stand in making short-term trade-offs for the sake of long-term sustainability.
Building a financially sustainable purpose agenda
To build ethical and profitable organisations, leaders must find a pragmatic, long-term, and sustainable purpose. Top leadership teams must carefully assess the materiality of sustainability initiatives, selecting a purpose agenda based on its alignment with their overall business strategy and competitive advantage instead of jumping on the latest ‘bandwagon’.
For instance, Mahindra Finance, the financial services unit of Indian conglomerate Mahindra Group, embraces the RISE philosophy, which is centred around the purpose of innovation and positive stakeholder impact. To align purpose and business agenda, Mahindra Finance decided to target its core offering, vehicle financing, to rural areas, where there is a large unbanked population who often have no identity documents, no collateral, and erratic cash flows.
To serve their unique needs and help them gain access to vital financial services, the company created new and innovative ways to craft repayment terms, customer approval, disbursement, and collections. It even went one step further to help farmers obtain insurance for their tractors, lives, and health.
Profitable businesses are built by good leaders; but only outstanding, purpose-led leaders can dig deep to find a sweet spot between their corporate purpose and business strategy, building a long-term purpose agenda that drives change and impacts the lives of wider communities within India.