Business Doesn’t Need a ‘Social Purpose’ Revolution

There is no shortage of candidates for the title of the most dangerous business idea of the moment. Management-by-algorithm may remove what humanity there is left in the corporate world. The office-less future may dissolve workers into angst-ridden atoms. I want to suggest a less obvious contender for the title: “social purpose.”

The idea of social purpose can be heard wherever high-minded people gather to talk about business. In America, BlackRock Inc.’s CEO Larry Fink argues that companies should have a “social purpose beyond financial performance,” and that this purpose should involve a “positive contribution to society.” In France, the 2019 PACTE Act gives companies more freedom to pursue social as well as profit-maximizing purposes. Globally, almost every management consultancy or accountancy worthy of the name has a practice devoted to the promotion of the p-word.

Yet the clamor for social purpose may be heard today most loudly in Britain, the country that invented the limited liability company. The British Academy, a club of prominent academics, recently concluded a four-year project on the future of the corporation with a tortuously alliterative definition of the purpose of business: “creating profitable solutions for problems of people and planet, and not profiting from creating problems.” More than 900 British businesses, from local firms to high-street brands, have jumped on the “purpose” bandwagon.”

It’s tempting to dismiss the academy’s work as yet more well-meaning guff, up there with mission statements and “we are the world” advertisements. What does it mean for a corporation, as opposed to an individual, to have a social purpose? And what is the distinction between a business purpose and a social purpose? The French defense and technology company Thales SA spent six months working on a statement of its corporate purpose, consulting more than half its 86,000 workforce, only to come up with “building a future we can all trust.” Terry Smith, the boss of the £29 billion Fundsmith Equity Fund, is so sick of Unilever Plc’s habit of dolloping the term on everything that it produces that he exclaimed, in a recent letter to investors, that “a company which feels it has to define the purpose of Hellmann’s mayonnaise has, in our view, clearly lost the plot.”