EY | Assurance | Tax | Transactions | Advisory About EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. With the creation of an institute dedicated to the science of purpose, we’re moving from intention to action. Inspired by our commitment to build a better working world, this institute will be a collaborative, catalytic force to transform business. In partnership with thought leaders around the world, we’re advancing the science and execution of purpose by: EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com. © 2015 EYGM Limited. All Rights Reserved. EYG no. AU2860 BSC no. 1412-1368980 Burning platform? Burning ambition? ED None This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax, or other professional advice. Please refer to your advisors for specific advice. ey.com Accelerating research and thought leadership, documenting the business case and stories of how to embed purpose in the core business model to drive innovation and growth Convening a community of diverse members committed to honest inquiry and action on their own purposeful journey Holding year-round Publicly recognizing events to advance this dialogue and exchange leading practices individuals, teams and organizations leading with purpose Building on the impressive work to date, the institute pushes the movement forward, giving companies, individuals and organizations the hard tools for their journey. Join us on the web: www.ey.com/purposeinstitute on Twitter: @EY_Advisory Let’s build a better working world together. Can a company’s purpose improve its agility to transform? Charting an evolution Transformation trends Phase 1 joint research study findings Current global realities have changed the game. Today, corporate capacity for innovation and transformation is a critical imperative to survive – and to thrive. This is transformation beyond better products or services. It is the ability to do business in fundamentally different ways, attuned to these new realities. 1 An evolving view of the corporation’s role increasingly emphasizes the corporation as a partner for societal well-being. In this period of increased inequality and austerity, leaders speak often about the corporation as both a source of shareholder value and a tool for addressing challenges. For many in our sample, the times point to a historically distinctive moment, when the institutional foundations of the corporation are contested. Their shared voice argues for a view of the corporation as a partner to address global challenges. We have observed senior executives, including those leading EY’s own transformation by building a better working world, pioneering a portfolio of new approaches leveraging purpose to spur and sustain innovation and growth. As a strategic transformation force for global corporations, EY has observed a dynamic shift into this new era of transformation. Across industries and geographies, this focus is a move beyond harm reduction — or the corporation taking responsibility for externalities — to now having an active role in creating well-being. This tracks key shifts: from “value creation for its own sake” to “value creation without harm,” to now actively “building value for and with a wider set of stakeholders.” EY and the University of Oxford Saïd Business School are collaborating on research to understand this shift. Launched during the 2014 World Economic Forum Annual Meeting of New Champions in Tianjin, EY and the University of Oxford Saïd Business School have completed an initial review of relevant literature, assembled case studies from global firms, and interviewed senior executives across industries and geographies worldwide. 2 The corporate dialogue on purpose is louder and is changing. We also observe an expansion from the traditional mission statement that predominantly focused on products and services (what companies do) a 2014 global survey conducted in collaboration with Harvard The full report will Business be Review Analytic Services. The full available in spring 2015 at report will be available in March 2015 atwww.ey.com/purposeinsights. www.ey.com/us/en/purposeinsights Executives are using a common language of purpose to engage stakeholders. Pioneering CEOs and other senior leaders are speaking a language of purpose that engages employees and customers in new ways, inviting their insights for innovation. This is a language of open-sourced value creation among diverse constituents. It foregrounds “meaning” with an appeal to shared values that invite the extended group of stakeholders — employees, customers, suppliers, regulators and others — to recognize a stake in the growth path of a corporation. Making (shared) meaning in this way is critical work for leaders today. 2013 2011 2009 2007 2005 2003 2001 1999 1997 Corporate/organizational purpose Corporate/organizational sustainability Publicdiscourse discourseabout about “corporate/ Public “corporate/organizational organizational purpose” has increased purpose” has increased ﬁvefold since 1995, trending at an exponential rate that surpasses fivefold since 1995, trending at an the rate of public about sustainability. exponential ratediscourse that surpasses the rate of These pioneering senior leaders use a language that links firm innovation and renewal with contributing to addressing significant challenges — or providing for human well-being in ways that go beyond product lines and traditional competition. Taking a view that “purpose drives profits,” they seek to involve existing and new product/service lines in ways that achieve this broader purpose. They are also initiating purpose-led transformation journeys in their organizations, spanning from the brand identity through the business model, across business units and functions. public discourse about sustainability. Source: XYZ 123 source source source source source Source: Factiva database Purpose-driven organizations are believed to have better results 3 89% Shareholder Shareholder 35% 85% Creating value for the customer 76% Positively impacting society Purpose-led transformation benefits Today, in ways that are historically novel, “purpose” and “meaning” have a role as a strategic, transformational element. Our findings indicate corporations are at various stages of a journey that explores or expands their institutional purpose — and then aligns strategy, business models and processes to execute. At the organizational level, executives recognize the more immediate benefits, such as providing competitive differentiation and increasing consumer sales and loyalty. It is also recognized as a useful tool to build trust in the wider marketplace. Embedded into the structure and operating model, institutional purpose may also enhance employee morale, attract talent, increase productivity and decrease attrition. Importantly, these CEOs anticipate that a purpose-led transformation will enhance organizational agility — i.e., their capacity to adapt to an increasingly dynamic, uncertain and interdependent macro business environment — and do so in a way that engages employees, customers and stakeholders to drive sustainable growth. 81% 4 Purpose is being underleveraged Purpose 70% believe it is important to integrate purpose into core business functions Purpose But only 37% Strategy development Greater employee satisfaction Better customer advocacy Higher-quality products and services 84% believe their transformation efforts will be more successful if integrated with purpose 85% 53% Product development Generating ﬁnancial return for shareholders Operations Major gaps between the importance of purpose integration vs. actual integration and 63% Business model say their business model and operations are well-aligned with their purpose Employee Top three purpose elements 85% A broad cross-section of business professionals and thought leaders recognize the importance of integrated, humane purpose as a core decision-making lens driving core functions like strategy, business models and talent management. But they also report a gap between this recognition and the policy and practice in their organizations. Our research points to still uncharted territory where purpose reinforces innovation in offerings, business models and governance. feel they are successful at innovation and continuous transformation Purpose Society There is an implementation gap: purpose is underleveraged to drive transformation. Purpose is viewed as a driver of innovation and transformation believe companies perform best over time if their purpose goes beyond proﬁt Customer The following insights are based on a 2014 global survey of business executives among the readers of HBR and EY clients conducted by Harvard Business Review Analytic Services and The following insights are based on sponsored by EY. 3 bu t 87% On the far end of a spectrum we observe companies fully restating their identity in the marketplace, grounded in an outward-facing declaration around their role in the global community. This contemporary usage of “purpose” is distinctive and promising as a source of action. Purpose can be a lever driving innovation and transformation for growth. 2 Corporate purpose goes beyond ﬁnancial results 5 4 1995 While “purpose” is certainly not new to conversations about commercial activity, more than ever it is dominating the conversation. Our initial findings reveal that pioneering executives are talking about purpose more and more and in different ways. This idiom is new, and consequential. Our initial findings point to the following trends, challenges and benefits of this attention to purpose-led transformation. 1 and attributes such as trustworthiness and timeliness (how they do it) to corporations also articulating a broader purpose that is their reason for being (why they exist). 55% plan to leverage purpose in strategy development in the near future 39% Business model 40% Importance of integration 74% 72% Actual integration