Insights April

The invasion of Ukraine is not progressing as the aggressor would have wanted, which is down to a number of factors, including I believe, the purpose for which the two separate armies and their soldiers are fighting. The war also takes a lot of my attention. I assume that many people are a bit like me in that respect and therefore not everyone may have noticed that in early April, the 6th assessment report of the IPCC, working group III delivered a very interesting report on mitigation of climate change.

IPCC – at least there is some hope!

My reading of the report is that there is certainly room for hope for a decent future – but it is getting urgent. For a start, the report states that “Average annual GHG emissions during 2010-2019 were higher than in any previous decade, but the rate of growth between 2010 and 2019 was lower than that between 2000 and 2009. (high confidence)”.

One precondition for change is that financial flows change direction: away from fossil fuels and unsustainable practices to renewables and more circular business models. However, climate-related financial risk is underestimated by financial institutions. That limits the financial sector’s ability of being an enabler of the transition. Or as the IPCC-report puts it:

There is sufficient global capital and liquidity to close global investment gaps, given the size of the global financial system, but there are barriers to redirect capital to climate action both within and outside the global financial sector, and in the macroeconomic headwinds facing developing regions. Barriers […] include: inadequate assessment of climate-related risks and investment opportunities, […] and limited institutional capacities (high confidence).

The report also concludes that net-zero CO2 emissions from the industrial sector is a challenging but possible target.  One reason is falling unit cost of low-emission technologies. That is promising, especially as it also gives hope to people living in poverty:

Eradicating extreme poverty, energy poverty, and providing decent living standards (FOOTNOTE 21) to all in these regions in the context of achieving sustainable development objectives, in the near-term, can be achieved without significant global emissions growth. (high confidence)  

Personally, I think that regulation will continue to play an important role in the transition towards a greener and more sustainable economy. However, regulation and other state interventions will not take us all the way. We also need to look at cultural and individual preferences towards sustainability. And when doing that, “the higher purpose” of organizations and businesses plays an important role.

Purpose – the reason for which something is done: intention, resolution, determination…

There are different ways in which to view purpose. I think most people would agree that companies with lots of “purpose” are in a better place to deliver on their goals than those who are not. You may have read studies on the advantages with a strong sense of purpose (and there are quite a few), or perhaps you have experiences of your own; you may have observed that people who like what they are doing (i.e. have a purpose) are usually more motivated and perform “better”?

In a recent article, What Is the Purpose of Your Purpose? (hbr.org) authors Knowles, Hunsaker, Groves and James, distinguish between three aspects of purpose: cause based purpose, competence based purpose and culture based purpose. Depending on the company and its offer, some or potentially all three types can apply. And they can all contribute to a sense of meaningfulness. As some companies tend to get this wrong, the authors argue, the potential of purpose is not fully utilized. To better utilize the strength of purpose, not least in relation to sustainability, they offer three recommendations that correspond well with my own experience working with purpose:

  • Don’t pretend to have a higher cause with your business unless you have one. Not all companies offer a product, or a business model developed to have a positive social or environmental purpose.
  • Working on your culture can make a huge difference, as it relates to how you run your business, even if you don’t have a “higher cause”.
  • Avoid making purpose the responsibility of the market team (alone). If – when – customers notice that the purpose doesn’t resonate with the culture of the company, they will consider it fake.

Having a “higher purpose” with your business is certainly a strength. But that higher purpose doesn’t have to be about saving the world or about life and death (which brings us back to where this article started, with the strong case of Ukraine where the aggressor seems to struggle a lot with lack of motivation compared to the Ukrainians who believe in their cause). It can also be about the pure joy of working with a particular task, or the culture of the company, with sentiments such as “in our company we care about one another”.

Working on your purpose is more than working on a mission statement. The difficult part often starts when walking the talk. But when you walk that talk, then it will pay off by giving you the direction, the motivation as well as the reputation your company needs!

 I hope you enjoyed this summary. For further reading/more information: there is of course plenty out there. For those who like listening there are several interesting podcasts at HBR, for example this one on getting the purpose-profit balance right. For Swedish speakers I would also warmly recommend this podcast with Julia Norinder (a former colleague of mine).


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