If companies want to thrive in the purpose-driven economy, they must decide where they stand
Jan 16, 2019 10:46AM
By Kathleen Maris
By Tom Martin
Along with the usual business buzzwords such as vision, mission, goals, objectives, and values, a new word has been gaining traction in recent years: purpose.
Customers are seeking it in the companies that make the products they buy. Young graduates are searching for it from prospective employers. Investors are scanning research reports when deciding where to direct their stock purchases. What is the company’s purpose? What does it stand for? Why does it exist?
For some organizations, this examination can lead to some uncomfortable dialogue and the ultimate realization that they really haven’t spent much time defining their purpose. And if the sole purpose of a company’s existence is simply to make a profit, that may leave some stakeholders wanting more.
Three companies provide excellent examples of how leaders are making bold decisions that balance the need to be profitable with the realization that purpose increasingly matters to many stakeholders.
CVS Health made a bold decision in 2014 to stop selling tobacco products in its stores. The move cost the company more than $2 billion in lost sales, ruffling the feathers of CVS shareholders. But the company felt that as a healthcare provider it could not ignore the obvious disconnect implicit in selling products that were clearly damaging the health of its customers and employees.
Since CVS stopped selling tobacco, some remarkable things have happened. According to the company, cigarette pack sales have dropped an additional one percent across all retailers in states where CVS Pharmacy had a 15 percent or greater share of the retail pharmacy market, compared to states with no CVS Pharmacy stores.
A company-sponsored study also showed a four percent increase in nicotine patch purchases in those same states during the period immediately following the end of tobacco sales, indicating that there was also a positive effect on attempts to quit smoking. People are obviously still buying tobacco products, but not in CVS stores.
Dick’s Sporting Goods made a similar tough decision following the tragedy at Marjory Stoneman Douglas High School in Parkland, Fla., when it chose to stop selling assault-style weapons and high-capacity ammunition magazines in its stores and on its website. The company also stopped selling any type of gun to customers under age 21. The assailant in Parkland had purchased a shotgun from a Dick’s Sporting Goods store in 2017, although it was not the weapon used in the killings. Nevertheless, it made the difficult decision even more poignant.
The company’s CEO, Edward Stack, expressed it this way: “We did everything by the book. We did everything that the law required, and still he was able to buy a gun. When we looked at that, we said, ‘The systems that are in place across the board just aren’t effective enough to keep us from selling someone a gun like that.’"
Not everyone was pleased with the decision. Some employees resigned from the company, and some unhappy customers vowed to never shop at Dick’s again. But Stack was undeterred. “We needed to take a stand and do this,” he said.
Chobani took a stand in a different way: through its employment practices. Chobani’s founder and CEO, Hamdi Ulukaya, was concerned enough about the plight of refugees around the world that he implemented a program to recruit and hire those who had been displaced though war, famine, and other hardships. Ulukaya is himself a Turkish immigrant of Kurdish descent. He immigrated in 1994 to New York and founded Chobani in 2007. The yogurt company has grown rapidly, and now employs more than 2,000 people. Ulukaya himself has prospered and is now a billionaire.
He has traveled to refugee camps in the Greek islands, where he has witnessed the travails of thousands of refugees firsthand. He has signed Bill Gates and Warren Buffett’s Giving Pledge and has committed to giving away much of his fortune to help refugees in need. As he put it, “The minute a refugee has a job, that’s the minute they stop being a refugee.”
Despite death threats, negative publicity, and attempts to boycott Chobani products, Ulukaya is undeterred. “My story, like so many others, is only possible in America,” he said. “The magic and power of the American dream is something I believe should be available to everyone.”
President Calvin Coolidge is famously quoted as noting that “the chief business of the American people is business.” That line might have worked in 1925 when he delivered the speech, but it rings hollow now. Younger consumers and prospective employees are now demanding more from the companies they choose to buy from and work for. If companies are to thrive in the new purpose-driven economy, they should recognize this reality and begin asking some hard questions. What, indeed, do we stand for?