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Pandemic scrutiny brings purpose to the fore

Government support for companies during the Covid-19 pandemic has demonstrated why all businesses need to maintain a social licence to operate underpinned by a corporate purpose.

The pandemic has added a practical dimension to the debate about business purpose, posing real-world dilemmas. While some companies have won plaudits for their compassionate and responsible behaviour, others have been widely criticised for their treatment of workers and customers.

During a crisis, companies must make difficult trade-offs between achieving shorter-term financial returns and maintaining strong relationships with key stakeholders. If a company can demonstrate it remained true to its purpose through a crisis, this will enhance its licence to operate and support long-term sustainable returns.

The last few months have provided a stress test of corporate purposes and their usefulness in times of crises. We expect companies to be guided by a purpose that serves not only shareholders, but also other stakeholders, society and the environment.

In our engagements, we consider how purpose is expressed, supported by our Statement of Purpose guidance. We also consider how purpose is enacted, seeking clarity on how the current strategy and capital allocation are aligned with purpose, and how it is embedded into organisational behaviours.

This article appears in our Q3 2020 Public Engagement Report.