In today’s business environment, purpose is the path to enduring profit

ACROSS my time working in and leading very different organisations, one idea remained remarkably persistent: The primary purpose of business was to maximise shareholder returns.

For much of the past half-century, that assumption has been associated with American economist Milton Friedman. But the world in which it flourished was very different from the one business leaders inhabit today.

One reason is that we have entered what I call the “glasshouse economy”, an era in which artificial intelligence, social media and universal connectivity are making corporate behaviour radically more transparent.

Supply chains can be scrutinised. Worker treatment is searchable. Environmental externalities are more readily audited. Executive behaviour and a customer’s experience can be broadcast to millions.

That is making employees, customers, investors and the public reconsider the criteria they use to assess companies.

For business leaders, that changes the economics of purpose.

From governance to leadership

ESG is the prime example.

Companies have spent years talking about it and running a responsible business. There has undoubtedly been some progress. But too often, these ideas have existed alongside business strategy rather than at its centre.

The danger is that sustainability becomes an exercise in compliance: meet the disclosure requirement, achieve the appropriate rating, publish the report and move on.

That may satisfy a framework. It does not necessarily fulfil a purpose or solve a problem.

The more useful question for a chief executive is not simply: What must we disclose?

It is: What problem are we genuinely trying to solve – and is solving it central to how we make money?

Purpose, in this formulation, is not philanthropy. Nor is it a licence to ignore shareholders. It is about identifying a genuine human, social or environmental need and finding a profitable way to address it sustainably.

Asia already provides some remarkable examples.

Consider the Thai social enterprise Doi Tung. The project began in 1988 in an impoverished, deforested region in northern Thailand associated with opium cultivation.

Instead of treating poverty as something to be alleviated indefinitely through charity, it developed legitimate economic alternatives around coffee, macadamia farming, handicrafts and tourism.

Doi Tung subsequently worked with brands including Ikea and Muji to feature the region’s produce and textiles, reinvested in reforestation and zero-waste production, and achieved financial self-sufficiency by 2001, surviving even the Asian financial crisis.

The lesson it imparts is important. For sustainability itself to be sustainable, solving a problem ultimately needs to create economic value.

The economics of purpose

Purpose-led companies tend to have greater longevity and thrive over the long term. Examples from both Asia and beyond demonstrate this. Tata and Faber-Castell, both longstanding global businesses, are cases in point.

Jamsetji Tata, founder of the Tata Group, began embedding worker welfare into his businesses in the 19th century, long before his company became the global conglomerate it is today.

Water systems, sanitation, provident funds and pensions were provided to employees beginning from as early as 1874. Successive generations expanded the group, while retaining the conviction that community was fundamental to the enterprise.

Outside Asia, Faber-Castell offers another version of the same principle. The family-controlled company was a global pioneer in employee benefits and pensions roughly in the mid-19th century, long before such benefits became standard or required by law.

It later committed to sustainable forestry in Brazil during the 1980s, partly to secure its timber supply for the long term, decades before today’s sustainability initiatives became mainstream.

Tata and Faber-Castell have endured for well more than a century: Tata for close to 160 years, and Faber-Castell, more than 260 years.

Both continue to thrive today, underscoring that a purpose-led approach can sustain a business rather than hold it back.

None of this means purpose and profit will always align neatly.

Paying a sustainable wage before regulation requires it, investing in a genuinely sustainable supply chain or abandoning a profitable but harmful product can impose real short-term costs.

Pretending otherwise undermines the argument.

What has changed is the other side of the calculation. Reputational, legal, talent-retention and capital-access risks can now materialise much faster when companies ignore the expectations of their stakeholders.

That makes authenticity increasingly valuable – and deliberate misrepresentation increasingly dangerous.

There are some straightforward tests.

Is a company’s stated purpose reflected in its core products and capital allocation, or merely its communications? Does the commitment survive a bad quarter or a change of chief executive?

And would its claims withstand scrutiny from an investigative journalist, a disgruntled former employee or an AI-assisted fact-checker?

Increasingly, they will have to.

The companies that endure

The implications for leaders are practical.

Take one important decision currently sitting on the management table, and test it against the organisation’s stated purpose as rigorously as you test its financial return.

Ask what societal or environmental problem your core business can solve profitably, rather than leaving ESG to a separate function.

This is not an argument for abandoning profit. It is an argument for understanding where sustainable profit will increasingly come from.

In a radically transparent economy, candour can create more trust than polish. Sometimes the strongest evidence of responsible leadership is not another glossy sustainability report, but an organisation willing to explain where it is falling short, and what it intends to do about it.

When a business fails the test, the effects will not necessarily be dramatic or immediate. Companies rarely collapse overnight because they lack purpose.

More often, the consequences accumulate gradually through diminished trust, weaker talent attraction, reputational damage and pressure on margins.

But over time, that accumulation matters. The companies most likely to thrive in the “glasshouse economy” will thus not be those that choose purpose over profit.

They will be those which understand that, increasingly, purpose is how enduring profit is created.

The writer is CEO of Steward Leadership Institute.

This is an edited excerpt from the writer’s book, Maximum Purpose, Maximum Profit: Why Steward Leadership is the Answer.