Pinpointing purpose

Reform of the Corporate Governance Code and amendments to Guidance on the Strategic Report have rightfully moved purpose up the corporate agenda.

Purpose should tell us why a company exists and how it benefits wider society. For purpose to be effective, it needs to guide everything a company does, not just what it says. When a business lacks clear purpose, it lacks meaningful direction.

Purpose must be addressed by the Board with serious intent, but this is not always the case and ‘purpose washing’ is on the rise. Our research shows that while 60% of FTSE 100 companies discuss purpose in their annual report, only 30% include a genuine, credible and well thought-out statement of it.

How to achieve best practice

– As renowned leadership consultant Simon Sinek said in his 2009 TED Talk ‘Start with why’, “People don’t buy what you do, they buy why you do it.” His golden circle is a useful starting point for uncovering purpose.

– Through your reporting, demonstrate how your company’s business model is aligned to purpose; and make it clear how strategy supports its fulfilment.

– Through leadership and governance, illustrate how your company’s purpose plays a key role in defining the actions of the business.

The Luminous view

In our experience, defining purpose is never about ‘creating’ it, it’s about ‘uncovering’ it. Real purpose must be grounded in reality – a business must walk the talk. If it’s not real or believable, purpose will inspire cynicism rather than trust and engagement. According to the EY Beacon Institute, 90% of executives acknowledge the benefits of purpose, yet less than half of this same group believe their organisation possesses a strong sense of it. This dissonance must be tackled if businesses are to build a robust and long-lasting relationship with their stakeholders.

Best practice examples

Luminous clients National Express and Unite Group both offer examples of highly effective and distinctive statements of purpose.

National Express provides a well-integrated purpose statement that articulates the reason for the company’s existence whilst taking a diverse group of stakeholders into consideration.

Unite’s purpose is integrated throughout the company’s annual report and is particularly well aligned with the business model and stakeholder engagement spreads. The report makes it clear that the workforce is key to making Unite a ‘Home for success’.

Where can I find more information?

Join us, and guest speakers from ACCA and Informa, on Thursday 14 June, at #Illumination2 / Beyond words: purpose and culture for a discussion on the importance of purpose.

And if you’d like to find out what you should be doing right now, simply contact [email protected] for some advance guidance and support.


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Connor Lundy

As Investor Insight Executive, Connor works closely with Stephen Butler, Luminous' Director of Stakeholder Engagement to research the latest best practice regulations and trends across narrative reporting, digital, investor events, sustainability and integrated reporting.