An analysis of Canada’s top 30 companies shows that the quality of their corporate purpose statements is highly variable.
Four companies had excellent statements while one third of the sample were below average, meaning they may not be satisfying the demands of the growing number of investors who take ESG and purpose seriously.
When purpose is either actually or perceived to be lacking, it can adversely affect analysts’ views of future earnings with flow on effects to their cost of capital and shareholder returns.
Putting aside the actual scores, the bigger takeaways from this study include:
- A lack of understanding what a purpose statement should be communicating
- Difficulty in finding purpose statements on many company websites
- Confusion between vision, purpose, mission statements and values; and
- Instances of statements that came across as vague, flippant or marketing hyperbole.
Overall, there is evidence that many companies understand that purpose is important and needs to be well communicated, coupled with many that haven’t yet grasped the changing investor landscape.
Companies that featured in the good to excellent range were spread across diverse industries.
For example, Royal Bank of Canada has the purpose of “helping clients thrive and communities prosper” through to Canadian Pacific Railway with “deliver transportation solutions that connect North America and the world”, Suncor Energy’s “provide trusted energy that enhances people’s lives, while caring for each other and the Earth” and Magna International’s “creating a better world of mobility, responsibly”.
Most fossil fuel and resource companies ranked in the lower half, with several focusing on financial performance and shareholder returns ahead of any true purpose ambitions.
Life insurance company and telecommunications company purpose statements showed a mix of high, medium and low quality. Across the sample, a handful of statements were either very vague in their scope or somewhat frivolous in their nature.
Loblaws shows evidence of ‘structure’ with an overall purpose of “Live Life Well” complemented by pillars of good and affordable food, accessibility to health and beauty products and saving for the future.
About 60 per cent of the companies explicitly state their purpose. For the others, it was deduced as per the notes below.
METHOD & NOTES
A purpose statement is only an indication of the quality of what they company says – it doesn’t not necessarily correlate with it being implemented or done well. In conducting this desktop analysis it is important to note:
- A purpose statement should reflect the benefit to society that a company delivers in a profitable way.
- When the purpose of the company is not explicitly stated, we analysed a range of other statements such as its overview, mission, vision or sustainability information.
- The study is based on a proprietary 5-factor scoring system.
Readers should note this is a qualitative review based on an interpretation of website data and should not be relied upon for making investment or other decisions.
WANT TO KNOW MORE?
If you’d like a more in depth briefing or assistance then please reach out via email@example.com
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Phil Preston is a purpose speaker, strategist and founder of The Business Purpose Project. He is the author of Connecting Profit with Purpose and co-host of Corporate Conversations on Purpose. You can contact him via firstname.lastname@example.org
Image courtesy of Ali Tawfiq and unsplash.com