Thirty years ago, Lapin International embarked on a journey to unlock human energy and economic value for companies by helping them discover their purpose and align with it. At that time, our concept of purpose did not encompass principles like sustainability, diversity, and other factors that are now integral to the ESG (Environment, Social, and Governance) perspective. Our focus on purpose was not centered around the broader social good a company could achieve, but rather on the contribution it made to both the economic and the human well-being of its customers. We delved into both the tangible and intangible ways in which a company served its customers. For instance, Apple’s Purpose extended beyond merely manufacturing computers; it aimed to “make a contribution to the world by making tools for the mind that advance humankind.” Similarly, Lego’s Purpose transcended building blocks for children to play with; it sought “to inspire and nurture children, encouraging creative thinking, systematic reasoning, and the realization of their potential to shape their own future.” It is through the unique difference a company makes to the lives of its customers, that it serves the world and fulfils its higher purpose.
Our perspective on purpose marked a significant departure from the prevalent philosophy espoused by Professor Milton Friedman at that time. He posited that a company’s purpose was to generate value for its shareholders. However, our understanding of purpose did not venture as far as today’s ESG movement, which recognizes the imperative for a company to have a purpose that serves not only the interests of shareholders and customers but also the broader interests of society.
We differentiated between the strategic good that a company does for its customers, encapsulated in its purpose, and the social good it does for all its stakeholders articulated in its system of values. ESG, we postulated, belongs with a company’s values, not at the core of its purpose. This methodology allowed leadership to focus its strategy on the interests of its customers, expanding that focus beyond tangible products to encompass the intangible benefits provided to customers. At the same time its philosophy of values and ethics would inform the broader good it does for all stakeholders. The company’s leadership had two guiding pillars for navigation: the strategic instrument of purpose and the cultural and ethical instrument of values.
This unique approach to strategy and values ensured that we did not encounter, and never have, the resistance to ethical initiatives such as ESG and DEI (Diversity, Equity, and Inclusion) that we are seeing currently in the business world. In the current edition of Fast Magazine, Clint Rainey pens a brilliant piece on the opposing forces against the ESG movement. He comments, “The culture war has reached America’s 401Ks, bringing with it a fight for the soul of corporate America.” This battle for the soul of corporate America does not stem from any inherent flaws in ESG itself. Similarly, the resistance we observe in certain regions towards DEI initiatives is not because DEI is inherently negative. Opposition arises from the clumsy, autocratic, and patronizing attitude that often accompanies the implementation of such initiatives, rather than from any inherent wrong within the concepts themselves.
When ESG and DEI are positioned as a strategic imperative rather than a tenet of the companies values, they lose their moral force and confuse a company’s focus. The resulting strategic confusion fails to serve the long-term interests of the company, its shareholders, or its customers. By simply separating strategy and values while at the same time establishing a philosophical connection between them to ensure their alignment, we can guarantee that a company’s ESG and DEI initiatives are embraced and supported by all stakeholders.