Chapter 1 - What does 'purpose-driven' really mean?

I've always been fascinated by how our personal conception of different words strongly influences how we perceive the world (i.e. phenomenology). Just as two people can talk about the same topic whilst using completely different words, the same words can also hold drastically different meanings for different people depending on our values, environment, and culture.

So too is the case for 'Purpose' along with all its derivatives: 'Purpose-driven', 'For-purpose', ‘Purpose-led’, 'Profit-for-purpose', etc. And thus, before we can talk about the future of ‘purpose’, I started my research by asking everyone what their definition of purpose meant.

In this chapter, I'll start by presenting the different interpretations shared with me, and then explore those definitions in the context of business.

What does 'Purpose-driven' mean?

The first question I asked was this: "What does being 'Purpose-driven' mean to you? If I came to you and said that I run a 'Purpose-driven business' or a 'For-purpose organisation', what does that make you think?"

My first observation was how many people had to pause and think, musing: “Hmm, that’s a good question.” Or some who would start with a quick definition but then pause, reflect, and offer a more nuanced definition. I don’t bring that up to cast judgment on anyone; it simply reinforced for me the importance of taking time to consider our relationship with concepts that we might consider to be ‘widely understood’.

I grouped the responses in to 4 categories:

  1. A functional interpretation of the phrase: “The purpose of a locksmithing business is to provide locksmithing services.”
  2. An aspirational ‘more than profit’ interpretation that engages people emotionally (the Simon Sinek ‘Start With Why’ approach): “The purpose of a locksmithing business is to help people achieve a sense of security.”
  3. A ‘socially holistic’ interpretation that considers what the business can do through the lens of helping the community or achieve greater social good: “The purpose of a locksmithing business is to help people achieve a sense of security in a manner that also supports or addresses an area of social / environmental disadvantage.”
  4. And finally, there were several respondents who said it depends; that the phrase meant nothing by itself (or who had never heard of the phrase). They either acknowledged that their personal values would shape their interpretation, or they needed more information about the business to be able to give a proper answer.

The second observation I want to share is the diversity of responses from people whose backgrounds might otherwise suggest they would belong in a different category. For example, there were people with extensive experience in social enterprises / charities who offered a functional interpretation of ‘Purpose-driven’, and vice versa. I learned to check my assumptions after the first handful of interviews where this occurred.

The breakdown of responses could be interpreted in a couple of different ways:

  • A quarter of respondents don’t necessarily consider ‘purpose-driven’ to mean anything by itself, or requires further context
  • Almost half of all respondents consider ‘purpose-driven’ to mean something humanitarian / societal by default
  • But to put it conversely, over half of all respondents don’t automatically consider ‘purpose-driven’ to include humanitarian / societal definitions

The functional interpretation and the ‘it depends’ view

I’m grouping these two categories together as the responses shared some overlap in how our conversations progressed.

I should also clarify that in my interviews, I deliberately provided little to no context about the nature of the interview before I asked respondents to share their definitions. It is possible that this approach would have contributed to why half the respondents in this category started with a more functional interpretation, and the other half needed more context.

To give a few more examples of what the ‘functional’ interpretation looks like:

  • The purpose of a locksmithing business is to provide locksmithing services
  • The purpose of a business is to sell products or services and to make money
  • The purpose of any business is to solve customer problems

To prompt the conversation further, I asked respondents how they would describe businesses such as Thank You., an Australian social enterprise that donates all profits from the sale of water and sanitation products to water accessibility initiatives around the world, or Patagonia, an international outdoor apparel retailer that adopts a very strong mandate on environmental sustainability (but doesn’t necessarily call itself a social enterprise).

This nudge did provide additional context for respondents to explore their interpretations further. Some came back with definitions that included phrases such as ‘socially-minded’ and ‘ethical’. A couple of accountants / engineers described these businesses to be ones that were ‘willing to sacrifice profit in exchange for a social good’, though this wasn't expressed cynically or negatively.

Some of the ‘it depends’ respondents shared a level of suspicion towards the phrase, wondering why it would be necessary for a business to self-identify as being ‘for-purpose’ or ‘purpose-driven’ at all, and thus wondered if they were doing it for marketing purposes.

One important conversation I do want to share came from an interviewee who had never heard of the phrase ‘purpose’ used in the context of business before, yet was able to talk with me at length about the importance being more ethical in our lifestyles. This conversation really stuck with me because it highlighted that there are people who ‘walk the walk’ without even knowing about ‘talking the talk’.

The aspirational interpretation (aka the Simon Sinek approach)


For those unfamiliar with Simon Sinek, he’s an author and speaker most famous for his ‘Start With Why’ philosophy, that people buy from businesses because of why they do things, not what they do. E.g.: “The purpose of a locksmithing business is to help people achieve a sense of security.”

The respondents I grouped in here are ones that largely described being ‘purpose-driven’ as:

  • Being focused on something other than the bottom dollar
  • Focusing on connecting with people first
  • Having a greater clarity around why the businesses existed, beyond making money

I appreciate some of these definitions can extend to businesses that focus on humanitarian / social causes (below) however the reason I grouped those responses separately was because these respondents focused more on ‘purpose beyond profit’ concept whereas other respondents had a stronger or more specific focus on social / humanitarian / environmental impacts.

Apple was identified as a strong example of a business that fits this category. To quote Sinek's interpretation of Apple's 'purpose': "With everything we do, we aim to challenge the status quo. We aim to think differently. Our products are user-friendly, beautifully designed, and easy to use. We just happen to make great computers. Want to buy one?"

Several respondents expanded on their interpretation, clarifying that businesses able to articulate a purpose beyond profit are those able to understand their impact on people and the broader ecosystem they were in. They place value on human experiences and on creating a positive impact for people, more so than just pure profits.

However, the problem I uncovered in my discussions is that this does not necessarily translate into broader societal benefit. For example, a luxury hotel chain whose purpose is to create the ultimate human experience may not be ethical about how they do so. Or going back to the example of Apple, whilst their 'Why' demonstrates a strong focus on creating incredible user experiences, they also have a pretty poor reputation when it comes to how ethical their supply chains are.

To me, this is where the distinction between being ‘purpose-driven’ becomes more important, because both Apple and Thank You. could be considered ‘purpose-driven’ businesses, yet how they achieve their purpose is vastly different.

The ‘socially holistic’ interpretation

The final category of responses represented those that started with a strong social focus, which often included numerous references to outcomes that were social, humanitarian, or environmental.

For example, ‘purpose-driven’ businesses are those that:

  • Leverage or redirect profit to create social impact
  • Have a humanitarian / social cause as part of their purpose
  • Looks beyond the footprint of the business itself, towards its net impact on society

I noticed two approaches to this interpretation: People who used variations of the 'profit for purpose' approach, emphasising the business and profit component first in order to create broader social impact. The other variation I would describe as ‘purpose via profit’, which fundamentally describes the same thing but from the opposite direction. It perhaps comes as no surprise that interviewees with the first category tended to have backgrounds in business.

The reason I found this distinction interesting is because it influenced the types of conversations I ended up having later in my interviews. For instance, those in the ‘profit for purpose’ category talked more about business structures, reporting, and would provide examples around the operations of business.

The latter ‘purpose via profit’ group focused more on integrated global outcomes, UN Sustainable Development Goals, or social impact. When we spoke of businesses, it was more within the context of being 'cause-led', of being built from the ground up in support of that cause, such as charities and NFPs.

So 'purpose-driven' means...?

As you can see, there's truly a wide range of interpretations on the definition of 'Purpose' from a diverse group of people, all of which are equally valid.

I’m belaboring the point now, but this deep dive reinforced for me why it’s vitally important not to assume that we share the same understanding of simple concepts. That it’s important to provide further context, and to be aware that different people have different values that will influence their interpretation of key concepts.

That said, if I did need to pin down a shared definition to use as we navigate the rest of my interviews, it would be that being ‘purpose-driven’ means being driven to create or achieve a positive outcome (the purpose) that goes beyond profit.

This applies equally to individuals and businesses. Where we might expect 'purpose-driven businesses' to focus on positive outcomes beyond the bottom line, so too should we expect 'purpose-driven individuals' to share that focus.

The role of money and profit in business

One thing I found remarkable was the sheer number of respondents who agreed on the importance of business and the need to make money and generate profit in order to create positive social impact.

In fact, there was push back from respondents from across the spectrum on the notion that just because a business made profits, that meant they were doing something bad or were inherently evil.

For example, Unilever (a multinational consumer goods company), Patagonia, and Ben & Jerry’s (global ice cream producer though it turns out they're also owned by Unilever) were cited as major companies that were known to focus on being socially ‘purpose-driven’, leveraging their size and scale to create major positive social and environmental impact across their supply chain.

I also found it particularly interesting that respondents who have lived in developing nations in Africa, Asia, and South America all saw business as a critical part of creating positive change. To them, businesses were necessary to fill the gaps that governments couldn’t (or won't) address, and reflected on sheer abundance of ‘social enterprises’ in those regions.

Instead, the critique against businesses was typically levelled at personal greed and how current business structures - especially public listed ones - optimised profit above all else. These are the main vectors that respondents attributed to bad or exploitative behaviour by businesses.

The different types of 'purpose-driven' organisations

Seeing as most respondents recognised the importance of business as a way of creating long term impact, I feel it's worth taking a moment to talk about the different types of 'purpose-driven' organisations and entities, and the different perspectives shared by respondents.

Charities and Not-For-Profits (NFPs)

These are the most traditionally recognised types of 'purpose-driven organisation', that exist in order to fill a gap that neither Government nor businesses address; aka ‘externalities’. These organisations typically raise the bulk of their money from government grants or from philanthropic donations.

What I found interesting was that while respondents paid respect to the work done by charities and NFPs, there were several interesting concerns raised about their ongoing sustainability.
One concern was around the public perception of charities, in particular the idea that they're not allowed to make money, or that people who work in charities are expected to work for free. In Australia, this is perhaps best demonstrated by the backlash against the Australian Red Cross following the 2020 Bushfires for not directing 100% of donations to bushfire relief; 10% was set aside for essentially administrative services.

Another concern was that many charities and NFPs focused too heavily on their cause / mission, at the expense of understanding how to achieve long term sustainable impact. As such, their impact is often beholden to cyclical funding models or unsteady private donor fundraising streams.

The perspectives I found most intriguing - especially as they came from respondents with deep experiences in the NFP sector - were ones that wondered whether there were too many active charities and NFPs. According to the Australian Charities and Not-for-profits Commission (ACNC), there are now over 56,000 registered charities in Australia with a 4% year on year growth.

The concern is that because these organisations are reliant on donations and a limited pool of government funding, competition increases, there’s more people working for less, and their collective impact becomes dispersed. The ACNC has a different perspective and argues for more diversity and options for people, though I will note that they don’t necessarily suggest that all charities should be successful. In fact, the ACNC advocates for more mergers and collaborations where duplications exist.

B-Corp

For those unfamiliar with B-Corp, it is a rigorous points-based certification program that looks at every part of a business to determine its demonstrated commitment to social and environmental performance, public transparency, and legal accountability.

B-Corp certification is difficult to achieve however from a rigour and due diligence perspective, and the larger a business becomes, the harder it is to achieve. One of the most notable examples in recent times is the certification of Danone, who in 2018 became North America's largest certified B-Corp.

B-Corp was perhaps the most widely endorsed by respondents (by those familiar with it) as the corporate structure that genuinely demonstrates whether a business is 'purpose-driven', primarily because it focused on transparency and accountability.

The operative phrase here however is what I bolded above because in my interviews, I'd say the majority of people didn't actually know what B-Corp was nor why it's important, whereas the majority were able to make an educated guess to what a social enterprise represents. This leads me to wonder if B-Corp has a branding issue in terms of how it engages the broader community.

I also personally found it interesting that B-Corp doesn't appear to require businesses to have a purpose that is strictly in the realm of UNSDG or social good, as long as how it operates is ethical. I think this distinction provides a pathway for more businesses (especially existing ones) a pathway towards being better.

Social Enterprise

Finally, we have Social Enterprises, defined broadly as businesses that use trade and commerce to intentionally tackle social problems, improve communities, and achieve positive social and environment outcomes.

The reason I said 'broadly' is because this category of 'purpose-driven organisation' attracted a variety of different definitions. Whereas the definition of B-Corps was quite clear among those familiar with the certification, the definition of a social enterprise varied depending on who I spoke to.

The most common interpretation is that social enterprises are structured to donate X% of their profits to a purpose or charitable cause. In Australia it's typically 50% though I've also come across 30% 'plowbacks'.

There wasn't a consensus on whether social enterprises needed a specific formal business vehicle. For example, NFPs (e.g. Thank You.) and private companies (e.g. Ben & Jerry’s) were both considered social enterprises depending on who I talked to.

In Australia, there is no legal structure that denotes what a social enterprise is though there is a certifying body (Social Traders) that awards certificates based on commercial performance, profit sharing metrics, and shareholder structures. In contrast, Europe recognises social enterprise through various legal structures.

Some of the concerns flagged by respondents include:

  • Consumers perceiving social enterprises to be charities, which creates some of the associated issues above
  • The inconsistency of what defines a social enterprise, as contrasted to B-Corp's rigorous and standardised certification process
  • Businesses declaring themselves to be social enterprises as a marketing or branding position without necessarily creating positive social impact (i.e. purpose-washing)

All in all, the majority of people I spoke to were in favour of social enterprises and saw these organisations as pioneering a way forward.

Is there a 'best' structure?

It should come as no surprise at this point that the answer is 'it depends'. Even among respondents who were advocates for B-Corp for example, there was not a strong preference that 'purpose-driven' businesses needed to be B-Corp.

Instead, my biggest takeaway was that people wanted to see business more actively consider their social impact or purpose first, and then consider what's the most appropriate vehicle to achieve their impact while maintaining profits.

I should also add that there are many other types of businesses structures that fall within the 'purpose-driven' spectrum that I haven't covered above, including but not limited to Pledge 1% and various social impact plowback options.

Conclusion

I hope that this chapter helped bring a bit more texture and nuance to both the concept of being ‘purpose-driven’ as well as the types of entities involved.

But are we really becoming more 'purpose-driven'? Do people really want to support ‘purpose-driven’ businesses? Or is this simply another form of Corporate Social Responsibility in action?

That is what I'll cover in the next chapter.