Are brands communicating to shareholders the value of aligning with a purpose?

A prominent fund manager's criticism of Unilever's focus on purpose-led communications—while its financial performance has waned over the past couple of years—has brought into question whether brands are doing enough to communicate to shareholders the long-term value of aligning with a purpose.

Terry Smith, founder of fund manager Fundsmith, last week said the FMCG giant had "lost the plot" by focusing on defining the purpose of brands like Hellmann’s mayonnaise rather than "focusing on the fundamentals of the business".

Fundsmith owns in the region of £888 million (US$1.21 billion) of Unilever stock, and was commenting after witnessing a relatively poor performance from the company over the past couple of years—including a 9% drop in share value in the past 12 months. Unilever is one of the bottom five performers in his company.

While the disgruntled investor singled out purpose marketing activities for Hellmann’s and Ben & Jerry’s as examples of how the company had taken its eye off the ball, the numbers suggest otherwise. In 2018, prior to the pandemic, Unilever’s 28 Sustainable Living Brands, which include both Hellmann's and Ben & Jerry’s, grew 69% faster than the rest of its business, and accounted for 75% of the FMCG giant’s overall growth.

Indeed, sustainability marketing experts predict "purpose" and "sustainability" will increasingly become "a stick to beat away poor performance".

Does the disconnect point to a trend in which brands are ineffectively communicating the value of purpose to their shareholders? Does every brand need to have a focus on purpose, or can this come across as greenwashing or virtue signalling? Campaign Asia-Pacific asked APAC CMOs, analysts and communication experts for their thoughts.

Is the value of purpose being effectively communicated to shareholders?

Suzy Goulding, director, MullenLowe Sustainability

I think the issues arise in the use of the word ‘purpose’. What is a company’s purpose at the end of the day? Why does it exist? It exists to make products and services people want or need and takes a commercial benefit from that, but shouldn’t it also exist to make that money in as ethical and sustainable a way as possible? Purpose and profit should work together for sustainable growth, but I suspect this isn’t being communicated in the most effective way. The emphasis on communications to shareholders should be on the commercial benefits derived from a company that not only produces something people want or need, but also treats its employees well and acknowledges the social and environmental impacts of its products or services on the communities in which it operates—and takes active steps to address them.   

Rupen Desai, global CMO, Dole Sunshine Company

The climate crisis and growing inequalities are clear indicators that the old belief of profit at the cost of people and/or the planet needs immediate change. There is a clear interdependence between people, planet and prosperity. Business bears a huge responsibility in finding systemic solutions to growth models; where people, planet and prosperity all thrive together, never one at the cost of another. And companies that are leading the search for different, better answers need to be celebrated; by all stakeholders, including the shareholder.

Xiaofeng Wang, principal analyst, Forrester

When we talk about sustainable businesses or values-driven companies, first of all, they are businesses and still have financial targets to meet. The British fund manager was upset about the financial performance of Unilever stock, rather than the Hellmann's purpose-marketing campaign itself. Hellmann's mayonnaise has been pushing another sustainable/ purpose initiative—going cage-free since 2010—and achieved the goal three years ahead of schedule in 2017. No shareholder complained about the initiative at the time, as Unilever stock was up 14.6% that year over the previous year. It’s understandable that shareholders value financial performance, but investing in sustainability and purposes of brands is not necessarily the direct cause of underperforming financial reports. There are a lot more factors to consider. It’s important for leaders to strike the right balance between financial and non-financial targets. Sustainability and brand purpose have their long-term values, and successful businesses balance both well without undermining their financial performances.

Edward Bell, GM of brand, insights and marketing communications, Cathay Pacific

When purpose goes right, it's super powerful and helps the brand to transcend competitors, making them almost untouchable. But when the brand overplays its role and thinks it is more important than it really is, brands get very preachy and boring. And in marketing, boring is expensive.

 

 

 

Yves Briantais, APAC VP of marketing, Colgate-Palmolive

It does not make sense to oppose business fundamentals and purpose: both are needed, one will not be enough to deliver growth without the other. Focusing on business fundamentals without a clear purpose, and vice-versa, will ultimately impact brands' growth.

 

 

 

Michael Barnes, VP and research director, Forrester

No, the value or purpose has not been effectively communicated to shareholders. But I’d go further and say the actual meaning of ‘purpose’, at least in terms of corporate brand value, vision and direction, isn’t being effectively communicated. Corporate leaders and boards must do a far better job articulating the rationale behind purpose, otherwise it will be impossible to convince shareholders of its value. Moving forward, every organisation must have a focus on purpose, that extends beyond quarterly corporate profits and growth. But it’s also true that not all brands within a particular organisation need to position purpose as a core part of their brand strategy.

Lars Voedisch, principal consultant and MD, Precious Communications

Discussions about purpose have to happen on multiple levels for an organisation. On one hand that’s linked to a company’s overall strategic mission and impact. Basically it’s about doing the right thing for its various stakeholders—from employees and investors to society as a whole. Recently these discussions have been reignited by a push for ESG compliance by shareholders and other interest groups. On the other hand it is about individual products and services. What’s their original use case and how can you link it to secondary benefits. This is where some brands can lose the plot when the ‘purpose batch’ becomes too far-fetched and artificial—and unnatural for your consumers. The reason why your business exists and what it cares for can differ from brand purpose. And that’s okay—as long as it’s not going into completely different directions and contradicts itself.

Is purpose being pushed too far?

Goulding

When brand purpose works and has a genuine impact, it is when it is linked strongly back to the product—for example, soap brands raising awareness around the importance of handwashing to public health or disinfectant brands advocating for better sanitation conditions. And still with this, it only works if there is genuine commitment and intention to make a difference, and this doesn’t happen with just an ad campaign. So I don’t think every product needs a ‘purpose’ beyond its original intention, whether that’s getting floors cleaner or windows brighter. Regardless of ‘purpose’, every brand and company should be paying attention to how they’re delivering on that purpose, that they’re running that business in an ethical and sustainable way.  

Desai

I think we should question if purpose is being pushed deep enough. Unless purpose becomes part of the business model—in how the company grows, how it innovates, what practices are no longer acceptable, how it measures success, incentivises and organises—it tends to end up as an advertising or a PR brief, and probably does more harm than good. Eventually purposeful is what purposeful does, not says. 

Briantais

When it comes to purpose, it is like everything in business, including operation and execution: If you do it wrong, you will drive your business down. A purpose must be authentic and rooted in the DNA of the brand. And this is where some brands got lost recently—doing purpose for the sake of doing purpose instead of having a purpose explaining the authentic reason why the brand exists and, beyond delivering value to shareholders, how it contributes to improve people's life, every day.