Paul Holmes 02 Oct 2010 // 11:00PM GMT
A strong, strategically coherent and well communicated corporate purpose is associated with up to 17 percent of better financial performance and builds trust with stakeholders, according to a survey by Burson-Marsteller and IMD, one of the world’s top business schools, that ranks more than 200 leading European companies.
The survey also found that energy, pharmaceutical and healthcare and technology sectors score above the average when it comes to the impact of their communications on corporate purpose. Communicating corporate purpose more effectively is also a growing trend as companies increasingly understand its impact on financial performance and the importance of their social role.
The research carried out by IMD is based on a study of 213 European companies from 10 industries and an in-depth qualitative study including interviews with a selected group of 27 of these companies. It looks at how companies think about and communicate their corporate purpose—mostly defined as mission statement and strategy—and how this impacts financial performance.
The IMD research shows that Philips, Nokia, L’Oreal and BASF are recognised by a large base of stakeholders as the best in class in successfully differentiating themselves through effective communication on corporate purpose. Unilever, Allianz, Danone, Vodafone, Nestlé and Shell are recognised by their industry peers as examples of excellence in communicating corporate purpose.
“Corporate purpose goes well beyond corporate responsibility. It is part of a company’s DNA; it is the reason for the company’s existence,” says Jeremy Galbraith, CEO, Burson-Marsteller Europe, Middle East & Africa. “Companies that have a purpose deeply embedded into their overall corporate strategy—and one which is well communicated and understood both internally and externally—will have a significant competitive advantage. Communicating on corporate purpose is one of the key strategic tools for managers seeking to build trust and reputation with stakeholders.”
Adds IMD professor John Weeks: “With the growth in importance of social media and stakeholder expectations in an increasingly networked business environment, leading companies have realised that effective communication around corporate purpose requires a new approach.
“If stakeholders perceive that communication around corporate purpose is no more than window-dressing they are likely to react cynically. Stakeholders today expect a two-way dialogue that involves honesty, transparency and openness. This is key to building trust, as is ‘walking the talk.’ Leading companies have moved towards closing the gap between ‘walking the talk’ and ‘talking the walk’ and developing coherence between words and action. Moreover, companies’ corporate purpose communications are increasingly focused on satisfying multiple stakeholder groups and not just shareholders.
“Thirdly, companies investing in these new approaches see themselves as increasing their competitive advantage and improving their bottom line.”