Do Purpose-Driven Companies Outperform Traditional Ones?

Temps de lecture: 5 minutes

In its 2024 report, Deloitte found that nearly 90% of all Generation Z and Millennials stated that having a sense of purpose at work is important for their job satisfaction and well-being. No surprise, then, that purpose-driven companies are growing by leaps and bounds! Why are so many organizations choosing to become purpose-driven, and what impact does this decision have on their performance?

In this article, we reveal whether purpose-driven companies really are more successful than so-called “traditional” companies—and if so, what their secrets are. 👀

What is a purpose-driven company?

A purpose-driven company is one with a clear purpose, committed to achieving a number of social and environmental goals (in addition to its financial objectives).

In the U.S., the Inflation Reduction Act of 2022 encourages businesses to adopt more sustainable practices and invest in clean energy by offering tax incentives and funding for renewable energy projects, energy efficiency upgrades, and decarbonization initiatives. Purpose-driven companies with environmental goals can benefit from these provisions to align their business practices.

What’s the difference with traditional companies?

Unlike traditional companies, whose primary mission is generally to maximize profit for shareholders, purpose-driven companies have a purpose that goes beyond achieving mere financial goals. They must bake societal and environmental goals into their strategies—goals often seen as optional in traditional companies.

What’s the difference between purpose-driven, impact-driven and regenerative enterprises?

Purpose-driven companies are sometimes confused with impact-driven and regenerative enterprises. Here are a few definitions to help you understand the difference among these three concepts: 

• Impact-driven businesses aim to generate positive impacts on the environment and society. They measure these impacts without necessarily formalizing them in their articles of association as a purpose-driven company does.

• Regenerative enterprises, rather than simply reducing negative impacts, regenerate the natural, social and human resources they rely on. To this end, they adopt a biomimetic approach that enables them to innovate more by drawing inspiration from nature.

So, is it possible to be a purpose-driven, impact-driven, and regenerative company all at the same time? The answer is YES because—as you can plainly see—these three models completely complement one another.

Are purpose-driven companies really more efficient?

Purpose—a key performance driver

According to the Harvard Business Review, having a strong purpose is one of the key drivers of business growth. A study by EY confirms this: 85% of companies with a clearly defined purpose have seen their sales increase over the last three years, while 42% of companies without a purpose have seen their revenues stagnate or decline.

But purpose is precisely what sets purpose-driven companies apart! Given that it’s such a key lever for growth, we can conclude that purpose-driven companies are more likely to outperform traditional ones.

Other levers that impact performance

And the comparison between these two categories of companies doesn’t stop there. Many other levers impact how companies perform. Studies show that on average, purpose-driven companies do better in several other areas: 

• Attracting, retaining and developing talent: According to a study by Cone Communications, three quarters of millennials (people born between 1981 and 1996) take social and environmental engagement into account when choosing the company they want to work for. What’s more, purpose-driven employees are 54% more likely to stay with that company for five or more years—and even 30% more likely to become “top performers!”
• Engagement and satisfaction: 89% of managers believe that having a purpose with which everyone is aligned improves employee satisfaction (and by extension their engagement).
• Increased confidence: 82% of managers and employees of purpose-driven companies are convinced that their organization will continue to grow.
• Ability to innovate and transform: 84% of managers believe that having a shared purpose facilitates organizational transformation and innovation.

All these levers contribute not only to increased employee productivity but also the company’s overall performance. Based on this, we can say YES: on average, purpose-driven companies outperform traditional companies.

3 high-performance purpose-driven companies

For those still not totally convinced, let’s look at why a purpose-driven company is more efficient with three examples:

Patagonia

Patagonia is an emblematic example of a company with a mission. Their motto—”We’re in business to save our home planet”—guides all their decisions, from production to distribution. This commitment to sustainability and environmental preservation has not only secured a loyal customer base, but also attracted talent motivated by the same goals. The result: over the last ten years, Patagonia has multiplied its sales by 400%—all the while remaining true to its environmental values.

Contentsquare

Contentsquare, which specializes in user experience analysis, defines itself as a purpose-driven company with a clear objective: “make the digital world more human.”.” This mission has allowed the French gem to differentiate itself in a competitive market, attracting both customers and investors concerned with these issues. Thanks to its engagement, Contentsquare has raised over a billion dollars in funding and now generates several hundred million in annual recurring revenue (ARR). 

Trupanion

U.S.-based pet insurer Trupanion, is committed to “helping loving, responsible pet owners budget and care for their pets.” This has helped it attract more and more customers and boost its financial performance. In the second quarter of 2024, its subscription-based revenues rose by 20%, reaching over $200 million!

Defining your purpose, the first step to becoming a purpose-driven company

If the above examples have inspired you, then the next step is clear. To become a purpose-driven company, you need to start by defining your purpose. It needs to be ambitious, realistic, impactful, and aligned with your values. To forge it, ask yourself one question: “Why does my company exist?” 

Simon Sinek illustrates the process in his book, “Start with WHY.” In it, he introduces the famous “golden circle.” For the author, there’s no doubt: you have to start by defining why you do what you do, before explaining the how and the what. 

Aligning employees around your purpose 

Once your purpose has been defined, the next step is to communicate it transparently, and to align and mobilize employees. This will enable everyone to understand why their work is important, but also to make decisions that are aligned with the organization’s purpose.

At Talkspirit, we’ve created tools specifically designed for purpose-driven companies looking to bring transparency to their business and align their teams around common goals. In particular, you can use our platform to:

• clarify your company’s purpose and strategic objectives
• define and visualize roles and responsibilities
• identify how team objectives contribute to corporate objectives using the OKR method (Objectives and Key Results)
• monitor your team projects and link them to your strategic objectives

A final word

So, there you go, purpose-driven companies are far more successful than traditional ones! There are several reasons for this. Firstly, purpose-driven companies are better at attracting and retaining talent and customers. On average, their employees are also more committed, and that inevitably boosts their productivity. Finally, they know how to give deep meaning to their actions, thanks to their purpose, and not just make decisions based on the bottom line.

So, ready to take the plunge? If you want to become a purpose-driven company, start by defining a clear purpose. With the help of tools like Talkspirit, you can then align your teams around this purpose, and ensure that everyone relies on it to make the right decisions.

PS: Wondering what other tools a purpose-driven company should put in place? Download this white paper to learn more: 👇

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