‘Concrete purpose strengthens companies’ image’

MT500 is the research into the reputation of large Dutch companies among business customers, conducted by UvA for the 22nd time this year on behalf of MT / Sprout.

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Thousands of executives, decision makers and other executives who have recently traded with the companies surveyed were asked about their top 3 most admired companies and how they rated the companies’ product leadership, customer focus and execution. Also the quality of the employer and how they score on sustainable entrepreneurship determines a strong reputation.

ASML has the best reputation

Neither lockdowns nor pandemics seem to have hit the reputation of the best companies. ASML emerged as the big winner for the fourth time in a row. The new number 2 is also a trusted top-10 player: De Efteling. This year’s number 3 is Albert Heijn, who last year was still in 6th place.

All in all, no spectacular shifts. But then we come to a few surprises that may have more to do with each other than you might think at first glance. Both Shell and Tata Steel are the biggest losers in the top 10. The energy group, last year still number 4, we find this time in a modest 60th place, and the steel giant even fell from place 5 to place 287.

Transformation of Shell and Tata

Researcher Henk Volberda, Professor of Strategic Management & Innovation at UvA: “It may well be that the respondents, and the general public, trust the social compass more emphatically. That the transformation that Shell as an energy group and Tata as a steel producer must go through is still more important in the assessment than in previous years’, says Volberda.

Also read: MT500 survey: ASML best company, according to makers

Is it a coincidence that it is precisely the newcomers in the top 10 who are above average aware of social conditions such as climate, health and social conditions?

Auping and rituals full of purpose

Royal Auping, for example, has recently acquired the B Corp designation, an international certification for for-profit companies that has a large, positive impact on people and the environment. They work on circular production and have – as you know – made face masks below the low point of the corona crisis. Auping topped its strong progress in the MT500 with a number 7 listing.

Rituals are also a newcomer filled with purpose, if one can call it attention to things other than profitability.

Staatsbosbeheer the greenest

The rise of Staatsbosbeheer is absolutely spectacular – the MT500 includes not only commercial companies, but also the most important (semi-) governmental organizations in the Netherlands. A change in the weighting of all assessments, but certainly also a more positive response, brought the nature manager from place 99 to number 6. We could not imagine a party on the list greener than Staatsbosbeheer.

Strong purpose and reputation

Green, social, socially conscious: do the changes in the MT500 reflect a trend? Volberda: ‘I believe that purpose and social positioning are becoming increasingly important to the reputation of organizations. Companies with a strong purpose are highly valued by the respondents in this survey. It fits with the movements we see in the results: on the one hand Tata and Shell are making a tumbling, and on the other hand a party like Staatsbosbeheer storming into the top. ‘

‘The war in Ukraine started after we ended the investigation, but one can now also see how fast companies are moving and more or less choosing a position in the conflict. If you are not part of the solution, but the cause of a problem, you will be punished for it. ‘

Environment, society and stakeholders

‘I translate it as the purpose is profit: as a company, you can excel if you no longer subordinate the interests of the environment, society and your stakeholders to your profits and to one group of stakeholders: your shareholders. The old Milton Friedman paradigm that your business has a social responsibility to create more and more profit is subject to erosion. ‘

‘Of course, public regulation has always placed restrictions on companies’ room for maneuver, but the public now expects a director to make his own assessments within that framework. That everything that is allowed should not just happen like that ».

Profit of purpose

Volberda has been involved in writing a study on the extent to which companies prioritize economic versus social goals: Profit of purpose, which was recently published. By purpose-driven companies, Volberda means companies with a concrete goal that goes beyond profit maximization, and which describes how they contribute to solutions to human and planetary problems.

The purpose is not secondary, but focuses on the company’s core activities. ‘I admit that in the beginning I was critical of the subject of purpose and am wary of purpose washing. But it is different if you really know how to make your goals as an organization concrete and measurable. ‘

Purpose of Philips and PwC

Take Philips, which aims to improve the medical situation of 2.5 billion people by 2030. It is already much more concrete than doing something ‘for a better world’. ‘ Volberda also conducted some case studies from which surprising things emerged. For example, PwC no longer advises its customers on how to pay as little tax as possible. ‘It may mean they lose customers in the short term, but in the longer term it fits the purpose better.’

KLM makes films in which customers are advised not to take the plane in certain cases. ‘As long as electric flight does not come from the ground, it will harm its own turnover. But it takes its purpose seriously. ‘

Heineken and half a liter

Heineken’s purpose is brews the joy of true togetherness to inspire a better world† Non-alcoholic beer fits very well in this, but alcoholic beers with large volume less: Half-liter cans with a lot of alcohol and low price. It’s a segment where you can make good money, but Heineken thinks it’s beer enjoyment must stay. Heineken therefore no longer plays a significant role in this segment because it no longer fits the purpose.

“You can see: it’s a battle between the company’s economic interests and social interests. You see some companies moving under external pressure, while others are really pursuing their purpose with passion and a clear motivation. ‘

“It will not be easy for all companies either. But I see the purpose moving from something in the periphery of the business to the core of the activities. The ultimate goal would be to create solutions to ecological or social problems, and that’s where your profits come from. ‘

Switch to the purpose

Purpose is not yet common, research also shows. The majority of Dutch companies – 66 percent – have a dominant focus on economic goals. But there is a shift on the way: Compared to 2016, 4.5 percentage points more companies focused on non-economic targets in 2021.

“We were also able to identify what characterizes purpose-oriented companies: transformational leadership, innovative organizational qualities (including self-organization), a value-oriented organizational culture, serving multiple stakeholders simultaneously, higher innovation capacity and better business results.”

Value contributes to reputation

Seen in this way, this attention to relatively new values ​​therefore provides great value for the organizations’ reputation and the quality of their business operations. And even the largest investors in the world, traditionally mainly focused on return on investment for their customers, requires orientation towards social goals.

Blackrock boss Larry Fink

Volberda calls Larry Fink, CEO of Blackrock, the largest asset manager in the world. Earlier this year, he wrote a letter to the CEOs of the countless companies he invests in: for him, it’s just about what their business means to society. Only if they serve the interests of all stakeholders well can they cope with the enormous disruptive development they are facing. In addition to the pandemic, this is the need to become CO2 neutral.

Include purpose in reward and culture

‘He sees the purpose as one The North Star: a goal that you need to focus on in the long run, in order to also achieve sustainable long-term returns. It is finely worded. But it is then the task to implement that goal in the organization. Make sure the board’s remuneration is linked to the fact that it is embedded in the organization’s culture that it motivates your employees. And finally, I come back to what the MT500 is all about: You need to touch your customers with it, too. ‘

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