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Ben Cope Insights

High tide on corporate purpose?

“What if we made a shoe that solved racism?”.

“What if ice cream brought peace to the Middle East?”.

“You know Hellmann’s? … the mayonnaise… what if it fixed food waste?”.

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It must be hard to admit you’ve joined a cult or been swept up by mass hysteria. To hold up your hands and say, “I don’t know what that was, but it was wrong”, requires swallowing your pride. But the truth is becoming hard to ignore for those that have been drinking the corporate purpose Kool Aid for years.

In his annual letter to shareholders, star fund manager Terry Smith slammed Unilever, poster child of the movement, for being “obsessed with publicly displaying sustainability credentials at the expense of focusing on the fundamentals of the business”. Replying to Unilever CEO Alan Jope’s comments on Hellmann’s (not dissimilar to the one at the top of this article, satire being dead and all), Smith said, “a company which feels it has to define the purpose of Hellmann’s mayonnaise has in our view clearly lost the plot”.

Could Smith’s comments mark an inflection point in the corporate purpose movement, and perhaps stakeholder capitalism more broadly?

The public is becoming increasingly cynical of corporate attempts of greenwashing and wokewashing, jumping on the stakeholder business bandwagon with jargon-filled marketing stunts. It is possible some ‘true believers’ are getting caught in the crossfire. Unilever, after all, has a long history of ethical business.

But even evangelists must keep their feet on the ground. Previous Unilever CEO Paul Polman irked shareholders with his statesmanlike approach. Like a latter-day Tony Blair, he spun off into the stratosphere to join the Davos men, leaving real problems behind. Jope should be wary of making the same mistakes. Lofty talk proclaiming business as the answer to all ills may attract young employees but doesn’t always wash with the public.

This isn’t the end of business doing good. Investors are more obsessed with ESG than ever, realising capital can be used to affect change. Record issuances of green bonds in 2021 and a change of tack from key pension providers such as Aviva show this.

But Smith’s comments may indicate a divergence between traditional growth investors and hardcore purpose-driven businesses. In recent years, many have claimed profit and purpose are mutually beneficial, that businesses can have their cake and eat it. Perhaps it is fitting given the week Boris Johnson has had that we’re learning that only goes so far. Bruno Monteyne, an analyst at Bernstein, said Unilever “has really deprioritised growth”. Barring a radical challenge to growth-based economics, that will never be acceptable for a publicly listed company.

So far, the corporate purpose movement has benefited from bullish market conditions. In times of plenty, it’s easy to philosophise about the good life. High mindedness becomes tougher to maintain when times are tougher. As the great man once said, “only when the tide goes out do you discover who’s been swimming naked”.