Is the rise of purpose-driven business a red-herring?

Rachel Baker
The term “purpose-led business” has become ubiquitous in recent years. As a society, we’ve become increasingly aware of environmental and social problems and the part that businesses play. As a result, lots of new purpose-led businesses have sprung up, and many established companies are reassessing their social impact. The number of B-Corp companies tripled between 2016 and 2021, and by 2018 over half of UK consumers in an Accenture survey said that they’d prefer to buy from brands that reflect their personal values and beliefs.

So does this mean we’re on track for all businesses to be purpose-led in the future? Or is that just wishful thinking?

The increasing popularity of purpose

More and more people have begun joining the dots between business and wider social issues. From global warming to fair pay and labour conditions, the public have wised up and are putting increasing pressure on businesses to mitigate their negative impact. And of course, many people have been inspired to start their own purpose-driven businesses to help remedy some of our collective issues.

This has been reflected in the growing interest in ESG – environmental and social governance. At least 85% of investors are now interested in sustainable investment. And it’s no surprise when you consider stats like 73% of Morningstar ESG indexes outperforming their non-ESG equivalents. While there are questions about whether ESG is the best model – it’s not synonymous with sustainable investing – this is still a noteworthy trend for the finance industry, which has previously been focussed solely on growth at any cost.

There’s plenty of evidence to show that purpose-driven businesses have excellent growth potential. They’re more likely to drive innovation, think long-term, mitigate risks, and yield higher returns. B Corp businesses grow 28 times faster than the average business, while Deloitte reports that companies with purpose tend to witness higher market share gains & have better employee and customer satisfaction. But is there more to the story?

What do people mean by “purpose”?

Before we get overexcited, we should take a minute to consider what “purpose” really means. Essentially, it’s different to everyone. For example, Deloitte cites Kelloggs’ purpose of “nourishing families so they can flourish and thrive”. So the “purpose” being discussed isn’t necessarily as loft or altruistic as we might imagine.

Likewise, by definition, B Corp only really means that a company has to honour another purpose alongside creating returns for its investors, but the purpose is up to them to choose. There are quite a few B Corp companies who we wouldn’t necessarily consider as ethical. At the end of the day, purpose is a subjective term, and anyone can use it. This means that we have to take stats about the rise of purpose-led business with a pinch of salt.

The barriers to truly purpose-led business

Of course, there are still many businesses for whom social and environmental impact are a key priority. But even for those with the best intentions, it’s not always an easy ride to achieving it.


Greenwashing – and general purpose washing – is on the rise too. Sadly, many companies simply view sustainability and working on other social issues purely as a marketing exercise. Knowing that customers care about these things, corporations want to seem like they care too – seem being the operative word. There is legislation and guidance in place to stop this from happening – for example the Green Claims Code – but realistically it’s difficult to police every company, marketing material and ethical claim.


Ultimately, there will always be people who are more interested in pursuing money than ethics. Legislation and consumer pressure can hold businesses to account to a certain extent, but there are usually loopholes to be found – just think about all the companies who register in tax havens. Similarly, Harvard Business Review recently reported that companies in countries with the strictest environmental regulations will often go to countries with more relaxed laws where they can get away with more environmental damage.


Kate Raworth – author of Donut Economics, which proposes an alternative economy prioritising people and planet alongside profit – recently gave a speech warning about how many purpose-led business compromise on their morals due to pressure from investors. In her experience, VC can often turn impact companies mainstream. This can be due to investors wanting the ethical label in order to appeal to customers – but being less willing to implement concrete impact measures that might cut into profits.

Issues at company level

As well as CEOs, boards and investors, resistance to social and environmental measures can come from staff as well. Gihan Hyde, Founder and CEO of Communique, a consultancy for ESG corporate communications, highlights how ESG models can fail when not correctly communicated:
“For an organisation to embed ESG it needs to transform its business model and the mindset of its employees.

The internal commitment to communicating around how the company is saving people and planet should be thought of as an asset that should be reported on the balance sheet – something that can generate cashflow, reduce expenses, attract the right talent, and improve sales. An asset that needs funding, improvement, testing, loving, caring and attention. It needs to be taken seriously, with time spent harnessing its powers.

Sadly, this often doesn’t happen – hence the majority of organisations falling into the greenwashing trap, resulting in their reputation being damaged and their employees losing trust in them.”

Lack of support

We often think of start-ups as being the most aspirational in terms of purpose and ethics, but actually a lack of resources and support can be a barrier to them achieving their goals. Recent research by ESG VC found that only 11% of start-ups surveyed measured their carbon footprint and only 7% had a net zero carbon plan in place. However, their environmental performance tended to improve the larger they got. This suggests that early-stage companies often lack the resources and know-how to implement environmental strategies.

What businesses can do to have a truly positive impact

If you’re reading this thinking “hey, I run a purpose-led business and I’m really out there to make a difference” then great! That’s what we like to hear at FutureX. While there are certainly challenges and there will always be companies looking to pay lip-service rather than actually putting in the work, that shouldn’t deter truly purpose-led businesses.

Here are a few ways that you can stay true to your purpose while growing your business:

  • Find investors who are aligned with your goals

As Raworth says, the investors you choose can end up having a huge effect on the direction of your business. Thanks to the growing interest in impact investment, there are plenty of investors out there who’ll be aligned with your vision. Big Society Capital, Purpose Ventures, and ClearlySo are just a few examples of funds that specialises in businesses making a positive social impact.

  • Take out (the right) certifications

While there’s no perfect certification to guarantee ultimate ethics in every area of business, there are certainly lots out there that can help you put the right systems in place. ISO Accreditations, Carbon Trust, Living Wage Foundation, ESG Mark and The Responsible Business Standard are a few good places to start.

  • Use the support that’s out there

There’s oodles of support for business who want to have a positive impact. Courses and workshops are great ways to continually deepen your own understanding of business impact. When it comes to understanding and minimising your carbon footprint, The Carbon Literacy project offers training to companies and employees to help everyone understand their carbon footprint and how to reduce it.

  • Find a community

Being a purpose-led founder can be tough, so finding others going through the same thing can bolster your motivation, offer support and spark inspiration! We may be biased but we think the FutureX community is pretty great for that. And if you’d like to mix with like-minded business leaders, learn more about business ethics and get inspired by business leaders, why not attend the Impact Summit in September?

True purpose leaders – we need you!

At the end of the day, some businesses will always be more purpose led than others. As long as humanity exists, there’ll be those who try to cheat the system and exploit people and the planet for their own gain. We just have to watch out for the ones doing it under the guise of greenwashing or purpose washing. Every person and business makes an impact, so if you’re on a mission to make a positive impact with your business – keep doing what you’re doing. The world needs more people like you!
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