The Economist Group (TEG) returned to the Cannes Lions International Festival of Creativity with a programme of engaging debate and discussion led by The Economist journalists.
At the Palais de Festival Zanny Minton Beddoes, editor-in-chief of The Economist, hosted a debate between; Rory Sutherland, Vice Chairman at Ogilvy, Livia Firth, Co-Founder and Creative Director at EcoAge, Todd Kaplan, VP Marketing at PepsiCo and Kathleen Hall, Corporate Vice President of Brand, Advertising and Research at Microsoft on whether the business of business is to create value for shareholders or value for the world.
Kathleen Hall kicked off by arguing that “long term profit comes from purpose”, but added that even beyond profit, companies have a responsibility, pointing to Microsoft’s $500bn donation to the city of Seattle to provide affordable housing as such a step. Todd Kaplan took a slightly different stance arguing that whilst “the role of the business is to make profit, the role of brands is to add value to consumers – to have a purpose”.
Rory Sutherland pointed out that a Milton Friedman-esque shareholder value movement isn’t a strategy in and of itself, agreeing with Kathleen Hall by pointing out that a problem with capitalism is the short-termism of the shareholder – the pension funds and corporate investors versus the long term shareowner. Sutherland argued that the “narrow pursuit of profit doesn’t lead to profit”, leading Zanny Minton Beddoes to conclude “that the business of business isn’t short term profits”.
The debate moved onto discussion around the question ‘what is purpose’ with Livia Firth arguing that “purpose has to be beyond profit”. Zanny Minton Beddoes tackled Todd Kaplan on Pepsi’s forays into purpose, with Todd responding, “you need to be consistent about purpose, it needs to be built into the profit and it needs to be a fundamental belief”. Livia Firth countered him on this point, asking, “if PepsiCo really is about purpose, what about plastic?”.
Kaplan pointed to Pepsi’s pledge to make 100% of bottles 100% recyclable by 2025, as well as their purchase of Sodastream to help progress the shared goal of reducing plastic waste, and other initiatives including the creation of filling stations on college campuses.
The case against purpose as marketing
Rory Sutherland argued that purpose doesn’t necessarily have to be something that is communicated in marketing, claiming “brands should do good by stealth”. He pointed to the purpose of the original soap companies which was to prevent disease through encouraging cleanliness, but argued that you didn’t see ads saying “use soap and don’t get cholera”. Instead, they focussed on how soap could make you look and smell good. He concluded that he worried about outward brand purpose giving people a false sense of doing good.
The role of leadership
The debate then turned to the key role of executive leadership in driving brand purpose, with Todd Kaplan saying that if it’s only the marketing department championing brand purpose then short-termism can obstruct it.
Katheleen Hall pointed to Microsoft as the perfect example of how value-led leadership really matters and can increase share price, pointing to the increase in share price from $23 a share under Steve Ballmer to $134 a share today under the value led leadership of Satya Nadella.
Answering a question from the floor, about whether purpose driven start-ups should avoid going public to remove the pressures of quarterly reporting, Todd Kaplan disagreed and reiterated “ultimately it’s down to leadership and convictions from leadership”. He pointed to Patagonia as a company that was purpose driven from its foundation and now as a listed company retains that clear sense of purpose.
Livia Firth also pointed to Patagonia as a great example of how leadership can drive purpose, using their Black Friday initiative in which they donated 100% of sales revenues to sustainable causes as an example. Firth also called out H&M who have just been sanctioned by the Norwegian Consumer Authority (CA) for “illegal marketing” in the promotion of its Conscious collection as an example of marketing-led greenwashing.
The panel agreed that despite what they may wish, short-termism persists. Sadly, this is supported by the Economist’s survey of global executives announced today, which found that whilst nearly half (48%) of respondents agreed that companies that operate with social purpose have a financial competitive advantage over their peers, 78% say that companies don’t invest in long-term initiatives.
The panel were hopeful that this would change, with Livia Firth arguing that “doing the right thing for society and doing it for profit are the same in the long term”.