Purpose: "Good washing"or powerful compass?
In France, the Loi relative à la croissance et la transformation des entreprises, known as Loi PACTE, voted on May 22nd, 2019, aimed, among other dispositions, at allowing companies to define their social objectives beyond their commercial definition. French companies can now officially state their Raison d’Etre, or purpose
It is a strong tool to incite companies to define their value proposition to the society, while allowing for new governance, new KPIs, new strategies and, for some companies choosing to do so, paving the way for more fundamental transformations.
Yet, the non-mandatory, non-standardized character of its application weakens its impact. Unless they become an “entreprise à mission” (mission-driven company, going further than simply having a Raison d’Etre), companies can opt for a non-specific Raison d’Etre, not matched by actual product/servies products, governing bodies and operational translations.
Raison d’Etre allows companies to clearly state their social purpose and it is now widespread among the largest companies in France
The PACTE law allows companies to incorporate in their articles of association (statuts) a Raison d’Etre, a purpose. Such a purpose is voluntary and aims to provide a social purpose to companies that complements their corporate purpose. Although sometimes close, it differs from the company’s mission statement.
Companies can now have a social mission and interest and should consider the impact of their activities with regard to their Raison d’Etre. 26 CAC40 companies have integrated a Raison d’Etre in their articles of association, 3 more are working on it and 3 have stated that their existing mission statement includes a Raison d’Être
25 CAC40 companies are sampled in following paragraphs, including 2 without Raison d’Etre in their statuts but whose Mission Statement is similar to a Raison d’Etre nonetheless.
Raison d’Etre must be translated in actual product portfolio, indicators and actions, if companies want to achieve Do Well & Do Good
The PACTE Law provides neither definition nor criteria of company compliance. How the Raison d’Etre affects the company’s products, services and daily operations is left to company Legal, CSR or Compliance departments. It cannot be legally binding, only perhaps leading to the suppression of the Raison d’Etre statement in case of explicit violation
McKinsey Senior Advisor Bruce Simpson goes even further in the ascertainment:
“[a majority] of companies have a purpose statement that does not mean anything to anybody. It’s a fluffy statement, often created by an ad agency, that does not anchor any specific business initiatives.”
Most Raison d’Etre statements leave open the means to achieve their goals and only a minority of CAC40 companies yet make an explicit link between their Raison d’Etre and their products and services.
For that, they will need to become practical: perhaps choosing to abandon product, subsidiaries, participations if they conflict with their stated objectives.
In order to do so, they will need to adequately measure their activities. Many standards and KPIs are emerging to track this impact, from the Global Reporting Initiative standards to the UN Sustainable development goals. All useful, but less so if companies do not create dedicated bodies of governance beyond the CSR department.
Today, only a minority of companies have created specific committees associating Board members, managers and employees and third-party experts.
Do Well Do Good companies surely must have a Raison d’Etre, but they must be bold enough to make it precise enough to be binding. Most of all, they must embody it in their strategic choices, everyday operations and company culture. Strong labels, such as B Corp, can be a useful third-party tool to oversee that.
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