Every business leader faces difficult tradeoffs when working to make a company both profitable and purposeful. But leaders who articulate a company’s deep purpose can tap into that broader vision to help them navigate short-term decisions by keeping the company’s longer-term intentions in mind.
In my new book Deep Purpose: The Heart and Soul of High-Performance Companies, I explore how purpose-driven leaders find success by going beyond focusing only on shareholders and customers and also considering their employees, communities, and the environment.
In the video below, I speak with Best Buy CEO Corie Barry, who says that making money is the company’s business imperative, not its purpose. Barry explains how the company manages to balance pursuing its mission of enriching people’s lives through technology while also focusing on its social purpose of caring for the environment, for example by refurbishing electronic products and selling them in stores to contribute to the recycling effort.
“Purpose becomes your lighthouse in the storm,” Barry says. “Purpose is the direction you’re always going to move the company. And it helps you navigate the tradeoffs because if you’re clear about your ultimate goal, then you can try to think through: Where might you make investments? Where might you make decisions? Where might you prioritize one constituency over another? Because you’re clear about what it is that you as an organization are there to do, not just today, but well into the future.”
Book Excerpt## Deep Purpose: The Heart and Soul of High-Performance Companies
Ranjay Gulati
Chapter 2: The Art of the Tradeoff
If you buy Gotham Greens’ fresh produce, you’ll notice that it comes packaged in single-use plastic packaging, which is terrible for the environment. Why didn’t a company so dedicated to reinventing agriculture to be more sustainable and less polluting use planet-friendly packaging? It wasn’t an oversight. As founder Viraj Puri recalls, when the company was starting out, his team researched alternative options, eventually landing on highly attractive packaging made of compostable fiber. “We thought very highly of ourselves and patted ourselves on the back for doing such an amazing job and for the impact we were going to make.” As workers began harvesting lettuce and putting it into the eco-friendly packages, they ran tests to determine the product’s shelf life so that they could print expiration dates on the packages. It turned out the greens lasted only a few days in fiber-based packaging as compared with two weeks or longer in plastic. The fiber acted as a desiccant, drying out the greens, causing them to wilt and wither. This put Puri and his team in a bind: Would they have to compromise on their social purpose and use plastic? Or could they come up with a different solution?
Team members had an idea: What if they sold their produce to supermarkets unpackaged, and supermarkets retailed it to consumers in loose bins? The team went to supermarket produce buyers and proposed this solution. The buyers agreed, but they indicated they would only want to purchase a small fraction of the order that they had originally placed with Gotham Greens since the demand wasn’t there. As the produce buyers explained, consumers were gravitating away from unpackaged greens and toward locally-grown packaged greens, which are cleaner, retain their quality, and are safer to eat.
After extensive research, the team perceived the inherent tension between environmentally friendly packaging and food waste. According to Puri, “when you look at a complete lifecycle analysis, food waste is a major factor,” having tremendous harmful environmental impacts due to the unnecessary expenditure of natural resources to grow products that consumers don’t actually use, plus the additional emissions related to disposing of a previously edible product. The team concluded that alternative packaging solutions weren’t as green as they purported to be if they didn’t perform well in their main function: storing and preserving the food they contained. Recognizing they would need to use plastic packaging if they were to market a commercially viable product, Puri and his team researched the types of plastic available to them, seeking options that did the least damage to the environment. Recyclable and recycled plastic intrigued them as a relatively sustainable solution, but the team worried that it was more costly than conventional plastic. At one point, compostable plastic seemed like a godsend: perhaps Gotham Greens could create packaging from plastic that degraded naturally and replenished the soil.
As team members learned more about this option, however, they concluded that compostable plastic wasn’t as sustainable as it seemed. Suppliers used subsidized, genetically modified corn to manufacture it, and only consumers in locations with municipal composting facilities could compost this packaging. Most of the company’s compostable plastic would wind up in landfills, or even worse, consumers would put it in their recycling bins and it would create operational inefficiencies in recycling facilities, which can’t recycle compostable plastic.
After months of research and analysis, Puri and his team resolved to package their produce in #1 PET plastic, the type most universally accepted at recycling facilities. “As an ESG (Environmental, Social, and Governance) company rooted in natural resource conservation as part of our DNA, it was a really hard, emotional decision for us,” Puri says, “but we’re still using plastic boxes ten years later because there isn’t an alternative available commercially on the market today” that delivers longer shelf life and gives consumers the product quality they expect.
Observing this decision from a distance and out of context, a skeptic might question Gotham Greens’ commitment to its purpose, concluding it had chosen a commercial logic over a social one. With more information, a different picture emerges. Gotham Greens has an ongoing sustainable packaging team that stays abreast of new technologies as they emerge, continually searching for more sustainable options. Puri believes that a lack of suitable eco-packaging alternatives that perform well and are accessibly priced so that consumers can still afford groceries is the reason we see so much plastic in grocery aisles today. “Despite our best efforts, Gotham Greens is a small company with limited influence in the packaging sector. Changing the landscape requires the collective action of consumers demanding better, large companies making commitments that influence the supply chain, and governments creating proper incentives and market dynamics to fuel innovation and usher in improvements.”
Puri and his team did indeed make the decision to use plastic despite its negative environmental impacts in order to create a viable business with sufficient consumer demand and investor interest. But they did so knowing that if the company could get its product right, grow its sales and geographical footprint, and succeed in its larger vision of reinventing agriculture, the social and environmental benefits would far outweigh the harms caused by plastic packaging. One day, they hope to be able to switch to a truly green alternative as packaging technology advances.
The world is a messy place. Gotham Greens’ struggle with packaging illustrates how hard companies and leaders embracing practical idealism must work to arrive at meaningful Purpose with Profit solutions, and the imperfect nature of many of these arrangements. Even when a product offering or a strategy represents a clear Purpose with Profit solution overall, specific executional decisions might reside in either Profit First or Good Samaritan. In Gotham Greens’ case, leaders couldn’t arrive at a perfect solution given the needs of its stakeholders, because no such solution existed. But they could and did do their utmost to find a solution that was not quite as bad as other options and that would allow the company to stay in Purpose with Profit overall. In deciding to stick with recyclable plastic due to a lack of viable alternatives, the company did its best to negotiate the interests of investors, end consumers, supermarkets, and the environment. And judging from the company’s overall social and commercial impact to date, these efforts were quite worthwhile.
This example leads us to an important theme: purpose’s role in helping leaders navigate tradeoffs. During the months-long process of selecting packaging, Puri and his team looked toward the company’s purpose for guidance at every turn. Clarity about the reason for being led in turn to clarity about priorities. As a business, the company had to see to a commercial logic that pleased customers and did so economically. But as a business with a purpose, its intent was clear: it had to ensure that even highly tactical decisions such as this one supported the company’s ambitions and moral vision. The deeply felt, existential commitment enshrined in the purpose served as a set of guardrails for commercial activity, indicating options that just wouldn’t work or that the company would avoid if it could. In my research, many deep purpose leaders described the purpose as a “North Star” that helped orient them and see them through the complexity of negotiating tradeoffs.
DEEP PURPOSE. Copyright © 2022 by Ranjay Gulati. Reprinted here with permission from Harper Business, an imprint of HarperCollins Publishers.
Read more about why it’s important for companies to find their deep purpose here.
Read more about building a sense of purpose among employees here.
[iStockphoto/shaunl]
