Purpose: The Final Exam

When it comes to purpose in corporate strategy, 2025 is the year of the final exam.

For a corporate innovation hitherto enthusiastically labeled as "best practice", the exam results will play a significant role in the future life of the concept.

If it passes the exam, purpose will become an essential cornerstone for the development of companies. If conversely purpose doesn’t cut it, it will fall into oblivion like many other corporate fads which can inflame CEOs and company boards for a couple of business seasons, thanks also to the push received from company advisors and consulting firms feeding on the fads, and then fade away.

But in order to predict the outcome of the exam, let's briefly unroll the thread on purpose, like any AI model would do today.

The original idea of ​​​​a corporation giving itself a purpose – that is, an “institutional purpose" or "ultimate finality" – can be ascribed to the famous letter sent by Larry Fink, the influential head of Blackrock, to the CEOs having dealings with the investment company in 2018. The global outlook of the new millennium had changed heavily following three financial crises (the dot-com bubble in 2000, the subprime crisis in 2008 and the sovereign debt crisis in 2011) and above all there was increased awareness of galloping climate change and the progressively widening economic gulf both between social classes and emerging and established regions of the world. Added to all this, it had become clear that Western democratic states were having an increasingly hard time meeting growing spending commitments on security, education and healthcare, to name the main ones. The idea was that the private sector could and should do more. Having a purpose was a useful synthetic exercise to highlight a company's contribution to society in terms of the business organization's impact on the surrounding context and have a compass of reference for long-term strategy.

In reality, the astute Fink did nothing more than crystallize in a company project a historically important issue that had been explored since the dawn of the theory of the modern corporation – namely the idea that a company should respond to stakeholders in addition to stockholders. The latter are interested in profit and dividends. All the former – from suppliers to consumers, including workers and employees, minorities and all the communities on which the company has an impact, including country and territory – have other more specific interests. Employees have wages and salaries and their wellbeing at work as terms of reference; consumers, the satisfaction they derive from the products and services they purchase; and so on. However, everyone, including shareholders, have one thing in common: the "long term", i.e. the long-term survival of the company. Purpose is precisely that philosophical dimension, which potentially has a decidedly empirical corollary, that helps achieve the long term.

A few years ago, we did a complicated exercise at Bocconi to come up with a synthesis of the University’s purpose. The motto “Knowledge That Matters” came out of that reflection, because we thought it well encapsulated the roots, the historical evolution, and above all the prospective trajectory of the university founded in Milan in 1902 by retail entrepreneur Ferdinando Bocconi. Producing and disseminating “knowledge that matters” could well represent the reasons for the existence and long-term survival of the university and help catalyze the forces of all Bocconi’s stakeholders. 

Despite the collective enthusiasm for statements of purpose, which had led several CEO associations in the US and Europe to meet at the time of Covid to finalize its definition in official documents, the concept of corporate purpose has been dented over the years by the drastic turn of world events. Everything seems to have overflowed in this complex year of wars, MAGA, DOGE, where everything is called into question by a combination of conservative individualism and neoliberalism that seems to be prevailing again. After all, if big tech companies that deal with media backtrack on fact-checking – which was introduced after the Cambridge Analytica scandal precisely to protect users – what happens to their corporate purpose?

And if some of the big four in the auditing world are now embarrassed in the United States to continue to advertise the very DEI principles of diversity, equity and inclusion which they themselves had sponsored to make the corporate world a better place, what will their weaker stakeholders think of them?

And if, even on this side of the Atlantic, the European Commission that had taken a strong commitment with cadenced steps to mitigate CO2 emissions, now revises the dates of deadlines and even seems to renege on the European Corporate Social Responsibility Directive (CSRD), how should directors of companies that were starting to impose CSR protocols tell their managers to respect them?

In short, will purpose pass this test or not?

It certainly won't pass it, if those who govern the strategic direction of a company, its control and guidance, are sidetracked by the confusion of this critical juncture and think of purpose as a simple stylistic exercise to be included in the strategic plan.

Instead, purpose will pass the test if those who run the company realize the importance of what good business theory has always preached, namely that the long term is the result of the attention and therefore of the incentives we give to all – or at least a substantial part of – the stakeholders who revolve around our business model since the institution of the company. Which, in addition to producing a healthy profit, must also have a rounded purpose and a positive impact for everyone. Therefore, it may be well worth gearing up for reflections on corporate purpose at the tables of company boards.