Is purpose just a new marketing gimmick? Or is it a real yardstick for your own actions? Banks separate wheat from the chaff, especially in times of crisis: only those who follow their words will survive in the market.
Larry Fink, CEO of Blackrock, recently wrote in his letter to company executives
"The evidence on climate risk is compelling investors to reassess core assumptions about modern finance. Research from a wide range of organizations – including the UN’s Intergovernmental Panel on Climate Change, the BlackRock Investment Institute, and many others, including new studies from McKinsey on the socioeconomic implications of physical climate risk – is deepening our understanding of how climate risk will impact both our physical world and the global system that finances economic growth."
In addition to the climate crisis, the same applies to the corona crisis: the more crises become investor risk, the more directly banks and financial service providers are affected with their business models. What are the risks lurking in companies' balance sheets? How can these risks be hedged? Perhaps more importantly, what behavior will customers and society accept in the future? What decisions are necessary to remain attractive as a bank?
Focus on social risks
The case of Siemens shows how quickly a company becomes an enemy of groups such as climate activists, young people or politicians and ultimately gets on the radar of investors. The german company decided against the demands of the climate movement "Fridays for Future" to deliver the railway technology for a coal mine project of the Adani group in Australia. Climate activists are demanding that Siemens should not limit environmental protection to a corporate sustainability report. The company should consciously withdraw from individual transactions and investments in a way that is publicly comprehensible.
In the field of weapons production, the organization PAX for Peace is committed to quitting nuclear weapons and cluster bombs. Pax for Peace publishes negative lists of banks and financial service providers that provide finance to companies involved in the production of these types of weapons. Financial institutions have already significantly reduced their involvement in this area, putting pressure on manufacturers to withdraw from cluster bomb production. This behaviour can create a lever in finance that triggers change. Instead of reacting to pressure in the future, there is an opportunity to proactively trigger social change through the financial world.
Quick decisions are necessary
So how can you make the step from talking to acting quickly? The World Economic Forum in Davos recently showed it again: The will in the financial world is recognizable, but necessary decisions do not follow automatically. Profit and purpose have not yet synchronized and sometimes clash.
Perhaps it is also not clear to decision-makers how to deal with the constantly changing requirements of an increasing number of stakeholders. This is a sign that a clear indicator of action in a complex environment is needed. The existing visions or mission statements are not sufficient. A formulation of purpose that was developed from the outside in the sense of a brand differentiation does not usually help either.
Purpose as a yardstick
So what does the solution look like? It is about finding a meaning and purpose on which the bank's actions are actually based. Such a purpose is known throughout the whole organization and serves as an evolutionary center. Frederick Laloux, author of the book "Reinventing Organizations", describes this as "Evolutionary Purpose": A meaning and purpose that can be listened to, which unites the interests of employees and customers as well as of analysts and activists - and, based on that purpose, it is easy to decide what to do and what to let go.
Such a purpose works in two ways:
It ensures that the organization remains relevant to its stakeholders. It is the basis for the intrinsic motivation of managers and employees and provides an answer to the question: "How much time, energy, imagination, identity ... do I really want to invest in this organization?"
It provides guidance for the entire organization, as decisions are suddenly easy, collaboration spreads across teams and departments, and the boundaries become clear when it is time to say “no”.
Just wishful thinking or dry theory?
Numerous companies such as the industrial electronics company S.I.E. (Austria), the bag manufacturer FREITAG (Switzerland), Gutmann Aluminum Draht GmbH (Germany) or Postfinance (Switzerland) have only recently switched to new leadership models with a purpose orientation. Two key questions emerge:estiegen. Es zeichnen sich jeweils zwei Kernfragen ab:
Impact: For what do stakeholders need a bank?
Contribution: What changes because of the performance of the bank in the world of stakeholders?
The prerequisites for entering this process are a management that is ready to take on a new leadership role and a fundamental openness to deal with the needs of stakeholders. The benefits can be large and also measurable: More than 90 percent of the purpose-driven companies achieve growth and profits above the industry average. Other restrictive laws can also be avoided. "If we do not make enough green investments, the industry will face another round of regulation," said Axel Weber, chief executive of the major Swiss bank UBSnn groß und auch messbar sein: Mehr als 90 Prozent der Purpose-getriebenen Unternehmen erzielen Wachstum und Gewinne über Branchendurchschnitt. Auch weitere, einschränkende Gesetze lassen sich möglicherweise vermeiden. „Wenn wir nicht genügend grüne Investitionen tätigen und finanzieren, droht der Branche eine weitere Runde an Regulierungen“, sagte zum Beispiel kürzlich Axel Weber, Verwaltungsratschef der Schweizer Großbank UBS.
The opportunity to drive the change
Greta Thunberg recently criticized in Davos: “You say children shouldn't be worried. You say, 'just leave it to us, we will fix it'. And then? 'Nothing'. ”Based on an evolutionary purpose, banks can end the speechlessness of the economy. If you keep an eye on the effect and demonstrate a clear contribution to solving the current challenges, you can enter the public discussion and re-anchor your role in society. When, if not now, is the time to align yourself as a bank with your own evolutionary purpose?