Why care about purpose in business?

Peter Drucker famously said that the purpose of a business is to create a customer and a customer is defined as someone who pays for the products and services the company offers. This perspective seems to be shared by many in business: as long as revenue and profits are generated, there’s no reason to bother about anything else. It’s all about the money!

Whenever there’s a discussion about morals and ethics, lip service is paid to those questions, but only if there’s a monetary reason for it. For instance, if trading with certain types of industries would be frowned upon by other customers and thus might lead to reduced sales. In this case, the revenue loss with existing customers outweighs the additional revenue and, as a result, the company may decide to not serve those industries. Although the outcome may be the desirable one, the rationale for the decision is pecuniary only.

At the same time, there are many companies out there that are purpose driven and explicitly seek to make the world a better place and improve the state of humanity. In the US, Whole Foods and Patagonia are good examples of this. To paraphrase the former co-CEO of Whole Foods, John Mackey: companies need to make money in the same way as our bodies need to make red blood cells if we want to live. But the purpose of our bodies is not to make red blood cells. Similarly, companies need to go beyond the sole focus of making money.