6 trillion reasons purpose is no longer optional (what the BlackRock letter is telling us)
In his annual letter to CEOs, BlackRock chairman and chief executive officer Larry Fink issued a bold edict. Companies need to embrace a purpose if they want the support of BlackRock. Progressive business leaders have been extolling the virtues of purpose for a few years now. What makes this statement significant is the reach and influence of BlackRock. The firm manages more than $6 trillion in investments, making it the world's largest and most influential investor.
BlackRock is making no bones that it will tilt its influence toward those companies that demonstrate a commitment to purpose. As Fink wrote, "Society is demanding that companies, both public and private, serve a social purpose. To prosper over time, every company must not only deliver financial performance but also show how it makes a positive contribution to society."
There are plenty of examples of organizations advancing the business by embracing a purpose. Up until now, it took a visionary leader to take this path. And there is a sense that the world looked at purpose as a nice virtue for an organization but not necessarily a critical operating component.
Fink is telling us it is becoming just that, "Without a sense of purpose, no company, either public or private, can achieve its full potential. It will ultimately lose the license to operate from key stakeholders. It will succumb to short-term pressures to distribute earnings, and, in the process, sacrifice investments in employee development, innovation, and capital expenditures that are necessary for long-term growth."
"But we’re not on the radar of BlackRock"
We could easily presume that we need not worry about this issue if we aren't the size company that Blackrock engages. This is a dangerous presumption. If the largest of organizations are being called to purpose, then it will become the expectation for all organizations. Our customers and prospects will make sure of that.
Remember people talking about how the internet became the great leveler which allowed a mom and pop operation to have a digital presence right next to an industry behemoth – potentially leveling the playing field? Well, what a lot of people didn't talk about was that it goes both ways. Those industry behemoths can create experiences and set levels of expectation that customers and prospects begin to demand from everyone in the digital realm – regardless if you're a smaller competitor.
In today's world, we are less and less likely to stratify our expectations based on whether we are engaging with a large, mid-size, or small business. So as organizations begin this rapid adoption of purpose, no organization will be given a hall pass.
There is a new expectation. An expectation that purpose becomes part of our operating model. It's not a suggestion. It's the world's largest investor telling us it is becoming a requirement.