09/04/2024
The FRC has recently published some guidance on The UK Corporate Governance Code 2024.
The very first principles within the guidance concern Purpose, Strategy and the Business Model:
"An effective board defines the company’s purpose and sets a strategy to deliver it, underpinned by the values and behaviours that shape its culture and the way it conducts its business. It understands the main trends and factors affecting the long-term sustainable success, resilience and future prospects of the company ... It will also be able to explain how these have been assessed in the delivery of the company’s strategy and business model.
"A company’s purpose is the reason for which it exists. A well-defined purpose will help companies to articulate their business model, and develop their strategy, operating practices and approach to risk. A board which is clear about its purpose, and the corporate culture needed to deliver that purpose, often finds it easier to engage with its shareholders and wider stakeholders."
What is 'purpose'?
Purpose provides the guiding light for an individual or an organization, illuminating the reasons behind their actions and existence. It serves as a compass, directing efforts towards meaningful goals and driving motivation even in the face of challenges. Purpose transcends mere profit-making or personal gain; it embodies a deeper sense of fulfillment derived from contributing positively to the world. It inspires perseverance during times of uncertainty and empowers individuals and organizations to stay focused on their long-term objectives, anchoring decisions and strategies in values that resonate with their core beliefs.
How should companies approach purpose and articulate it?
Strive for a short, simple statement based on what you do and what you strive to achieve for your stakeholders. Some great examples are:
- "We help everyone enjoy amazing technology" (Dixons Carphone (now Currys plc) - Annual Report)
- "We provide the products and the advice that matter most to parents, to help them feel happy and confident" (Mothercare - Annual Report)
- "Enabling the energy transition" (Victory Hill Global Sustainable Energy Opportunities - Annual Report)
'Contributing positively to the world' is the key to articulating your purpose. Put aside profits; what positive outcomes do you strive to create for your stakeholders? Once you can understand this, then you also have the basis for articulating your Business Model.
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Strategy, on the other hand, acts as "the roadmap that translates purpose into actionable steps and goals". More abour Strategy and expressing your Business Model will be in Part II of this article, coming soon.
To find out how we can help you express your Purpose, Strategy and Business Model to meet the Code requirements, chat with us today: hello@blackandcallow.com
