What is the State of Purpose Governance in Canada?
Corporate governance continues to evolve driven by high-performing boards, new standards, and evolving stakeholder expectations. One area undergoing transformation is the board’s role in oversight of corporate purpose, otherwise known as “Purpose Governance”.
Four Clean50 honourees, including myself, are collaborating in various ways to advance this discussion.
Toby Heaps (2016), founder of Corporate Knights, published a study that uncovered the purpose governance gap in Canada. His company conducted the world’s first rating of social purpose companies in 2022, “The Social Purpose Transition Pathway: Helping Companies Move from ‘Say to Do’. It evaluated 34 Canadian companies and global brands that had significant operations in Canada to assess their purpose governance and implementation maturity. It found that many companies had corporate values that reflected the purpose, many boards disclosed progress on the purpose through annual reports, and some included purpose in the corporate strategy. However, not many boards included purpose oversight in their board charters, and boards did not include purpose responsibilities within the CEO’s performance description. A few boards included purpose metrics in incentive compensation and CEO and Executive deliverables. The report recommended that boards close the purpose governance gap.
This gap was picked up by the Canadian Purpose Economy Project (CPEP) which conducted a study on the State of Purpose Governance in Canada. In collaboration with Helle Bank Jorgensen (2019), founder of Competent Boards, and four governance education institutions, CPEP surveyed nearly 200 corporate directors and governance professionals to determine if they were governing the purpose of their organizations.
A majority of participants reported their organizations have a purpose statement approved by the board that sets out why their companies exist, and half responded this purpose was in fact a “social purpose” to contribute to a better world. Some might believe these numbers are high and that they overstate the number of boards overseeing their company’s purpose and ensuring it is enacted through strategy. It is possible that respondents are conflating a purpose, which is why the company exists, with its mission, which is what the company does to advance its purpose. It is also possible that directors and governance professionals are conflating purpose with their company’s sustainability or ESG (environmental, social and governance) commitments.
The study also found that while most are advancing their purpose through their corporate strategy, they face some purpose governance challenges, particularly how to monitor and disclose purpose integration and impact – critical roles for boards of purpose-driven firms. This is not surprising in light of the fact that few boards in the survey received purpose education or education on the board’s role in purpose oversight. Going forward, respondents believe purpose expertise or experience will be an important consideration in board recruitment to help address this knowledge gap.
Interested in learning more? The five partnering organizations are co-hosting a free webinar on the topic on June 14, 1 – 2 pm ET. For more information and to register click here:
What is the State of Purpose Governance in Canada?
Even if you are unable to attend the date, register to receive a copy of the recording.
Nancy Wright, Chief Operating Officer, Competent Boards (2017), and I, Chair of the Canadian Purpose Economy Project (2016), are speaking at it.
You’ll also learn about steps boards can take to enhance their purpose governance, avoid purpose-washing, and put their company on a solid footing – while creating a better world. These Purpose Governance Guidelines for Boards define the pathway for improved governance in Canada and beyond.
For more information about the Canadian Purpose Economy Project and to sign the Call to Purpose click here.
