Corporate purpose took a step backward this week

Facebook
Twitter
LinkedIn
Pinterest
Pocket
WhatsApp


This week, a New York judge ruled against Ben & Jerry’s in an unusual case the ice-cream maker brought against Unilever, its owner. Ben & Jerry’s had taken its parent company to court because, it argued, its mission was under threat.

The case highlights a question gaining prominence within modern capitalism: What is the purpose of companies? For the last five decades, many business people had an easy answer, because economist Milton Friedman gift-wrapped it for them back in 1970. The purpose of a company, Friedman said, was to make money for its shareholders. If it did that, like a shark focused on hunting, it would be working efficiently, totally focused on the one thing it was made to do.

This left many complexities—planetary harm, for example, or social inequality, or even wars—to other entities better suited to addressing those problems, like policy-makers, activists, or peacekeepers. Selling clothes can’t be anti-consumerist, after all, right? Ice cream on a stick, whether or not it’s called a “Peace Pop,” can’t actually stop a war.

In the last few years, however, Friedman’s neat thesis has been more forensically examined, and found wanting. The heads of companies are beginning to acknowledge that corporate power could be one of the most powerful levers to change the direction, and mitigate the harm, of our modern societies. Famously, Paul Polman, the former CEO of consumer-goods giant Unilever, was one of the most vocal proponents of company purpose.

Now, however, Polman’s former company has suggested that it’s not necessarily willing to stand by its stated values. Its model of purpose-promotion—buying small brands and letting them continue to control their ethics while ramping up their scale—might not survive a moment of difficult, principled decision-making. Exactly the kind of moment, arguably, when purpose is actually tested. Unilever might argue that its decision regarding Israel and the Occupied Palestinian Territories is fair and balanced, but that still doesn’t get around the fact that it’s over-ridden a purpose-driven board it agreed to keep in place.

Ben & Jerry’s in Israel

In June 2021, Ben & Jerry’s announced it would stop selling ice cream in the Occupied Palestinian Territories. A year later, after coming under criticism and pressure including from some shareholders, Unilever announced its solution: It sold Ben & Jerry’s in Israel to the local distributer, to continue being sold in exactly the same way—flavors, packaging colors, and designs—save for a change from the English-language name to versions in Arabic and Hebrew.

Ben & Jerry’s took Unilever to court to try and halt some aspects of the sale. On Monday, a New York judge ruled against the ice cream maker, saying it had failed to prove it was suffering “irreparable harm,” or that its customers would be confused.

But how is harm measured? If it’s in sales, then continuing to sell in a lucrative market instead of leaving it may show no harm has been done. But what about reputational harm, and how is that measured? And while customer confusion might be a recognizable business ill—maybe they’ll choose a competitor because they’ll no longer understand that their favorite brand is on offer, for example—what about customer disappointment? What about customers feeling betrayed?

Ben & Jerry’s had not responded to an email requesting comment by the time of publication. A spokesman for Unilever reiterated that the company doesn’t comment on issues with legal ramifications.

A signal to purpose-driven companies

Unilever bought Ben & Jerry’s in 2000 with the agreement to allow the brand to retain an independent board. It was this board that vociferously opposed the Israeli sale, and which Unilever now says has “no power” to stop it. The signal is clear: When a big company buys a small one, it can ignore the new subsidiary’s wishes, whatever promises may have been made at the beginning.

The path for small purpose-driven companies is less clear as a result. Remain independent, and probably never achieve scale, and therefore never achieve reach? Or sell, and potentially sell out?

Facebook
Twitter
LinkedIn
Pinterest
Pocket
WhatsApp

Never miss any important news. Subscribe to our newsletter.

Leave a Reply

Your email address will not be published.