Finalist for the OMT Division Responsible Research Award
We argue that a broader definition of corporate purpose—emphasizing societal and environmental well-being as intrinsic goals—addresses key criticisms of corporate sustainability research and stakeholder theory, such as unreliable findings, greenwashing, and narrow theoretical scope. By integrating societal and environmental concerns into the core mission of for-profit firms rather than treating them as means to economic ends (i.e. doing well by doing good), a focus on corporate purpose reframes understanding of business priorities. We develop hypotheses contrasting our view of purpose versus traditional forms of stakeholder management including that traditional firms prioritize direct economic stakeholders and are likely to disengage from non-shareholding constituencies over time. In contrast, purpose-driven firms, which we identify as those that encode an expanded definition of corporate purpose in their governance structures, engage more inclusively and equitably with societal and environmental stakeholders. Accountability mechanisms, such as third-party certifications, further reinforce this engagement by strengthening purpose-driven firms’ practices and also can affect traditional firms by mitigating their instrumental approach. Using proprietary data from global nonprofit B Lab, we test these hypotheses across multiple impact areas (community, customer, environment, and worker) and find robust support through various methodological checks, including entropy balancing and regression discontinuity designs. Our study advances corporate sustainability research beyond what traditional stakeholder approaches by showing how purpose-oriented governance provides a framework for achieving authentic societal and environmental impact.
