Anuradha Chugh has spent much of her career at purpose-driven businesses. After nearly 15 years leading brand and marketing efforts at Unilever, Chugh was managing director at Ben & Jerry’s, a B Corp, from 2017 to 2021. She then served as CEO of another B Corp, Pukka Herbs, the herbal tea brand, until late 2023.
Having seen the positive impact purpose-led businesses can have, she’s convinced that ethical and responsible business leadership are key to tackling some of the world’s most challenging problems, including climate change and modern slavery.
“Businesses can move faster than governments,” she says. “They understand the externalities and they experience them first-hand because those issues impact their supply chains. They have a lot of power, whether it’s through lobbying or by showing the way forward.”
Chugh’s longest employer, Unilever, was once renowned for its efforts on sustainability. However, the company publicly rowed back on some of its commitments following a change of leadership, investor pushback and a period of disappointing growth. In 2022, Terry Smith, a major investor in Unilever, said: “A company which feels it has to define the purpose of Hellmann’s mayonnaise has, in our view, clearly lost the plot.”
The growing disconnect between investors and investees
Comments such as these illustrate what Chugh believes is one of the most pressing problems for purpose-led businesses: a disconnect between investors and the companies they invest in.
“For a while, I’ve felt a growing misalignment between governance, finance and business,” says Chugh. “Purpose-led businesses operate differently than traditional businesses and finance hasn’t caught up; the function doesn’t understand the needs of regenerative businesses. At the same time, governance is becoming even more focused on risk and regulation; box-ticking and auditing.”
According to Chugh, the fixation on risk can hold back bold innovations that often characterise purpose-led businesses. With her decision to leave Pukka Herbs, she has made it her mission to help investors and investees achieve better alignment.
Chugh now sits on multiple corporate boards, including at B Lab UK, the organisation behind the B Corp certification. Reflecting on her decision, she explains: “I wanted to talk the language of bridging and get people to understand what actions and systems were needed to do business better.”
How to bridge the gap between investors and leaders
As a board member, Chugh has been in many situations where the disconnect between investors and business leaders is glaringly obvious.
One such example was a recent panel she hosted for B Lab on the investor-investee relationship. She recalls: “There was a palpable discomfort in the room. I could feel a lot of agitation because the founders and business leaders didn’t understand what the investors were saying. They felt like they were talking a completely different language.”
The problem – one that is all too common among purpose-led organisations – was that the business leaders were keen to emphasise their mission and purpose, while their investors were laser-focused on the bottom line. To bridge the communication gap, Chugh says leaders of purpose-driven brands must become more conversant with financial terms. “Founders are fairly lost when it comes to this but there are lots of resources out there,” she says.
She recommends using training courses to gain a better understanding of financial terminology. Moreover, leaders must be aware of the different types of investment that are available and which is best suited to their business , whether it be an angel investor or a crowdfunding model, she advises.
Chugh also suggests connecting with other founders to learn from their experiences. “You are not alone,” she says. “Reach out to other CEOs. Given the many different types of capital that are available, look for similar businesses to yours and learn from them because they might give you suggestions on where things have gone right or wrong.”
The changing nature of boards
But most importantly, these businesses need to find what Chugh calls “aligned capital” – and this largely comes down to understanding and carefully selecting the board members. “Whether they like it or not, purpose-driven businesses need to be paying much more attention to who’s on the board,” she says.
Fortunately for mission-led organisations, the composition of boards appears to be changing. “The old, fuddy-duddy, drinking-wine-at-lunch board days are gone,” says Chugh. Instead, some of the questions she often hears include: Do we have nature on the board? Do we have youth on the board? Does the board really understand what impact means?
This demonstrates how the influence of the board can be used to boost the triple bottom line of planet, profit and people rather than simply maximise shareholder returns.
The power of purpose-driven brands
Chugh is confident that the power balance is shifting. “It’s often felt that the power is sitting in the hands of the investor,” she says. “But business leaders need to realise that the power is really sitting with them – they own the brand.”
And, in her experience, there are many reasons to preserve the purpose behind the brand. Research shows that purpose-driven businesses can grow faster, achieve higher returns and build a stronger brand and reputation than their competitors. Plus, such organisations are often better at attracting talent and their partnerships are more likely to be founded on meaningful relationships with like-minded partners, Chugh explains.
This alignment can be invaluable in relationships with suppliers, for example. Supply chains have been under immense pressure in recent years, with climate change and geopolitical conflict disrupting trade routes all over the world. Therefore, leaders who are able to strengthen their supply chain partnerships through meaningful connections can create tremendous value for their business. But it’s difficult to express this type of value in financial terms. “Supply relationships are an intangible asset,” says Chugh. “So companies such as B Corps need to learn the language of monetising intangibles.”
Chugh adds that investors may need some re-education to appreciate the benefits of intangible assets and the activities that go into developing or acquiring them. “You need to start from the basics with some private equity owners,” she says. “They may have understood the need for purpose-driven businesses when they invested in them, but it is different day-to-day when many activities seem superfluous or add no value.”
For instance, activities such as using more ethical – and expensive – suppliers, investing in diversity and inclusion initiatives, offering a four-day week or giving a percentage of profits to charity, can seem like unnecessary costs unless they are viewed as part of a bigger picture.
Despite the challenges in the investor-investee relationship, Chugh notes that many financiers choose to back purpose-driven businesses not only because it is the right thing to do, but also because of the potential return on investment.
But, she is adamant that the “one-size-fits-all equity model” must be reimagined. Whether its investors seeking an opportunity that is both lucrative and meaningful, or founders looking for capital to grow their purpose-led business, the two sides must ensure they’re speaking the same language. Failure to do so could mean missing out on both purpose and profit.
