ISO 37011: When Purpose Becomes Governance

For years, organisations have been encouraged to define their purpose. ISO 37011 is the first international standard designed to explain exactly what being purpose-driven actually means, and how purpose can move from words into governance, decisions and performance. For businesses in New Zealand and around the world, its emergence creates a considerable opportunity.

Purpose has spent much of the past decade suffering from an excess of enthusiasm and a shortage of discipline. Thousands of organisations have adopted purpose statements. Consultants have developed purpose propositions. Advertising agencies have turned purpose into campaigns. Annual reports have filled with increasingly expansive explanations of why companies exist and the difference they intend to make. Some of this has undoubtedly been worthwhile. But it has also created a fundamental problem. Having a purpose and being driven by one are not the same thing.

That distinction sits at the heart of ISO 37011, Purpose-driven organizations — Guidance, the emerging international standard that has now reached an important stage in its development. In September, the draft entered ISO’s formal enquiry phase, giving national standards bodies and other stakeholders around the world an opportunity to examine and comment on it before it progresses towards publication.

I have had the privilege of contributing to the international expert group involved in its development. For me, its importance lies not simply in the arrival of another ISO document, but in what it represents. Purpose is moving from the language of aspiration towards the discipline of governance. And that matters enormously.

Where ISO 37011 comes from

The story did not begin with ISO 37011. In 2021, ISO published ISO 37000, Governance of organizations — Guidance, the first international benchmark covering the governance of organisations of every type and size. Significantly, purpose sits at the heart of that standard. ISO 37000 defines organisational purpose as an organisation’s meaningful reason to exist and places it at the centre of the responsibilities of those governing an organisation.

That was an important development in itself. It shifted purpose away from marketing and communications and placed it where I have long believed it belongs; inside governance.

The next important step came in Britain with PAS 808:2022, developed by the British Standards Institute (BSI). PAS 808 provided more detailed guidance on purpose-driven organisations, including how purpose should influence decisions and behaviour, and how organisations might assess whether they genuinely operate in accordance with their stated intent. PAS 808 is now evolving onto the international stage through ISO 37011.

The new standard is being developed through ISO/TC 309, the technical committee responsible for governance of organisations. The current draft follows more than 60 international meetings over two years, three working drafts and two committee drafts, involving experts working through the painstaking consensus-building process that sits behind international standards.

That process matters because purpose has desperately needed a common language. Ask ten executives what organisational purpose means and you may still receive ten different answers. For some it is a mission. For others it is a brand promise, a values statement, a social impact programme or simply a more inspiring description of the business strategy. The consequence is predictable. If we cannot agree what purpose means, it becomes almost impossible to agree what being purpose-driven requires. ISO 37011 address that issue.

What the standard actually does

The draft provides guidance on organisational purpose and on the governance of purpose-driven organisations. It is intended for organisations of every type and size, including businesses, public-sector organisations, regulators, voluntary organisations, social enterprises, government bodies and professional associations.

Importantly, it is guidance, not a certification standard. There are no requirements against which an organisation can simply tick boxes and declare itself ISO 37011 compliant. There is no verification framework and no certificate to hang in reception. Its recommendations are expressed as things an organisation should do rather than things it must do. That is important because becoming purpose-driven is not fundamentally a compliance exercise. It is an organisational one.

The standard builds on the three central governance functions established by ISO 37000 — direction, oversight and accountability. It asks governing bodies to consider the purpose their organisation exists to fulfil, ensure that decisions and actions are aligned with it, and hold the organisation accountable for doing so.

At its core is an important proposition. A purpose-driven organisation seeks to align its decisions and actions with the long-term wellbeing of people and the planet.

For some business leaders, that language may initially sound as though commercial performance is being displaced by social ambition, but that interpretation misses the point, and here’s why:

A business that continually loses money will eventually cease to exist. Profitability, productivity, investment, innovation and growth remain essential. Capital still needs to earn an appropriate return. Employees still need to be paid. Customers still need to choose what the organisation sells. Purpose does not remove commercial reality. It simply provides a better way of organising the enterprise within it.

The performance argument

This is where my own interest in ISO 37011 becomes particularly strong. For more than 25 years, my work on Single Organizing Idea (SOI®) has been built around a relatively simple proposition — that organisations perform better when they know clearly what they exist to achieve and organise themselves around delivering it.

Not when purpose sits alongside strategy. Not when it appears as a paragraph on the website. And certainly not when it becomes the responsibility of the communications, sustainability or people team. Purpose has to drive the organisation.

When that happens, it provides a common reference point for decisions. It helps leaders determine where to invest and where not to invest. It guides innovation. It informs the products and services an organisation develops, the customers it serves, the people it recruits, the behaviours it rewards and the measures by which performance is judged.

Importantly it creates alignment. And alignment matters because organisations waste an extraordinary amount of energy through competing priorities, disconnected functions, contradictory incentives and strategies that pull different parts of the enterprise in different directions.

A clear purpose cannot magically remove those tensions. But when it becomes the organising principle around which the organisation is governed and managed, it provides a way of resolving them. Strategy becomes the means through which purpose is pursued. Culture reinforces it. Operations deliver it. Measures tell leaders whether it is being achieved.

Commercial performance and purpose therefore need not sit at opposite ends of a philosophical argument. They are actually mutually reinforcing.

A successful purpose-driven business creates the financial strength necessary to continue investing, employing people, innovating and fulfilling its purpose. In turn, clarity of purpose can create the focus, engagement, trust and strategic coherence from which stronger performance emerges. That creates enduring value for shareholders, employees, customers, suppliers, communities and the wider systems upon which the business ultimately depends.

This is where ISO 37011 makes an important contribution. It gives the international business community a common governance framework around something that has until now been interpreted far too loosely. That makes purpose harder to casually claim, but it also makes it considerably more useful.

Why Aotearoa New Zealand should pay attention

We are unlikely to compete with the largest economies through scale alone. Our advantages have always depended more heavily on ingenuity, relationships, reputation, trust and our ability to create distinctive forms of value.

Purpose-driven governance can strengthen those advantages. For an export business, clarity of purpose can help maintain coherence as the organisation enters different markets and encounters different pressures. For a fast-growing company, it can provide continuity as new people, investors and capabilities arrive. For an established organisation, it can expose areas where legacy practices no longer support what the business is trying to achieve. For boards, it introduces a more searching question than whether the organisation has a purpose statement.

Is the organisation actually being governed by its purpose?

Does purpose influence capital allocation? Strategy? Risk? Executive incentives? Innovation? Measures of success? Decisions about which opportunities to pursue and which to reject?

If the answer is no, the organisation may have declared a purpose, but it is difficult to argue that it is being driven by one. And that distinction could become increasingly important internationally as ISO 37011 creates a shared reference point against which purpose-driven claims can be understood.

For New Zealand, getting ahead of that development represents an opportunity to lead now rather than follow an obligation later. In other words, we can wait until international expectations evolve around us. Or alternatively, we can participate in shaping them and begin applying the thinking now.

From Cambridge to Auckland

Next week, Dr Victoria Hurth will be visiting New Zealand to promote ISO 37011 and discuss what the emerging standard could mean for organisations here. Her visit has a particular personal significance for me, as Victoria and I go back quite a long way.

I first met Dr Victoria Hurth around a decade ago through a purpose-focused think tank convened by Ben Kellard at the University of Cambridge Institute for Sustainability Leadership. Victoria and I were both active, and occasionally rather vocal, participants. We have been discussing, arguing about and advocating for the role of organisational purpose ever since.

Victoria went on to play a leading role in ISO 37000 and PAS 808 and done a truly amazing job as Project Leader for ISO 37011.

Next Tuesday, 27 October, she will be in Auckland for a special British New Zealand Business Association event at AUT, From purpose statements to real decisions: building a wellbeing economy. Victoria will deliver the keynote before joining me and Andrew Baker of Tika Learning for a panel discussion moderated by BNZBA Vice President Dr Victoria Hatton.

The timing could hardly be better. ISO 37011 is currently in its international enquiry period, which runs from 24 September until 17 December, although national consultation deadlines may be earlier. New Zealand participates in ISO through the New Zealand Standards Organisation, giving this country a route into the international standards process rather than simply leaving others to define the framework for us. That makes the conversation next week much more than another discussion about the merits of purpose. It’s an opportunity to consider what purpose looks like when it becomes part of the actual machinery of governance.

Beyond the statement

I have spent much of my career arguing that purpose should not be treated as an addition to the organisation. It should sit at the heart of it and that is ultimately why I believe ISO 37011 matters.

The standard will not tell leaders precisely what their organisation’s purpose should be. Nor will it remove the difficult choices, compromises and tensions involved in running a successful organisation. What it can do is establish a much clearer international understanding of what leaders mean when they claim their organisation is purpose-driven.

That raises the bar. But it also creates an opportunity. Because once purpose moves beyond the statement and begins genuinely influencing governance, strategy, investment, culture, operations and performance, it stops being another piece of corporate language. It becomes useful. And when an organisation is coherently organised around a meaningful purpose, delivering value through everything it does, I believe it becomes capable not only of contributing more to the people and systems around it, but of performing better itself. That is good for business and that is good for all stakeholders too.