Family Businesses Looking At Their Raison D’être

A new generation of family shareholders is advocating a more proactive approach to corporate social responsibility (CSR), in particular by pushing their companies to adopt a raison d’être. This requires an alignment of visions across the company. Professor Miruna Radu-Lefebvre of Audencia explores the challenges involved in this process.

Faced with increasing demands from consumers and civil society, companies have realised that they need to take a more proactive approach to corporate responsibility. In fact, many family businesses have taken active steps to commit to building a sustainable future and making CSR part of their DNA. With a model favouring responsible ownership and long-term performance, these family businesses are concerned about the environment, their employees, and their customers. And now, the arrival of new generations of younger family shareholders is accelerating this process.

“The new generations of family business shareholders are concerned about preserving the identity of the business”, says Johan Gaulin, EY partner in charge of the family business market in France.

“This new generation is clearly pushing to accelerate the transformation of family businesses in terms of social responsibility.”

Among other things, they are seeking to reduce their business’ impact on the environment and enhance the wellbeing of their employees. They also want to promote diversity and strengthen ties with their clients. This new breed of shareholders is also exploring new ways of working as well as new governance styles. This underlying trend is in line with the notion of long-term value, which will be the challenge of the years to come.

Raison D’être And Intergenerational Dialogue

A growing number of companies are mobilising to find the unifying elements of strategy, business, and sustainable development, under the demanding eye of these young family business shareholders.

Unsurprisingly, the raison d’être appears to be the backbone that gives meaning and strength to the two pillars of the company – the executive board and the shareholders. Working on a project, a mission or a vision is essential to make tangible and intangible capital grow and pass it on to the next generation. Family businesses and entrepreneurs questioning their contribution to the world are at the heart of the discourse.

The definition of a family business’ raison d’être requires a real dialogue between parties, to ensure that it is more than just rhetoric. Without unity and an aligned vision among family business shareholders, a company runs the risk of ending up with a rather disappointing raison d’être, which could even block future developments and growth.

This alignment is all the more necessary if the raison d’être is written into the Articles of Association of the Company, as it then acts as a strategic filter that guides the decisions of the Board of Directors. The decision to include the raison d’être in the company’s Articles of Association must therefore be carefully considered to ensure that the family’s vision and the company’s strategy are aligned and that the necessary resources will be made available.

Becoming A Mission-Driven Company?

Some large family businesses have gone even further by becoming ‘mission-oriented’ companies. Nowadays, companies can change their corporate purpose by adding a raison d’être – the formulation of their mission as well as quantified objectives and monitoring indicators.

Even though there is not yet much hindsight on this, family groups such as Yves Rocher have taken the plunge. Their leaders are pioneers in this field and have taken a significant step forward in the history of their family businesses.

In a few years’ time, we will be able to assess the effects of the application of this status on the durability of family businesses and on the success of the intergenerational transmission of these businesses.