The Purpose of Israeli Business

Background

At the kind invitation of the Arison ESG Center at Reichman University, I visited the University in the last week of November 2025.   I met many academics, business leaders, journalists and students and heard their views on the current state of the Israeli economy and business.  I discussed the profound changes that businesses around the world are currently experiencing and the relevance of these for Israeli business.

The Rise and Fall of ESG

The world is experiencing a period of immense turbulence and global disorder.  In addition to political, economic, military and security risks, there are threats from the climate and environment, social fragmentation and polarization, and scientific and technological revolutions. These are creating substantial challenges for business, not least in terms of the growing expectations and regulatory requirements that are being imposed upon it.

The end of the last decade saw companies rushing to adopt corporate social responsibility (CSR), environmental, social and governance (ESG) reporting, and corporate purpose statements. There was a substantial rise in ESG regulation around disclosure and due diligence. But it was then slowly realized that CSR was just about philanthropy and charity, ESG reporting was frequently subjective, inconsistent and incoherent, and corporate statements were no more than straplines, promotion and marketing campaigns.   

There followed the inevitable backlash in accusations of ESG greenwashing, purpose washing and woke capitalism.  This has resulted in a bonfire of regulations, especially in the US but also in Europe where the Omnibus package has watered down previous regulations around the Corporate Sustainability Reporting Directive (CSRD), Corporate Sustainability Due Diligence Directive (CSDDD) and Sustainable Finance Disclosure Regulation (SFDR). 

The backlash has occurred for good reason.  ESG reports are often lengthy, costly and indigestible, and, most seriously, not business relevant.  They are an add-on to financial reports – not integrated into them.  Put simply ESG and sustainability reporting are cost centres, unrelated to the main task of business - to make money. 

Corporate Purpose

That is precisely why business is now going through a profound change – the sort of change that is observed every sixty or so years.   There is a growing recognition that the purpose of business is to make money from finding innovative ways of solving major problems – local, national and global problems.  This flips ESG from being a business cost to being a business opportunity of finding innovative way of solving problems that create financial value for firms and their investors. 

Business creates value by building trust in its stakeholders, thereby attracting more loyal customers, more engaged employees, supportive suppliers and collaborative communities and societies.  Above all, it establishes a natural partnership between governments that are seeking to solve environmental and social problems and businesses that are looking to profit and create financial value from solving not causing problems for others.  Governments therefore support businesses in internalizing the benefits they confer through licensing, chartering, purchasing from, subsidizing and co-investing with businesses that seek to profit from solving not creating problems for others. 

What is required to achieve this is a commitment by businesses, their owners and investors to a purpose of profiting from solving not creating problems.  The focus of business remains on profit and financial value creation but recognizes that profit and financial value derive from solving not creating problems for others.  In other words, the purpose of a business is to produce profitable solutions not problems for people and planet.

Delivering a Corporate Purpose

There are three key components to delivering this.  The first is the ownership of the problem- solving purpose of a business.  All the most successful businesses, such as the trillion-dollar companies in the US, the “magnificent seven” – Alphabet, Amazon, Apple etc – were founded, owned and/or led by remarkably ambitious and visionary people who sought to solve major world problems – for example, connecting people around the world with knowledge, consumer goods, computing power and each other. 

Second, they recognize that problem solving is a process – a long-term commitment to finding ways of deriving commercial value from solving problems, creating other problems, and solving those problems in turn.   The word profit derives from the Latin proficere/ profectus to advance and progress.   That is precisely where a profit and financial value come from – advancement and progress, not disadvantage and regress.

Third, alongside ownership and long-term commitment to the problem-solving purpose comes its governance. Everyone in an organization from the board to the shop floor needs to be committed to and have a sense of ownership of the corporate purpose.  They should recognize their part in the problem-solving purpose and feel motivated and inspired by it. They should believe it is authentic, reflected in the values, principles and culture of the organization, and in their incentives, remuneration, promotion and recognition.  That requires delegating authority and placing trust in people lower down in the organization who understand and can resolve the real problems the business needs to address.

The Israeli Context

This business revolution is particularly relevant to Israel now and in the future.     At the best of times, Israel is a remarkably successful economy in terms of growth, entrepreneurship and innovation.   It has one of the highest number of start-ups per capita of any country in the world.   What is even more remarkable is that even in the worst of times, Israel has remained a successful economy in terms of growth, entrepreneurship and innovation.   Despite the terrible circumstances and conflicts that have prevailed over the last few years, the economy has been strikingly resilient. 

At the heart of this has been a common purpose of the pursuit of safety, security, and survival across the public and private sectors.  If, as of course it is be hoped, conflict will now be replaced by a lasting peace then the new common purpose should be around a shared prosperity of individual, social and natural world flourishing.   While there is a fragile peace, Israel is not at peace with itself.  It remains a troubled and divided society between the politically right and left, between orthodox and liberal Jew, Jew and Arab, Israeli and Palestinian, and Israel, Palestine and the rest of the world.

The Purpose of Israeli Business

Business has a vital role to play in unifying the country and its neighbours.  It is not just that problem-solving business can benefit from the support that it receives from government and the public, but also that business in turn can promote a government and nation that seeks to create a common purpose of shared prosperity.  It is therefore critical, not only to the success, sustainability and survival of business but also of Israeli society and its democratic system. 

As Milton Friedman, the Nobel Prize winning economist said: “only a crisis actual or perceived produces real change.  When that change occurs, the actions that are taken depend on the ideas that are lying around.  It is therefore our basic function to develop alternatives to existing policy, keep them alive and available until the politically impossible becomes the politically inevitable”.  A purpose of profiting from solving not creating problems for others is an idea whose time has come.  If Israeli business can grasp it, then not only will it thrive and prosper but also demonstrate to the world how to do this in the most turbulent of places at the worst of times.

Colin Mayer, Emeritus Professor of Management Studies

Said Business School, University of Oxford