This year brought renewed focus to corporate citizenship, as companies looked to engage their customers, employees, and communities in the midst of economic, social, and political upheaval. Pursuing these efforts can drive large-scale, meaningful change for society while differentiating a company’s brands and products to deliver a competitive advantage. But what is corporate citizenship, and how can your company benefit from contributing to the broader good?
The Evolution of Corporate Citizenship
Goodness is the only investment that never fails. – Henry David Thoreau
According to the Boston College Center for Corporate Citizenship, corporate citizenship is “how a company exercises its rights, obligations, privileges, and overall corporate responsibility within our local and global environments.” While the practice goes by many names—corporate social responsibility (CSR); environmental, social, and governance (ESG); corporate responsibility, conscious capitalism, or compassionate capitalism—it’s about how a company creates a positive social and environmental impact while practicing good corporate governance and meeting its financial goals. A broad range of business areas are involved in the practice of corporate citizenship, including community giving, diversity and inclusion, health and wellbeing, pay and benefits, sustainability and environment, and sourcing.
While examples of commercial entities benefiting society can be found back to ancient Rome, socially responsible investing and the term CSR started gaining popularity in the 1960s and 1970s, respectively, following the political upheaval of the 1960s. (International Journal of Corporate Social Responsibility: A literature review of the history and evolution of corporate social responsibility) The 1960s were marked by the civil rights movement, the assassinations of President John F. Kennedy and Dr. Martin Luther King, Jr., and the Vietnam War. Vietnam was the first “televised” war. While the war was controversial for several reasons, Americans saw the devastating consequences of napalm, a Dow Chemical product, which contributed to protests against the company and war at campuses nationwide.
Granted, some companies likely saw early corporate citizenship efforts as a defensive strategy to avoid the ire of community and activist groups, socially conscious investors, organized labor, potential whistleblowers, and regulators. Others maintained their business agenda while pursuing activities, such as (tax-deductible) philanthropic donations, employee volunteer activities, or cultural history month events, that helped them drive employee engagement, win workplace awards, and achieve other goals.
Still, others have pursued corporate citizenship efforts in a genuine, concerted effort to improve the lives of stakeholders and communities. Multiple studies show that companies do well by doing good deeds that align with their purpose, even when such action may involve tough financial decisions. When CVS stopped selling cigarettes in 2014 to create greater alignment with its health mission, it risked losing $2 billion in revenue. By the end of that year, it had increased annual revenue by almost 10 percent, increased operating profit by more than 4 percent, and made it easier to recruit Millennials and like-minded business partners. (Inc.: This business move cost CVS $2 billion (but it was the smartest decision it could have made) Even better? Some people actually stopped smoking. (Reuters: When CVS stopped selling cigarettes, some customers quit smoking)
Recent Shifts Drive Opportunities
In the last 20 years, corporate citizenship has evolved significantly from activities that complemented (or at least didn’t detract from) a company’s business agenda. Leading companies now have visionary programs that integrate with the company’s business, involve multiple stakeholders, and are rooted in a higher, externally facing purpose that drives a distinct competitive advantage. Much of this shift may be attributed to Millennials and Gen Z, generations which prefer to shop with and work for socially responsible companies with whom they can have a relationship. Regardless of a company’s progress to date, 2020—with a global pandemic, political division, and a renewed fight for racial and social justice—has been a catalyst for companies to renew their focus on corporate citizenship. As Lily Zheng writes in the Harvard Business Review, this involves moving beyond corporate social responsibility to what employees and consumers now want: Corporate Social Justice. (HBR: We’re Entering the Age of Corporate Social Justice)
Nowhere is this truer than in retail and consumer goods companies. In KPMG Global retail trends 2020: Preparing for the new reality, “Purpose moves to the forefront” in Trend 2 behind the evolving retail business model. This report highlights the growing momentum toward purpose in recent years, as this year’s “upheaval only accelerated a trend that was already well underway.”
“Consider this: according to a study by Edelman in late 2018, nearly two-thirds of consumers around the world said they would decide to either buy or boycott a brand based solely on its position on a social or political issue.” – KPMG Global retail trends 2020: Preparing for the new reality
The study referenced, Edelman Earned Brand 2018, also found that “Nearly half (46 percent) of all consumers believe that brands have better ideas for solving our country’s problems than government.” The Edelman Trust Barometer 2020 found that trust is “built on competence and ethics,” with “ethical drivers 3X more important to company trust than competence.” Given the continued lagging trust in government and the importance of public/private partnerships (i.e., COVID-19 vaccine development), business can and must be a “catalyst for change.” (Edelman Trust Barometer 2020) It’s logical to expect a new wave of purpose-driven commerce spurred by the events and trends of 2020, similar to the post-1960s shift toward corporate social responsibility.
Many companies quickly and effectively stepped up how they define and deliver on their purpose. Those that have done so see purpose as integral to their business and look at how it enhances each aspect of the customer, employee, supplier, community, and shareholder experience. Others may have tried to stay neutral for fear of alienating customers or doing the wrong thing, yet are finding that stakeholders expect them to take a stand, pursue meaningful change, and learn from mistakes along the way. Regardless, the message is clear: A company’s social agenda is now a core part of its business agenda.
Beyond the U.S. Election and 2020
“Do the best you can until you know better. Then when you know better, do better.” – Maya Angelou
Where will companies focus heading into 2021? Making progress on the complex issues that comprise corporate citizenship takes time. Those companies with a relevant purpose will continue to work on their priorities and long-term goals—measuring, course-correcting, and setting new goals as they move forward. Stakeholders will hold companies to these commitments, so consistent and transparent reporting is critical.
Expect a continued focus on the following areas as systemic challenges persist, behavior shifts from 2020 take root, and companies pursue multi-year corporate citizenship goals:
- Equality and Social Justice: Companies will continue work in these areas, looking at the impact they’ve had and how to enhance their efforts. In addition, more companies may take similar efforts as they learn from the example of other companies leading the fight against injustice.
- Diversity, Inclusion, and Belonging: Many companies will report on the results of these efforts after making public commitments in 2020 and will look for ways to hold their organizations accountable for meeting these important, long-term goals. These levers could include more anti-bias training, programs to develop diverse talent, making diversity progress part of annual performance reviews, and linking incentives to diversity goals.
- Corporate Governance: The impact of COVID-19 has put ethics, diversity, compensation, transparency, shareholder rights, and economic disparities in an even brighter spotlight. This has implications for annual shareholder meetings (many of which will still be virtual), proxy statements, shareholder resolutions, executive compensation, and CEO pay ratio, director independence, and board diversity.
- Civic Engagement: In a politically divided America, many companies have engaged their workforces in nonpartisan efforts to get out the vote. Regardless of which candidates are elected on Nov. 3, companies would do well to continue focusing on constructive themes all employees can support, such as unity, healing, respect, inclusion, and calls to serve their communities in ways that will create meaningful change.
- Sustainability and Climate Change: While the public’s attention may have been diverted toward the pandemic in 2020, climate change remains a critically pressing issue. And the health of the planet and its people go hand in hand. Expect renewed energy toward addressing climate change post-pandemic.
- Health and Safety: Most experts say a COVID-19 vaccine won’t be available widely in the U.S. until mid-2021. That means customers and employees will continue to favor companies where they feel safe. This could mean improving basic safety measures, offering health services (flu and COVID-19 vaccines), improving omnichannel efforts to meet both short-term needs and long-term behavior shifts, and honing the model for remote work and engagement. Companies with robust corporate citizenship programs can take health and safety efforts into the community, particularly to those with a higher risk of serious illness, and think about what the very future of work looks like.
- Pay and Benefits: How will pay and benefits shift to meet employee and company needs? How will companies continue caring for their employees, families, and communities? What can companies do to meet the mental health needs of their workers? After a year of essential worker bonuses, flexible time off, financial assistance programs, and candid conversations about mental health, companies should take a forward-looking approach to their traditional HR offerings.
Purpose and Progress
Where your talents and the needs of the world cross, there lies your vocation. – Aristotle
Now is a good time to work on your purpose, whether you’re developing one, honing the one you have, or preparing to report on the results you’ve achieved toward its goals. Regardless of where you are on the corporate citizenship journey, the following elements are critical to your company’s credibility and success:
- Alignment: Your purpose or vision needs to align with your company’s mission and values. It also needs to be relevant within the context of your business and industry, reflecting where you can make a unique and credible difference for the better. For example, it makes sense for a health company to focus on narrowing the gap in health disparities. For your purpose or vision, Zheng recommends looking at “which issues lie at the intersection of your company’s mission and the unmet needs of its stakeholders.” (HBR: We’re Entering the Age of Corporate Social Justice)
- Stakeholder Input: The best corporate citizenship efforts are an outside-in process. To understand complex issues, uncover unmet needs, and learn where you can make a difference, get input from employees, communities, non-profit partners, suppliers, and other stakeholders. Be curious, ask deep questions, really listen, and seek to understand. The more conversations you have, the more likely your company’s unique purpose will become apparent.
- Comfort with Discomfort: As a fan of Ted Lasso on Apple TV+, this reminds me of a quote in the first episode about taking on a challenge, “If you’re comfortable while you’re doin’ it, you’re probably doin’ it wrong.” Discomfort will happen at every step in the process: When you’re getting input, taking a stand, implementing the work, communicating with stakeholders, evaluating results, and learning from inevitable mistakes. This is new, hard, messy work… and it’s more important than ever.
- Fortitude: Be ready to take criticism. Improve and adjust where needed, but decide up front where you’re willing to be criticized and how you’ll handle it. You may lose some customers, but you’ll likely gain many more.
- Consistency: Look across your company. Make sure other elements of your business—policies, political giving, or other practices—don’t conflict with the good you’re trying to do. Maintain a consistent and transparent cadence of action and communication about your corporate citizenship efforts. Erratic efforts, words unsupported by actions, and inconsistent communication will jeopardize the trust you’re working hard to build.
With these elements in place, your company is ready to pursue a purpose that will deliver benefits for all its stakeholders for years to come.
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About the Author: Lena Michaud
Lena is a communications executive with 25 years of experience in the areas of public relations, crisis communications, media training, internal communications, change management, and speech writing and coaching.
She previously held leadership roles at Target Corporation, Optum (UnitedHealth Group), Cargill, and JCPenney, and has nearly 15 years of experience in the retail industry. Lena has served as a media spokesperson on critical issues in the areas of public affairs, social issues and activism, safety and security, corporate governance, human resources, and litigation, and most recently led communications related to the COVID-19 pandemic.
She holds a B.A. in political science from Northwestern University and an advanced marketing certification from Southern Methodist University.
Learn more about Lena on her LinkedIn Profile