In this episode of the Managing Uncertainty Podcast, Bryghtpath Principal & Chief Executive Bryan Strawser discusses corporate citizenship in the midst of economic, social, and political upheaval. With the renewed focus on corporate citizenship over the past two years, as companies have engaged their customers, employees, and communities in the midst of economic, social, and political upheaval, how have our thoughts on corporate citizenship evolved and changed?
How can your company benefit from contributing to the broader good?
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Hello and Welcome to the Managing Uncertainty Podcast. This is Bryan Strawser, Principal and Chief Executive here at Bryghtpath. And in this week’s episode, I want to talk about corporate citizenship in this age of unrest that we’re all living in today. The past two years have brought renewed focus to corporate citizenship, as companies have looked to engage their customers, their employees, and their 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? Well, let’s start by looking at the evolution of this idea of corporate citizenship.
According to the Boston College Center for Corporate Leadership, they define corporate citizenship is how a company exercises its rights, obligations, privileges, and overall corporate responsibility within our local and global environments. Now, this practice goes by many names, corporate social responsibility or CSR, environmental, social, and governance, ESG, corporate responsibility, conscious capitalism, or compassionate capitalism.
But this is all about how a company creates a positive social and environmental impact while practicing good corporate governance while meeting its financial goals. A broad range of business areas could be involved in this practice of corporate citizenship, such as community giving, diversity and inclusion, health and well-being, pay and benefits, sustainability and environment, and sourcing.
While examples of commercial entities benefiting society go clear back to Ancient Rome, socially responsible investing and the term CSR started gaining popularity in the 1960s and ’70s. This was after the political upheaval that we saw here in the United States in the 1960s. The 1960s, of course, were marked by the civil rights movement, assassinations of John F. Kennedy, Robert Kennedy, and Dr. Martin Luther King, Jr., and the Vietnam War. Vietnam was the first televised war.
And while it was controversial for several reasons, Americans saw the devastating consequence of napalm, a dow chemical product, and that contributed to protests against the company and war at campuses nationwide. Now, granted some companies saw perhaps even earlier corporate citizenship efforts as a defensive strategy to avoid the ire of community and activist groups, socially conscious investors, organized labor, whistleblowers, and regulators.
But others maintained their business agenda while pursuing activities, such as charitable donations, employee volunteer activities, and cultural history month events. These are all things that help them drive employee engagement, win awards for the workplace, and achieve other goals. But others have pursued corporate citizenship efforts in a genuine concerted effort to improve the lives of stakeholders and communities.
Many studies show that companies do well by doing good deeds that align with their purpose, even though those actions might require tough financial decisions. For example, in 2014, when CVS stopped selling cigarettes to create better alignment with its health mission, it was facing the loss of $2 billion in revenue. But by the end of that year, it had increased annual revenue by over 10%, increased operating profit by more than 4%, and it made it easier for them to recruit millennials and like-minded business partners.
Even better, some people actually stopped smoking because of this. Now, recent shifts have driven a lot of opportunity in this area of corporate citizenship. And in the last 20 years, this idea of corporate citizenship has evolved significantly from activities that complimented or at least didn’t detract from a company’s business agenda. Leading companies now have visionary programs that integrate with their business model, involve multiple stakeholder, and are rooted in a higher externally facing purpose that drives a distinct competitive advantage.
Much of this shift can be attributed to generational changes with millennials and generation Z, generations that prefer to shop with and work for socially responsible companies with whom they can have a relationship. Regardless of a company’s progress today, 2020 and 2021 with a global pandemic, political division, and a renewed fight for racial and social justice has been seen as a catalyst for companies to renew their focus on corporate citizenship.
As Lily Zhang writes more recently in Harvard Business Review, this involves moving beyond corporate social responsibility to what employers and consumers now want, and that is corporate social justice. You can read this in the HBR article, We’re entering the age of corporate social justice. Nowhere is this truer than in retail and consumer goods companies. In KPMG Global’s retail trends for 2020, Preparing for the new reality, purpose moves to the forefront in trend two, as they describe it, moves beyond the evolving retail business model.
This report highlights the growing momentum towards purpose in recent years, as this year’s “upheaval only accelerated a trend that was already well underway.” Consider this in this study, according to a report by Edelman in late 2018, two-thirds of consumers around the world said they would decide to buy or boycott a brand solely based upon its position on a social or political issue.
The study referenced here, Edelman Earned Brand 2018, also found that nearly half, 46%, of all consumers believe that brands have better ideas for solving our country’s problems than governments. Edelman’s Trust Barometer last year in 2020 found that trust is built on this idea of competence and ethics, that ethical drivers are three times more important to the perception of trust with a company than their competence.
Given continued lagged trust in government and the importance of public-private partnerships, business can and must be a catalyst for change. It’s logical to expect that a new wave of purpose-driven commerce, spurred by the events and trends of 2020, would be similar to the post-1960 shift towards corporate social responsibility. Many companies last year quickly and effectively stepped up on how they define and deliver on this purpose.
Those that have done so see purpose as integral to their business and look at how it enhances each aspect of the customer, employer, supplier, community, and shareholder experience. Others may have tried to stay neutral for fear of alienating their customers or doing the wrong thing, but we’re finding that stakeholders expect them to take a stand. They expect companies to pursue meaningful change and learn from their mistakes along the way. Regardless, the message is clear. A company’s social agenda is now a core part of their business agenda.
So where does this cause companies to focus as we’ve gone through 2021 and are headed into 2022 because making progress on these complex issues that comprise corporate citizenship take time? Those companies with a relevant purpose will continue to work on their priorities and long-term goals. They’ll measure, they’ll course correct, and they’ll set 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 systematic challenges persist, as behavior shifts from the last two years take root, and companies pursue multi-year corporate citizenship goals. I’ll start with equity and social justice. Companies will continue to work in these areas, looking at the impact they’ve had and how they can enhance their efforts. In addition, more companies may take on similar efforts as they learn from the example of other companies leading in this fight. Diversity, inclusion, and belonging.
Many companies will report on the results of these efforts after making public commitments in 2020 and 2021, and they’ll 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 and making diversity progress part of annual reviews and even linking incentives towards diversity goals. Corporate governance.
The impact of the COVID-19 pandemic has really put ethics, diversity, compensation, transparency, shareholder rights, and economic disparities into an even greater spotlight. This has implications for shareholder meetings, which will probably still be virtual in 2022, proxy statements, shareholder, resolutions, executive compensation, CEO pay ratios, director independence, and board diversity. The fourth is civic engagement. In a continued politically divided America, many companies have engaged their workforces in nonpartisan efforts to get out the vote.
Regardless of which candidates are elected in November 2022, companies would do well to continue to focus on constructive themes that all employees can support, such as unity, healing, respect, inclusion, and calls to serve their communities in ways that will create meaningful change. The fifth is sustainability and climate change. While the public’s attention might have been diverted towards the pandemic in the last two years, climate change remains a critically pressing issue, and the health of the planet and its people go hand-in-hand.
Expect renewed energy towards addressing climate change post-pandemic. Health and safety. Many experts say that a COVID vaccine, which is now been available widely, will continue to be an important part of late 2021 and early 2022. It does mean that customers and employees will continue to favor companies where they feel safe. That could mean improving basic health measures, offering more health services such as the flu and COVID vaccines, improving omnichannel efforts to meet short 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 higher risk of serious illness, and think about what the future of work looks like. And lastly, pay and benefits. How will pay and benefits shift to meet employee and company needs? How will companies continue to care for their employees, their families, and their communities? What can they do to meet the mental health needs of their workers?
After two years now of essential worker focuses, flexible time off, financial assistance programs, and really candid conversations around mental health, companies should take a forward-looking approach to their traditional HR offerings. Now’s a good time to think about your company’s purpose, whether you’re developing one, honing the one you have, or preparing to report on results that you’ve achieved towards your goals.
Regardless of where your organization is on your corporate citizenship journey, the following elements are critical to your company’s credibility and success. The first is alignment. Your purpose and vision need to align with your company’s mission and values. It also needs to be relevant within the context of your business and industry, reflecting on where you can make a unique and incredible 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, Lily Zhang recommends looking at which issues lie at the intersection of your company’s mission and the unmet needs of its stakeholders. The second is 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 your employees, communities, nonprofit partners, suppliers, and other stakeholders. Be curious. Ask deep questions. Really listen and seek to understand the answers.
The more conversations you have, the more likely your company’s unique purpose will become apparent. Third is to have 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, why you’re doing it, you’re probably doing 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, or learning from inevitable mistakes, this is a new, hard, messy piece of work and it’s more important than ever. The fourth is fortitude. Be ready to take criticism, prove and adjust where needed, but decide up front where you’re willing to be criticized and how you’re going to handle that. You might lose some customers, but you’re likely to gain many more. And lastly, consistency.
Look across your company, make sure the other elements of your business, policies, political giving, and other practices don’t conflict with the good that you’re trying to do. Maintain a consistent and transparent cadence of action in communication about your corporate citizenship efforts. Erratic, frantic efforts, words that are unsupported by actions, and inconsistent communication will jeopardize the trust that you’re working hard to build.
With these elements in place, your company is ready to pursue a purpose that will benefit or deliver benefits for all of its stakeholders for years to come. That’s it for this edition of the Managing Uncertainty Podcast, we’ll be back next week with another new episode. Be well.