Part of being a leader today means deciding how to harness a business’s resources to help solve social problems. However, the progress that was made by corporations after the killing of George Floyd, Black Lives Matter protests and efforts to increase diversity, equity and inclusion is being reversed.
Corporations are turning down the dial on social impact in favour of increased profits and higher stock values, reported the Wall Street Journal. Some are continuing social impact initiatives but have chosen not to share what they are doing. Others have decided to do less and to say less.
Mentions of “environmental, social and governance”, “ESG”, “diversity, equity and inclusion”,“DEI” and “sustainability” by executives are 31% less than the same period last year according to financial-research platform AlphaSense. The Starbucks’ workers union, Starbuck Workers United, alleged that workers in 21 states were asked by the company’s management to take down Pride decorations, according to NBC News. Target announced that it will be removing some of its Pride Month products after receiving backlash against the items and threats against its workers.
Social media posts from conservative consumers reflect and amplify the growing anti-social impact sentiment. At this time last year, there were less than 400 social media posts calling for boycotts of Pride collections but by May this year, the number has risen to 15,000 according to RILA Global Consulting, a company that studies consumers, brands, and trends.
At the root of corporate backpedaling on social impact is the fear of losing conservative shareholders and customers. Specifically, the people who target corporate “wokeness”, boycotting brands such as Bud Light that partnered with transgender social media influencer Dylan Mulvaney. This fear is well-founded. In the case of Bud Light, a month after the backlash, sales of Bud Light at U.S. retail outlets had dropped by more than 24 per cent according to data from Nielsen IQ.
At same time as some companies are retreating from social impact, 70% of U.S. chief executives reported that their company’s ESG programs actually improve their financial performance, up from 37% a year earlier, according to a KPMG survey released last October. When asked to choose key drivers of ESG value, CEOs identified proactivity on social issues, the area that is now under the most scrutiny, as their top priority.
Business leadership is characterized by the ability to make decisions that help achieve the priorities of the organization and its stakeholders. For executives whose businesses are clearly on one side of the political spectrum, deciding what to do in the area of social impact isn’t difficult.
Patagonia, a company widely known for being an environmental advocate and the first California company to become a benefit corporation, has a self-imposed earth tax of 1% that provides support to environmental non-profits. The company also employs team members as designated as Global Sport Activists® that use their roles in the sport community to drive positive social and environmental change. Smith and Wesson, a leading firearm manufacturer, is on the other side of the political spectrum. Between Thanksgiving and Giving Tuesday the company supported firearm-related causes including Project ChildSafe® and BattleBuddy3Gun™. Regardless of one’s personal political ideology, these impact initiatives make sense for each company.
The majority of businesses are not on the extreme ends of the political spectrum and face a real dilemma when it comes to deciding whether to take a stand on positive social change or sit on the sidelines. How should leaders balance the well-documented value of being proactive on social issues with the risk of making headlines for being the next Bud Light?
When abortions after 6 weeks were banned in Texas, Shar Dubey who was Match Group’s CEO sent a message to the company’s employees. “I wanted to let you know that I am setting up a fund to ensure that if any of our Texas-based employees or a dependent find themselves impacted by this legislation and need to seek care outside of Texas, the fund will help cover the additional costs incurred,” the letter said. In spite of Dubey’s leadership on this issue, the majority of businesses kept quiet and the Business Roundtable, an organization that represents some of the nation’s most powerful companies, said it “does not have a position on the merits of the case.”, reported PBS.
It’s fair to say that polarization around social issues is only going to increase, and that being a decisive business leader in this context will be become increasingly difficult. Here are a set of considerations to help executives make decisions for their companies that will lower their risk and create more opportunities.
In what ways does your company contribute to social change directly through its business activities? This means understanding more than the quantitative indicators of the “S” in ESG (e.g. gap in compensation between male and female employees, percentage of racially diverse workers, human rights abuses in the supply chain). What matters more is the ways in which these indicators contribute to social change outcomes that are considered to be universally important – not politically expedient. These include improved education for families of employees, lower levels of domestic violence, and improved health and quality of life. Companies that substantiate and share the ways in which they are making social change directly will face less risk of backlash and create new opportunities to increase market share and improve profitability.
To what degree is your company considered deeply trustworthy and transparent? Gaining trust starts with the table stakes: complying with all laws and regulations and providing high quality products or services at a fair price. Deep trust happens when businesses do things that would not be considered to be in their best interests. For example, Patagonia asks customers to consider if they really need to purchase something new. Other organizations produce and share annual failure reports that demonstrate the company’s commitment to being transparent – even when things go wrong. Deep trust creates loyalty over the long term, and attracts new employees, investors and customers. It also gives companies the social license to take a stand on issues that matter – even if this is at odds with the beliefs of certain stakeholders.
Is your position on social issues informed by people with lived experience of these issues? Companies know a lot about their business but not a lot about issues such as sexual identity that are sources of risk and opportunity. In my work with large corporations, it’s most common to see highly privileged, and mostly male, executives making investment decisions about issues they know nothing about. The best way for businesses to decide how to support a potentially polarizing social investment is by listening to the advice of people who have personal lived experience with the issues. This creates a foundation of authenticity that reduces the risk of being seen to be “social washing” and creates new opportunities to build relationships with people who identify with the issue – inside and outside the company.
The considerations I’ve suggested here aren’t solutions to what is clearly an increasingly complex and polarized situation. However, I believe that business leadership starts with deciding not if, but how, to help solve social problems.
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