February 21, 2017 By FTI Consulting
In just one month, the political reshuffling in Washington is causing some business leaders to rethink the risks, opportunities and demands of civic engagement.
Clearly the landscape has changed when your valuation can be challenged by the prospect of 140 characters from the White House. However, business leaders are also realizing that the U.S. president is not the only stakeholder placing greater scrutiny on their organizations’ social and political activities.
Political headwinds, from the 2016 U.S. election and beyond, have contributed to a perceived leadership gap that corporate stakeholders – customers, investors and maybe most importantly, employees – are looking to trusted brands and their executives to fill. As trust in government and media reach record lows, businesses are increasingly seen (particularly among millennials) as a source for filling that void. And if this year’s Super Bowl ad buys are any indication, corporate America is happily taking up the charge.
While there are many reasons for private-sector leadership, one is likely the most significant: the line between material and social issues has blurred, and how an organization approaches its engagement with communities, people and the environment can have a significant influence on consumer demand for its products and services, its stock performance, and how well it attracts (and retains) talent.
As “social” issues have become operational challenges (or opportunities), there has been a notable shift away from corporate social responsibility (“CSR”) programs designed for solely PR value, and for good reason – stakeholders are demanding it. In the first half of 2014, nearly 40 percent of shareholder resolutions at Russell 3000 companies were related to social and environmental policies – up from 29.2 percent in 2010. In that same year, the amount of money invested according to socially responsible investing strategies hit a staggering $21 trillion (or 30 percent of all assets managed globally) – a remarkable 60 percent increase from 2012.
Perhaps most significantly, though, are the expectations of the stakeholder group with the greatest ability to influence every company’s success: their employees.
Executives are hearing a new civic challenge from their employees, who are not only asking, “What can my company do for me?” – but, “What can it do in my community?” For example, six in 10 millennials cite a “sense of purpose” as the reason they chose to work for their current employers.
It makes sense that employees often have the greatest stake in social impact efforts. After all, a job is often more intimately tied to identity and values than the shoes you wear or even the car you drive. And in this new environment of increased activism, regardless of your colleagues’ political affiliation, they are likely to want to know more about your company’s position on hot-button issues and the actions it is committed to taking to advance your shared values.
With the nation’s top talent choosing employers based on purpose, companies can no longer afford to view societal engagement as solely a cost center exercise or PR generation. Rather, social impact can create tremendous opportunities for business leaders to align their values with their employees’ and mobilize their people around desired behaviors and unexpected initiatives.
Just look at Howard Schultz, who announced late last month Starbucks’ plans to hire 10,000 refugees around the world, after the president’s executive order on immigration sparked protests around the U.S. Mr. Schultz has been an advocate for diversity for years, but his quick, vocal commitment to material investments in his company’s workforce and communities will likely drive loyalty not just with consumers, but also with existing employees (who were the focus of Schultz’ initial announcement).
It has been said that a business is only as good as its people, and the ROI in this time of civic leadership is clear. Organizations with engaged employees showed a 19 percent increase in operating income over a 12-month period, compared to a 34 percent decrease in organizations with disengaged employees. And when companies focus on sustainability practices and initiatives, employee retention, productivity and engagement go up.
It is no longer sustainable to divorce social issues from material decisions. So, while the business community grapples with a leader in the White House who is not timid about challenging individual companies, executives should remain proactive on the growing demands from broader stakeholders as well. With the best talent demanding it, the future of your business hinges on evaluating the universe of issues material to your success.