At the same time that the COVID-19 pandemic has sharpened economic divides, the world is reckoning with the threats of prejudice, racism, and climate change. The role of corporations has never been more visible or important—especially as the pandemic’s economic shocks drive corporate consolidation, leading big business to dominate the economy. Increasingly, consumers, investors, the media, and potential employees are watching the ways in which corporations commit to their values. As social contexts and pandemic impacts evolve, meeting expectations for corporate social responsibility (CSR) is a moving target.
Prompted by the major anti-racism protests that erupted in the United States and filtered overseas in the early summer, corporations have been increasingly vocal about their commitment to racial diversity and inclusion. Many have committed to increasing diversity among their own ranks, and still others have tied executive pay to meeting such goals. Other companies have made spending commitments to further social justice causes; prompted by protests against police violence and racial injustice, sparked by the murder of George Floyd. For example, Bank of America Corp. recently committed $1 billion over four years to support economic initiatives focused on diversity, which has since been eclipsed by JPMorgan Chase & Co.’s pledge of $30 billion over five years to address drivers of racial wealth inequality. At the same time, corporations of all stripes have increased their messaging on social justice issues, which has struck some as simply posturing if they are devoid of concrete commitment and accountability. Indeed, activists and labor experts continue to call for the publication of diversity data in order to hold corporations accountable to their diversity pledges—calls with which few have complied.
One of the most prominent areas of changing expectations around corporate social responsibility is climate change; 2020, a year likely to be the hottest on record and to bear witness to extraordinary natural disasters, has seen a series of major corporate pledges to take more action on combating climate change. Financial institutions and investors in particular have increased their scrutiny of climate impact, aiming to both reduce the negative impact of their portfolios and increase support for sustainable businesses. Just this month, a group of thirty of the world’s largest investors, collectively managing $5 trillion, pledged to align their portfolios with the climate goals of the 2015 Paris Agreement. Major corporations have also committed to net-zero emissions goals within the next few decades. This climate consciousness has been urged by corporate giants across sectors, from Walmart and Amazon.com to oft-criticized energy majors such as Total and BP. While many of these pledges have been critiqued for lack of concrete follow-through or realistic plans for implementation, the increasing prevalence of climate targets is changing how corporations engage with climate change.
With higher expectations come higher reputational risks: along with pressure from activists and consumers to improve records on social and economic goals, public scrutiny may limit the size and diversity of prospective talent pools. Oil majors, for example, have experienced difficulty attracting young graduates due to their negative climate records, and law firms that represent big oil have faced boycotts from top law school graduates. Reputational risks can also come in the form of increased data leaks or cyberattacks in efforts to expose and shame companies. Conversely, a growing number of corporate leaders are embracing heightened corporate social responsibility as a pathway to profitability. A quarter of global CEOs now strongly agree that investing in climate-friendly initiatives can lead to new business opportunity, up from 13 percent in 2010, according to a PwC survey of 1500 global CEOs.
Government failure to address social and environmental issues is another factor changing expectations of the private sector; when regulation and governance have not risen to meet the demands of the moment, simply following the government’s lead is no longer sufficient. The fallout from the COVID-19 pandemic only increases the stakes for corporate sustainability and social responsibility. As political polarization and paralyzed governance continues to hinder many of the world’s largest economies, the private sector has more space, and faces more pressure, to lead and take action on urgent issues.
In this context, seizing opportunities to raise the profile of your company’s social responsibility efforts and to mitigate future risk are increasingly crucial, and could include the following actions:
Coordinating with industry leaders to establish and finance an annual scorecard that will serve as a public display of accountability on engagement efforts. Activists, consumers, and the media have consistently called for more transparent accountability efforts. Periodic surveys of internal staff and the general public can also provide a metric for gauging progress.
Developing relationships with carefully vetted social and environmental nongovernmental organizations that can partner with businesses for events, talent recruitment, public statements, and more.
Getting rid of corporate jargon like “CSR” and reframing value initiatives as “corporate conscience,” “corporate citizenship,” “sustainable commitments,” or otherwise, to more authentically convey values in company statements and websites.
Better publicizing engagement efforts on social media to proactively build rapport with potential recruits, remaining aware of the issues that animate the next generation of talent.
Considering the ramifications and potential benefits of being a corporate pioneer versus remaining in the middle of the pack when planning strategies around value engagement. The next generation of talent and consumers value leadership on the issues that matter to them.
Karl V. Hopkins is a partner and the global chief security officer at Dentons.
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