The New Competitive Advantage
December 17, 2015–As 2015 comes to a close, it will be remembered for global triumphs and heartbreaking losses. The push and pull of a variety of worldwide forces presented us with simultaneous challenges and boundless opportunities. We face challenges of terrorism, racial tension, social injustice, refugees, and other regional and global conflicts that threaten our common purpose. Yet we remain optimistic as we witness the power of social media that accelerates communications and transparency, the energy of millennials who are looking to drive real change, and the excitement around the UN’s Sustainable Development Goals and the Paris Climate Conference, which show that the world’s countries can unite around the hope for a better world.
Within those bright spots, we saw a new business reality take center stage in 2015; one that puts customers, employees, community, and planet higher on the agenda. And leading companies have embraced this broader view because they found it good for business: Firms that increased their investments in the community grew faster than those that held back (Giving in Numbers: 2015 Edition).
Through a packed conference presentation circuit, hundreds of interactions with its companies, a record 300+ companies reporting to its major survey, interviews with top-tier media, and more, CECP identified the following trends from 2015:
- Companies’ Purpose Making Headlines: Many companies are leading on issues with purpose, such as veterans and education, but increasingly, visionary companies like PwC, PepsiCo, Starbucks, and Aetna are paying attention to the culture of the company—what it feels like to work there and the identity of the products and/or services the company provides. In fact, PwC recently created a Chief Purpose Officer title for one of its senior leaders. These companies are re-imagining the entire mission of the company and integrating purpose across all business functions. CEOs are speaking out on societal issues, hiring managers are focusing on how employees invest in communities as an employment benefit, and community engagement is driving innovation in how the business envisions success.
- Investments in purpose-driven companies have outperformed the market by fivefold during the last 10 years (Firms of Endearment).
- Growing Investment in Good beyond Giving: CECP is leading the effort to develop the next generation of measurement of corporate societal engagement to create a truer picture of how companies are creating social value. As we know in the business world, what gets measured gets done. Yet, as companies innovate by infusing the benefits of societal engagement throughout the business, it becomes harder to measure that work through traditional means, such as cash and non-cash categories of giving. For example, Southwire has developed the 12 for Life program to employ high school students in an effort to build a future workforce, which has become a profitable venture for the schools, the students, and Southwire.
- 91% of 2015 CECP Summit attendees said that there are examples of companies doing “good” that was not currently captured by measures of “giving”.
- Rising Power of the Employee: The power of an individual employee can make or break a company. Many companies are intrinsically shaped by and benefitting from the diversity of their employees, who bring their skills, resources, intellectual capital, passion, and values to the enterprise. Leading companies, such as Nielsen with its partnership with World Food Programme to create a technology platform to combat world hunger, are attracting top talent by allowing them to design the type of workplace that frees their creativity to bring innovative ideas to their work, which increasingly includes a commitment to solving societal challenges. And it’s not just millennials who are demanding this deeper connection to rewarding work, but also representatives from all generations who understand that they are “custodians of tomorrow”, as referenced by Georg Kell in his recent piece, Together We are Generation S. Yet, other companies, such as Volkswagen, appear to have been imperiled by the power of employees who became disconnected from a responsible corporate culture and a view of the big picture societal results of their individual actions.
- When asked what was the most valued benefit to expanding societal investment, 55% of CEOs reported “strengthening human capital.” (Live polling, 2015 CECP Board of Boards: Winning on Purpose)
- Demand for Transparency Puts Pressure on Reporting: Our hyper-connected culture has gone far beyond our social lives and has exposed the inner workings of companies, globally. Our norm of on-demand, real-time, multi-channel entertainment has created outlets that enable the expression of delight or dissatisfaction at the click of a button. Customers and employees are following suit and bringing down or building up companies on a whim. Beyond stock price and revenue, the public is demanding new levels of transparency and a deeper understanding of the inner workings of companies, from where it sources its products to how it is treating its employees. Many standards and guidelines exist to aid in this transparency–GRI, SASB, DJSI, and more—and companies are reflecting on the significant resources required to meet the multitude of reporting demands.
- 84% of companies in 2014 reported that they are measuring outcomes and/or impacts of their grants (Giving in Numbers: 2015 Edition).
- CSR Leaders Move Closer to the C-Suite: An individual who has a deep understanding of what the community (including employees) needs to thrive has a set of skills that are vital to the business world. Leading companies are increasingly acknowledging this, drawing CSR staff up the ranks and giving them a seat at the leadership table. This is reflected in changing titles, from chiefs of staff, to heads of diversity and inclusion, to global directors–such as Hilton’s Vice President of Corporate Responsibility, who is also the Chief of Staff, bringing the community lens to the office of the CEO. Societal engagement expertise is giving companies the edge on solving business challenges as it draws diverse, community-based solutions into the company to make it more responsive to market demands—a market that is increasingly focused on what’s good for the planet and its people.
- 65% of companies’ societal engagement teams stayed the same size or grew, despite a decrease in overall corporate headcount.
As CECP looks ahead to 2016, we are reminded of our founder Paul Newman’s belief that the world’s leading corporations can and should be a force for good in society. Leading companies have the resources, global reach, need to engage in real time, and ability to get things done. We see increasing evidence and expectations that companies will be a leading source of solutions that will ensure a resilient future. And we sense that companies that will lead the way will find a new competitive advantage.
CECP is a coalition of CEOs united in the belief that societal improvement is an essential measure of business performance. Founded in 1999, CECP has grown to a movement of more than 150 CEOs of the world’s largest companies across all industries. Revenues of engaged companies sum to $7 trillion annually. A nonprofit organization, CECP offers participating companies one-on-one consultation, networking events, exclusive data, media support, and case studies on corporate engagement.