CORPORATE LEADERSHIP, SOCIAL PROGRESS
Date: December 18, 2017
As the wild ride of 2017 comes to an end, we reflect on a year that was replete with loss and pain, but also a year when leading corporations have stepped up on major social issues.
Through CECP’s collaboration with 200+ companies, hundreds of monthly inquiries and discussions, proprietary surveys, and conversations with leading experts and on-the-ground practitioners, we see six trends as companies lead during these uncertain times.
ADULTS IN THE ROOM: The best corporate social commitments and investments are increasingly strategic and have not wavered in an uncertain environment.
PURPOSE IS THE NEW PERK: Companies are building programs that move employees from disengaged to purpose-driven.
WHOLE-COMPANY APPROACH: Social strategy is going deeper into the company and crossing multiple functions, business units, and assets, building off a strong business case.
DIVERSITY & EQUITY AS A COMPETITIVE ADVANTAGE: Companies are expanding the reach of their diversity and inclusion strategies to take a systems-level approach to address inequities in the talent pipeline.
VISION CORRECTION TO END “SHORT-TERMISM”: Leading investors look for company strategies and plans that go beyond the quarter.
MASS CUSTOMIZATION: Companies are refining and focusing their work to create unique value for all stakeholders based on the business’ skills and resources, and each stakeholder’s distinct needs and values.
ADULTS IN THE ROOM
Looking Back: Despite an uncertain sociopolitical environment, companies remain committed to stakeholders. In fact, data from Giving in Numbers: 2017 Edition show many companies increased social investments as median total giving increased in 2016. While many CEOs acted as advocates, we also saw corporate-wide support for causes—see two recent Economist articles, here and here, for comprehensive recaps. Take also, for example, the amicus brief filed on behalf of 162 technology firms, including CECP-affiliated companies eBay, Google, Intel, Microsoft, PayPal, and Salesforce.com, Inc. The brief noted President Trump’s Executive Order restricting refugees and travelers from several majority-Muslim countries would “inflict substantial harm on U.S. companies, their employees, and the entire economy.” See also the extraordinary response from companies in the wake of several man-made and natural disasters this year. As one example, UPS and its customers have donated more than $80M for the disasters, a number UPS CEO David Abney shared on the recent company earning call.
What CECP is doing: CECP carries out periodic Pulse Surveys to capture the sentiment of our affiliated companies around issues of global and national importance. A Pulse Survey carried out in August, shortly after the events in Charlottesville, showed that 53% of companies are prioritizing their support internally with employees. Additionally, CECP’s Board of Boards is one of very few CEO-only meetings that offer a peer-to-peer setting for CEOs to map out advocacy and social investment strategies together and set an agenda for the coming year, and the 13th annual convening will take place February 26, 2018.
Looking Forward: CECP speaks to companies every day to support the variety of new questions that arise out of the unique scenarios—from hurricanes, to DACA, to race, and more. In 2018 and beyond, we expect companies to apply their innovations, skills, and resources to address our most pressing challenges ranging from sexual harassment to tax reform. Companies, through their scope and scale, will lead on these issues by drawing on their strong cultures and policies to continue to protect their employees and other vital stakeholders.
PURPOSE IS THE NEW PERK
Looking Back: Companies that have tapped into purpose as a motivator for their workforce are seeing the rewards: 58% of companies with a clearly articulated and widely understood purpose see financial growth of more than 10%. As one illustration of purpose at work, a scientist at GSK (paywall) applied the company’s stated purpose “to help people do more, feel better, live longer” to her everyday work. She saw that the leading cause of death in babies in developing countries was umbilical cord infections, so she adapted GSK’s antiseptic mouthwash into a gel, which has the potential to save thousands of lives.
What CECP is doing: CECP, Imperative, and PWC are co-leading a Building a Culture of Purpose project over the coming year with 10+ companies to identify the steps to building purpose-driven leaders and a purpose-led global business culture. With the CECP network of companies, we’ll carefully examine best practices in the integration and infusion of purpose in a company, develop and advance broader understanding of purpose in a corporate setting, and ultimately ignite innovative ways for people to find meaning in their work.
Looking Forward: Purpose-led companies and cultures can no longer be considered a fad. Instead, they should be considered the future. We expect additional proof-points, through our joint research and others, to emerge that will demonstrate that companies must continue to embed purpose into the company — or else be left behind.
Looking Back: Social focus inside companies has moved in multiple dimensions. It’s moved vertically from the C-Suite to the front lines. Importantly, it has also shifted horizontally: from HR to IR to Marketing. CECP noticed these moves in our research that uncovered four business motivations for investing in society. In addition, CECP’s report, in partnership with USAA, What Counts: The S in ESG, explored how the private sector is innovating with multi-departmental, socially-driven efforts to create greater social impact. For example, CenterPoint Energy runs the CitySmart program, which provides technical assistance on investments in energy efficiency.
What CECP is doing: CECP is leading the way on capturing how companies are infusing social investments throughout the business–the “S in ESG”–by creating a more robust metric through its Social Scorecard, which is an ambitious internal measurement and evaluation framework that leading companies can utilize. CECP is working with companies, at all stages of adoption of the whole company approach, to unlock the learnings that the Scorecard can provide. CECP recently announced an upgraded self-serve online benchmarking portal and Knowledge Center for its companies, which houses hundreds of resources to inform the practice of innovative and cross-company social investment.
Looking Ahead: Corporate social investments will continue to be led by CEOs but at the same time will become more deeply rooted in the core of a business. Over time, this multi-dimensional integration of stakeholder interests and purpose will become increasingly intractable from corporate culture.
EQUITY AS A COMPETITIVE ADVANTAGE
Looking Back: Equitable workplaces foster a culture of trust and acceptance and are engines of prosperity. According to a McKinsey study, companies in the bottom quartile both for gender and for ethnicity and race are statistically less likely to achieve above-average financial returns. The Corporate Racial Equity Advantage from PolicyLink and FSG notes that “a company’s bottom line can be advanced by adhering to equity policies and practices that benefit underrepresented and marginalized populations.” A study by Goldman Sachs found that companies with higher levels of female employees have seen an astounding average annual return–or alpha—of 3.3%. In short, leading companies are laser-focused on the skills and experiences their employees possess and view these attributes as their greatest resource and competitive advantage. As one example, CECP saw this in the long-term plan business strategy presentation by CA Technologies, which focuses on the need to invest in STEM education.
What CECP is doing: CECP’s Accelerate Community initiative focused on Systemic Investments in Equity, Talent, and Tech is working towards the creation of an equity filter that can be applied to philanthropic engagement in computer science education and STEM. In addition, CECP is leading a related inquiry, supported by the Walmart Foundation, focusing on how and why companies are incorporating diversity and inclusion best practices across their entire philanthropic portfolio.
Looking Ahead: The business case for equity in the workplace is solid. But the gains we have seen will likely be challenged by additional forces in society. The latest 10-year forecast from the Bureau of Labor Statistics shows that inequality—by income, education, and geography—will continue to grow. Leading companies are already adapting and thinking ahead.
VISION CORRECTION TO END “SHORT-TERMISM”
Looking Back: While Wall Street and its day traders remain dominant, leading companies and investors are rubbing their eyes and allowing material long-term and environmental, social, and governance (ESG) issues to come into focus. The business case for a long-term view is clear: Unilever (paywall) credits its long-term, sustainable business model for fending off a hostile takeover. CECP’s ESG Corporate Scorecard showed that when compared to non-CECP-affiliated companies, CECP companies focused on ESG metrics performed better financially; 2016 data show higher revenue ($17.9B vs $9.7B) and a higher P/E ratio (18.6 vs 18.2). To illustrate this further, in an MIT Sloan Management Review article, CECP outlined the Six Reasons Why Companies Should Start Sharing Their Long-Term Thinking With Investors.
What CECP is doing: CECP and its Strategic Investor Initiative co-chaired by Bill McNabb, Chairman and CEO, Vanguard, along with nearly 30 S&P 500 companies and leading institutional investors—representing $2 trillion in annual revenue and eclipsing $25 trillion in AUM, are revolutionizing the way corporations and investors communicate. The central component is the CEO Investor Forum. These Forums are where CEOs of companies from Aetna to Voya, have presented long-term plans to a room of 200 institutional investors, based on calls from the biggest investors including Vanguard, State Street, and BlackRock.
Looking Ahead: CECP’s Strategic Investor Initiative aims to shift trillions of dollars in investment capital to companies that communicate long-term plans that:
- Share the Vision: 3-5+ years, publicly and regularly
- Feature financial and material environmental, social, and governance risks
- Incorporate significant stakeholders
- Describe approaches to governance and metrics
We expect this level of forward-thinking disclosure to become increasingly commonplace as a competitive advantage in gaining investor attention and dollars.
Looking Back: While mass customization is not a new idea, the set of acknowledged stakeholders of a corporation is growing and corporate social investments are being increasingly built around the recognition that there is no one-size-fits-all solution. For employees, the number of customizable engagement opportunities that companies provided to meet segments of interest and need increased. Between 2007 and 2016, the average number of types of volunteer programs grew, and in 2016, opportunities to design their own volunteer opportunities through paid-release time and flexible schedule were the most offered programs (at 61% and 60% of companies, respectively) (Giving in Numbers: 2017 Edition). Nine out of ten companies offered at least one matching gift program—one of the best ways companies can let employees customize giving based on their passions (Giving in Numbers: 2017 Edition).
What CECP is doing: CECP is leading an area of inquiry through its Employee Communications Accelerate Community initiative to synthesize best practices, set definitions and expectations for “engagement”, identify white space, and uncover new innovations. In addition, CECP is assisting companies to invest more deeply in global social challenges by understanding community needs across all regions. As an example, in surveying our companies to inform Giving Around the Globe, we found that the Asian region has the highest offering of Pro Bono Services (61%). This can be attributed to cultural norms to separate corporate and social sectors and volunteer efforts tapping their business skills is a more natural fit.
Looking Forward: Tying all this work together is the Global Exchange which seeks to unite country-based, mission-driven corporate social engagement organizations to advance the corporate sector as a force for good around the world. Each company and each country have a different culture, set of stakeholders, and business imperatives. We anticipate companies continuing the trend of adapting their approaches based upon these unique needs.
THE “MEGA TREND”
Overall, these six trends point to a deepening and broadening commitment of companies to making strategic social investments. Despite the wild ride of 2017, companies are in the position to be the steadying force for good our news headlines – and perhaps our society – need.