A New Age of Corporate Responsibility is Upon Us

by | Apr 11, 2018

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Only a quarter into 2018 and it’s already been an incredible year for corporate responsibility across many fronts. Protests, boycotts and calls-to-action from the grassroots to the C-Suite level indicate that a new playing field is being built:

In the workplace: Equal pay and human rights protections are being vehemently fought for across industries and professional settings, as most recently represented by the #MeToo movement.

On Wall Street: BlackRock’s Larry Fink notified CEOs that their companies must contribute to society while achieving positive financial performance and Yahoo! Finance recently made ESG (environmental, social and governance) scores on more than 2,000 publicly traded companies available to retail investors.

In the marketplace: There are countless examples that illustrate how customers and investors, more than ever before, want to know what their dollars support, how their products were made and how they can be disposed of – even if the impact is distant from the product or service itself.

It is a fascinating time to be a corporate responsibility practitioner, because with these social and environmental movements gaining energy, credibility and authority, many CEOs are unsure how to respond, how to act and, most importantly, how to change. Some even still wonder if they need to change. The answer, largely, is yes. Regardless if that change happens quickly or slowly, it needs to be strategic and thoughtful, make sense for the business and be accompanied by strategic and thoughtful communications.

Corporations often talk about culture and values, but do their actions align with their aspirations? While “responsibility” and “sustainability” can seem intangible to many corporate leaders, there are tools and methods that can provide concrete insights and drive action to help companies meet ESG goals while maintaining or even improving financial performance.

  • Materiality Analysis: A materiality analysis provides deep insight into issues important to the business and to a variety of corporate stakeholders. It identifies and prioritizes both opportunities and risks to the business. Understanding the issues that employees, investors, activists and consumers think are material risks and benefits to a business allows companies to focus on a core set of business-critical issues when developing sustainability plans and integrating these plans into their overall business operations.
  • ESG Reporting: It is important to establish a regular reporting cadence and evolve its structure over time. With this growing demand for transparency and disclosure focused on materiality, aligning with reporting structures like Global Reporting Initiative (GRI), Sustainability Accounting Standards Board (SASB) or International Integrated Reporting Council (IIRC) is becoming increasingly common, and will soon be table stakes. Transparent and regular reporting provides year-round stories to tell stakeholders and illustrates how ESG is a business driver that gives a company a competitive edge.
  • Investor Communications: Communicating ESG data to investors is increasingly important. Our research revealed that 98% of investors surveyed say a company with strong ESG initiatives makes for a more attractive investment and 77% believe building ESG initiatives into a company’s business model is a smart business decision. Although there is a growing number of ESG funds, there is room to improve communications with traditional investors who may not “speak sustainability” and don’t yet see how ESG is related to financial performance. A more open and proactive dialogue with investors is critical to clarifying that many of the issues they are already thinking about are also sustainability issues, they just aren’t using the same terminology as the Chief Sustainability Officer. Using the right financial vocabulary helps investors understand material ESG data, risks and opportunities. We need to speak EBIDTA, not purpose.
  • Honest and Modest Language: Leadership needs to be concise and specific in its language about these issues. It is now demanded that corporate boards and leaders provide detailed and transparent ESG disclosures. They must be modest in their accomplishments, not appear to be “greenwashing” and also be clear in articulating their goals and how they will accomplish their goals, even disclosing areas of risk or failure and how they are mitigating it. Walking the walk in this way builds trust and credibility.
  • Become an Advocate: Advocacy is the new wave of corporate responsibility. While not all CEOs feel comfortable taking a public stand for or against an issue, they are being called to lead. But advocacy is not for everyone and it can’t be a knee-jerk reaction to the latest issue. It is a long-term play that needs to be a material issue to your core business. Companies need to be guided by and live up to a specific set of principles that make a concerted effort to protect employees, the environment and communities, which yes, ultimately serve investor interests as well.

The public conversation is now shifting to how corporations – not policy makers – can create movements and spark social change. These efforts are an investment, but like any business investment, they support future growth. There is an immense opportunity for any company to seize this moment in time to strengthen its business and reputation and make a positive, lasting change on society.

By Jane P. Madden, Managing Director and Head of the Corporate Responsibility & Sustainability Practice, Burson-Marsteller.

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