2020 has presented novel challenges for corporate social responsibility and social impact leaders, and these challenges continue to evolve. During a time of widespread suffering and grief due to a global pandemic, economic recession, and prominent examples of systemic racism, it is hard to know how your corporate social impact strategy should change to keep up.
Many corporate social impact leaders are asking themselves questions like,
“Do we maintain our current impact strategy or pivot in a completely new direction?
Do we engage our now-virtual employees in a new initiative or maintain our tried-and-true initiatives?
What do our partner organizations even need most right now?
I feel like now is the time to act, but where do I focus?
Will our executives keep funding these kinds of programs, or cut spending because of the crisis?”
In our work helping corporations develop social impact strategies and programs, we’ve seen how the role of CSR has changed over time, and how our insights can help companies adapt to succeed in the new normal.
Before answering those questions and taking action, let’s take a step back and think about how the corporate social responsibility (CSR) movement has evolved so far. Just before COVID, a massive pivot was already underway in the CSR space away from just philanthropy and volunteer hours towards a more effective, strategic, and sustainable model of changing companies from the inside out. The concept of CSR has made gains since Howard Bowen introduced the social contract between business and society in the 1940’s, President H.W. Bush’s push for volunteerism in the 1990’s, the adoption of the SDGs in 2015, and even the more recent call in 2019 to create a new purpose for businesses.
The current economic, environmental, and civic crises have shifted the way companies are looking at their corporate social impact strategies, and are forcing them to adapt to a “new normal” (last week we wrote about what the new normal can look like, and what it will take to get there).
In the new normal, CSR is a top priority for business, no longer just a public relations agenda item. The field of CSR is driving the internal changes within companies that are needed to evolve the business landscape from a “winners take all” system to one that includes all stakeholders. To make that shift, CSR needs to be fully woven into a company’s overall strategy. That requires a focus on the changing relationship between business and society, and a move towards stakeholder capitalism. And in case you need to persuade yourself or others that moving away from profit maximization as the sole guiding force for business is the right next step, Just Capital released a poll last week revealing “three in four Americans say they will long remember the companies that took missteps in their response to the pandemic, and an even greater proportion – over four in five – will remember those that did the right thing by their workers by ensuring their health and safety or doing their best to avoid layoffs.”
To understand how CSR has become so central to corporate strategy, let’s look at a time when it wasn’t. A not-so-distant example is the corporate response to the 2008 financial crisis, when CSR was still primarily for shareholders and show, not society.
Companies responded to the financial crisis by acting in the best interest of their shareholders - employees first received pay cuts, then were laid off at the same time that executives received record bonuses and industries that contributed to the crisis received government bailouts. As a result, both income and wealth inequality widened. Corporate governance structures had failed, and there was a shared belief developed that if they had been intact/stronger, the crisis could have been avoided or at least the effect lessened. As business moved towards recovery, the perception by the public was that businesses needed higher levels of scrutiny and regulation to ensure they were acting responsibly, but in reality many regulations were rolled back to stimulate the economy.
The current environmental crisis accelerated in the years following the recession as companies grew in power and size. Inequalities in society, especially between the rich and poor, grew faster after the recession. This time, consumers, employees, and civil society at large are pushing for businesses to learn from their past mistakes. As Dan Shulman shared, companies must serve “multiple stakeholders, whether they be our employees, our customers, the environment, [or] the communities that we serve.” Schulman went on to implore that Wall Street leaders use their power for good, and “take a moral stance.”
The three factors that build the case for why CSR must play a central role in the new normal are:
A changing relationship between society and business
CSR teams have proven their value to communities, employees, and the business
Using the now to create a post-COVID new normal
In the years between 2008 and now, the relationship between society and corporate America has changed. We know that one result of the 2008 financial crisis was societal belief that corporations needed more regulation. At the same time, a generation of consumers (millennials) who prioritized corporate authenticity entered the economy. Because of consumer demand, businesses gradually accepted that CSR was a strategic priority that required action, not just words. Thus, the idea of stakeholder capitalism, as opposed to shareholder capitalism, began to take hold.
As part of the transition to stakeholder capitalism, companies began focusing on their purpose within society as a motivator for success, rather than just profits. C.B Bhattacharya, a professor of sustainability and ethics at the Katz Graduate School of Business at the University of Pittsburgh, promotes the following guidelines for business purpose development within stakeholder capitalism, “One should not define the purpose of the firm only so that it resonates with the stakeholders. It has to be something that is true to who you are as a company and what you are really trying to accomplish. It must come from our hearts and minds as leaders and the leadership team. You must then check if it gets the buy-in from employees. If employees understand what we are trying to do, it should be reasonably easy to communicate to the other stakeholders.”
We now know that purpose-driven companies work for the economy as much as they do for society. Companies that offer meaningful work and are values-driven “see a reduced risk of turnover (as much as 24%), higher levels of engagement, and deeper engagement.”
That leads us to the more recent (and in many cases, successful) CSR response to the COVID-19 global pandemic and economic recession. What we know is that CSR structures worked. Corporate response to both the pandemic and resulting economic downturn was quick and supportive. More importantly, companies that failed to respond adequately (such as Yelp and GoFundMe) were quickly brought to task by society and committed to change.
Perhaps the most important insight from the 2020 response, in terms of determining the new normal for CSR, is how companies chose to respond: by utilizing their core business in ways that will help society as a whole through this crisis.
For example, Amazon did the basics of allowing employees to work from home, paying hourly employees even if they weren’t working, and creating a $3B fund for small businesses near their office buildings to sustain them. But they took their response a step further by reorganizing warehouses to prioritize deliveries of essential goods and sourcing face masks for essential employees while still prioritizing sourcing PPE for healthcare workers. Microsoft responded similarly (allowed employees to work from home, paid hourly employees even if they weren’t working) and also collaborated with telehealth software and data projects to better track COVID. Cargill went so far as to pay workers and suppliers wages, and set up its own crisis support. In doing so, it enabled the company to sustain its participation as a critical player in the global food system, while building loyalty with communities and partners around the world.
The essence of stakeholder capitalism is that companies are leveraging their unique strengths for a greater purpose than profit maximization. Early results from the response to 2020 reveals business is meeting that goal (take a look at this resource to help guide your efforts).
So, where are we going next? Businesses have made commendable progress, but the challenges we’re facing in 2020 continue to reveal areas where CSR needs to be reinforced. The anti-racism movement has revealed that companies are quick to respond when it comes to their words, but not always in their actions when it comes to sustaining long term equity and inclusion. Ultimately, systems need to change, not just our willingness to speak out.
For example, the main players of the 2008 crisis are still around in 2020 - which speaks volumes about what has and hasn’t changed. At Amazon, a climate employee group proposed a climate initiative in 2019 that received impressive board support and led to company changes, but their climate/racism initiative proposed last week received minimal support. Companies and boards are eager to say they're committed to anti-racism, but they’re not backing that policy with action.
Further, individual corporate action can only take us so far. As exemplified by corporate response to the climate crisis, companies can take individual action to offset carbon emissions and become more sustainable. But the climate crisis continues to worsen. “Collective voice and collective action by business leaders across industries, across sectors, across geographic boundaries” is needed.
The new normal is within reach, and we, as CSR and social impact leaders, can use this time to get even closer to our goals. We suggest the steps below for you as a individual or team within your company:
1. Get executive support for long-term funding
The most adept social impact leaders within companies will use this time to not only announce COVID response initiatives, but also to entrench their position at the most senior levels of decision making. eBay Foundation convinced its board to contribute 6x the normally paltry payout rate of 5% that other foundations contribute. Amazon committed all of its Q2 profits to COVID response while expanding the size and responsibilities of its Amazon in the Community Team.
2. Harness employees into groups that you can leverage
Companies, like LinkedIn, have expanded their “employee resource groups”, and provided more training. Avanade increased training and support for its “Citizenship Champs” initiative to help its impact leaders launch more virtual community support activities today, while creating a group that can continue to push social impact projects forward in the future.
3. Integrate CSR measurement into key operations so that it's easier to monitor and measure the impact of your work
Companies measure and report on profit-driving initiatives, and CSR programs should be no different. At the same time Avanade launched “Citizenship Champs,” it also added a volunteering metric to its executive scorecard (used to ensure the company hits important milestones).
4. Build partnerships across all sectors of your company
Teams working in isolation will have minimal impact, so it’s crucial to get outside of your CSR bubble and work with teams across your company. Microsoft MySkill’s program launched through partnership between IT, marketing, sales, and the C-suite.
5. Turn the spotlight internally and fix systemic policies to do less harm.
It is no longer enough for companies to pat themselves on the back for one-off diversity and inclusion workshops - now is the time, to quote Bank of America Vice President Laura Silva, for companies to “show the receipts” to prove that they are: hiring and paying people fairly and equally; ensuring diverse representation on Executive Leadership Teams and company boards; taking responsibility for maintaining an inclusive culture.
6. Build external partnerships
Working with external partners will amplify your company’s impact. Resonance notes that cross-sector partnerships “help us adapt and respond more effectively in a crisis,” specifically stating that their clients have better navigated COVID because of partnerships. Steve Schmida of Resonance Global offers more guidance on how to build partnerships with purpose here.
If your company is looking for support developing its social responsibility strategy for the new normal, learn more about partnering with MovingWorlds here.
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