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Choosing Wisely: How Companies Can Make Decisions and a Difference on Social Issues

From LGBTQ+ equality to Black Lives Matter, and from gun rights to gun control, companies have been asked to take public positions on social issues, but the process for doing so hasn’t always been clear or consistent. This report discusses (1) the evolving context in which companies are operating; (2) who is involved in raising and deciding the company’s stance on social issues; (3) the criteria used in deciding whether and how to respond; (4) how companies ensure that there is appropriate follow-through; and (5) lessons learned from 2020 and what companies are planning to do differently.

EXECUTIVE SUMMARY

US corporations are facing mounting pressure to take stands on a plethora of social issues—including issues unrelated to their core business. This pressure is unlikely to go away: employees and others feel that the government isn’t doing enough to address societal problems and are looking to companies for leadership. Yet addressing these issues is increasingly complex in an era of intense polarization, with stakeholder views on all sides of the spectrum and social media fueling extreme divisions. If not handled appropriately, taking a stance can undermine the very trust that customers, employees, and others have in their companies.

On March 25, The Conference Board ESG Center held a roundtable discussion with about 100 executives on how companies decide whether, when, and how to take a stand on social issues. The discussion generated the following insights for what’s ahead on corporate social activity:

Having a clear set of criteria for deciding whether and how to address a social issue is important. It helps not only to ensure consistency and objectivity, but also to prepare for the inevitable negative reaction from those who disagree and the disappointment of those who wish the company had done more.

  • Insight: A company’s purpose or mission can be an important touchstone, but it alone doesn’t provide the answer to whether to respond. Other factors to consider are: 1) alignment with the company’s core values; 2) relationship between the issue and the company’s business; 3) incremental impact the company can have on the issue; 4) relationship with the company’s sustainability, CSR, and philanthropic programs; 5) external and internal expectations; and 6) risks and opportunities associated with taking a stand.
  • Insight: Key factors in deciding how to respond are: 1) the company’s resources; 2) ability to follow through; and 3) prior track record in the area. Companies can come across as inauthentic if, for example, they take a public position on racial equality but don’t commit to improving diversity in their boardroom or senior management.
  • Insight: Companies may wish to adopt a proactive rather than a reactive stance on social issues. Clarifying what you stand for can reduce, if not eliminate, the scramble for a response and allow you to focus on areas where you can have a meaningful impact.

While the CEO is a natural spokesperson on many social issues, be wary of conflating the CEO’s personal views with those of the company. Being transparent with employees and others about who is involved in deciding and what criteria they are using to determine which issues to take up can demonstrate that social issue engagement isn’t a matter of personal politics for the CEO. In an environment where much of the pressure for companies to take positions on social issues comes from groups advocating “progressive” positions, the CEO (and company) can avoid being viewed as aligned with one side of the political aisle.

  • Insight: Rather than assembling an ad hoc group based on each topic as it arises, taking a more structured approach that involves a core group of cross-functional executives (e.g., HR, communications, legal, corporate citizenship, government relations, investor relations) and business unit leaders in the decision-making process can help. Another model is to establish an office with a direct line to the C-suite to take the lead in addressing social issues.

Companies can do more to constructively engage their board of directors in the process. Generally speaking, boards don’t make decisions about corporate stances on social issues. However, leaving the board out of the process can surprise or offend directors and cause the company to miss out on opportunities to refine its thinking.

  • Insight: Discussing with the board the process and criteria your firm uses to take stands on social issues helps. Moreover, as companies move from a reactive mode to a proactive approach in addressing social issues, it’s natural to engage the board in this more strategic discussion.

With most of the pressure to address social issues coming from within the organization, clarifying how a company makes decisions in this area is important. Issues are typically raised by individual employees, employee resource groups (“ERGs”), senior management, and board members. Employees who are passionate about a cause may be frustrated if the company isn’t working to bring about social change in line with their views.

  • Insight: Educate your employees (and other internal stakeholders) about how your firm approaches social issues to set realistic expectations that your company won’t take a stand on every topic.

Taking a stand on social issues in today’s polarized environment can, if not managed adroitly, weaken the trust that employees and others have in companies. Phrasing your position in a way that avoids polarizing and partisan terms is therefore critical.

  • Insight: Be empathetic in your response to social issues, recognizing that even though issues may be making “news” today, they are not at all “new” to those most affected. Ground your approach in the company’s business and values, as a matter of policy and not politics.
  • Insight: Employees are an important resource when addressing social issues, so listen continuously and carefully to your ERGs to get a pulse on what’s going on in their communities. Consider engaging them before making a public statement. Encourage collaboration among different ERGs, which will allow them to learn from each other and also help your firm refine its strategies, both regionally and across demographic groups.

Addressing social issues around the world is one of the bigger challenges for multinational companies. For example, “diversity” can mean different things depending on the country, and cultural norms and regulatory regimes vary.

  • Insight: While not shying away from taking principled stands that apply across the globe, companies can engage local leadership and employees in a region to understand their priorities and how best to articulate company-wide stances. At times, the most constructive approach may be to articulate your stance in terms of the company’s internal policies toward its employees, rather than in terms of public policy.

Coordinating responses by and across brands is another key challenge; a two-way partnership between, and clear guidelines for, corporate headquarters and the business units can help. Often, individual brands are on the front lines in being exposed to or affected by social issues, so they may wish to respond more quickly and may speak more credibly to customers and other stakeholders than the overall corporation does. However, individual brands’ responding carries risks: a brand may get ahead of the rest of the company in responding or may not be the most appropriate one to lead the response.

  • Insight: Having all responses come from corporate headquarters may deprive a company of the agility, creativity, and impact that come from engaging individual brands up front in addressing a social issue. It can help to have internal guidelines on the role that corporate headquarters and the business units play, guardrails for the types of issues and statements brands can make, and a required heads-up to headquarters before taking a stance.

Following through on commitments is critical. Making a public statement is only the start when addressing a social issue; following through is pivotal for impact, and the goodwill generated by taking a stand can be lost if a company doesn’t do so. Moreover, customers, employees, and others alike are attuned to whether a company is truly trying to make a difference or merely “virtue signaling.”

  • Insight: Before taking a stand, decide how you’ll follow through on a commitment—and ensure you have the resources to do so. Enlist the company’s citizenship/philanthropy/social responsibility function—which often has one foot in the company and another in the community—to track your firm’s progress.

Companies can ramp up their efforts to measure the impact they’re having in taking stands on social issues. While some companies measure how their stakeholders respond to the social issues stances they’ve taken, many don’t have a clear sense of whether taking stands has either benefited or harmed them more than they expected.

  • Insight: As companies engage more on social issues, they can use surveys, data-based analyses of sales, employee hiring and retention, etc., to measure the impact they’re having, not only on the issue itself (e.g., improving health outcomes in underserved communities), but also on the perceptions of customers, employees, investors, business partners, and the public.

AUTHORS

Washington.jpg

Paul Washington

Executive Director, ESG Center
The Conference Board

Merel Spierings.jpg

Merel Spierings

Program Manager, ESG Center
The Conference Board

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