How companies can 'walk the talk' on pressing social issues

No company is an island. Each exists at the centre of a complex web of mutually beneficial stakeholder relationships: raw materials suppliers with investor capital; employee output with consumers’ wallets. Balancing the needs and desires of each group – against both each other and the organization’s financial performance – is no easy task.

As recently as 2017, leadership teams heard that taking a stance on social or political issues “typically [involved] more risk than benefit”. But this advice has dated fast, especially in the age of COVID-19: The proportion of consumers who want companies to take a stand on issues such as sustainability, transparency or fair employment practice has risen from 62% in 2018 to 72% in 2022. And while most leadership teams say they recognize that things need to change, trust in them to “walk the talk” is relatively low.

Take the 2020 racial injustice protests. As decades of anger poured out on to the streets in the US and beyond, corporate bosses heeded a warning: that “the fight for equality doesn’t exist in some vacuum outside your organization”. Many companies rushed to show their support through traditional and social media. But some were accused of cosmetic support for the protests when past actions or the ethnic homogeneity of their workforce – especially in leadership – were exposed.

In contrast, other organizations were well placed to respond quickly and authentically. One example is ice cream maker Ben & Jerry’s who first asserted their support for Black Lives Matter in a 2016 blog post. As board member Daryn Dodson noted, the company’s reaction to the 2020 racial injustice protests didn’t come out of the blue, but rather “from a muscle that was continuously being developed from the board and management team over time”.

Another is Nike. Their anti-racism campaign, launched in late May 2020, was consistent with previous messaging, like an advert featuring Colin Kaepernick in 2018 and their significant commitment to funding for Black community initiatives. Speaking in June 2020, CEO John Donahoe pointed to progress made by the company internally on diversity – but also to the need to accelerate progress.

So how do companies constructively engage in potentially divisive social issues in a way that balances both people and profit?

The problem for many organizations is that stakeholder-centricity remains somewhat superficial. Too often, we see the perspectives of customers, employees, suppliers and other stakeholders “bolted on” to existing business practices, instead of being “built in”: properly embedded, measured and incentivized. The result is weak stakeholder relationships that deliver neither the insight nor the sense of shared ownership needed to drive behavioural change.

The antidote to this challenge starts with a set of leadership qualities we identified with the World Economic Forum as the “Five Elements” of responsible leadership. But values and intentions don’t equal action. So, we see high-performance leadership teams infusing stakeholder-centricity down through their organizations via a set of 21 management practices we call “Sustainability DNA”.

Of particular relevance to companies trying to balance their response to important, potentially divisive issues with financial growth are practices we group into two buckets: Human Dignity and Tangible Empathy.

The concept of Human Dignity is enshrined within the UN Universal Declaration of Human Rights. It requires leadership teams to consider inequalities inside and outside their organization. For example, ensuring that pay and working conditions are “just and favourable”, or that “basic human needs” of local communities are met.

In the workplace, boldly advocating for Equal Opportunity is critical. Public statements on the importance of diversity and equal opportunity – backed by inclusive hiring, retention and progression practices – are the backbone of cultures where everyone can succeed. For example, Google matches employees from under-represented groups with mentors and coaches, who support individuals to “find deeper career fulfilment” by identifying internal opportunities, roles and sponsors.

Leadership teams must also consider Human Development in the communities in which they operate. This includes providing education programmes, funding local infrastructure development and developing targeted, affordable products and services. Nike has an annual target to invest at least 1.5% of pre-tax income in community projects, noting that its history is "rooted on the trails, courts, fields and tracks of communities all around the globe".

These values are then consolidated through actions we call Tangible Empathy. These answer stakeholder calls to “put your money where your mouth is” through clear, public commitments that embed stakeholder inclusion deep into the organization's fabric.

Practices that seek to support and maximize Stakeholder Welfare will help to “level the playing field” for marginalized or under-represented groups. For instance, Prudential, the multinational insurance company, has developed digital health products that target underserved communities in Asia.

Companies further extend their material commitment to stakeholder inclusion by setting Environmental Targets. This recognizes local communities as key stakeholders – particularly those with fewer resources to insulate themselves from the negative side-effects of business activity, such as air or water pollution. For example, the Australian skincare brand Aesop looks to source key ingredients “with respect for people and biodiversity”, which is evident in their partnership with indigenous-owned, local enterprises in western Australia.

Such practices shouldn’t be confused with philanthropy or with greenwashing. Stakeholder inclusion can drive innovation, open the door to new markets and boost a company’s brand. By recognizing and building on these interdependencies, leadership teams can shape more sustainable businesses that instinctively and effectively balance different stakeholder needs.