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Citizenship and social impact: Society holds the mirror

by Gaurav Lahiri, Jeff Schwartz
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    28 March 2018

    Citizenship and social impact: Society holds the mirror 2018 Global Human Capital Trends

    28 March 2018
    • Gaurav Lahiri India
    • Jeff Schwartz United States
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    • Building an organization’s social capital
    • Why is citizenship critical now?
    • Good corporate citizens outperform others financially
    • Needed: An integrated, authentic citizenship strategy
    • The bottom line

    ​Stakeholders today are taking an intense look at organizations’ impact on society, and their expectations for good corporate citizenship are rising. In an effort to meet these expectations, leading organizations are making citizenship a core part of their strategy and identity.

    Building an organization’s social capital

    Learn more

    View 2018 Global Human Capital Trends

    Explore the infographic

    Watch the related video for this trend

    Read the press release

    Download the full report or create a custom PDF

    The social enterprise must evaluate its actions based on its impact on society, not just the bottom line. As stakeholder expectations rise, an inauthentic or uneven commitment to citizenship can quickly damage a company’s reputation, undermine its sales, and limit its ability to attract talent. For organizations, a new question is becoming vital: When we look in the mirror held up by society, do we like what we see?

    Corporate citizenship is no longer simply a corporate social responsibility (CSR) program, a marketing initiative, or a program led by the CHRO. It is now a CEO-level business strategy—defining the organization’s very identity. Issues such as diversity and inclusion, gender pay equity, income inequality, immigration, and global warming are being openly discussed by individuals, families, and political leaders around the world. And our research shows that many stakeholders are frustrated with political solutions to these problems and now expect businesses to help address these critical problems.

    In a letter to investors in early 2018, BlackRock CEO Laurence Fink indicated that people are “turning to the private sector and asking that companies respond to broader societal challenges.”1 This sentiment, confirmed by this year’s Global Human Capital Trends research, prompts CEOs and the entire C-suite to hold their companies to higher standards. In this year’s Global Human Capital Trends survey, 77 percent of our respondents cited citizenship as important and 36 percent rated it as very important.

    The term “citizenship” can refer to everything an organization does that impacts society. We define it as a company’s ability to do social good and account for its actions—both externally, among customers, communities, and society, and internally, among employees and corporate stakeholders.

    Why is citizenship critical now?

    What is driving the intense focus on citizenship for organizations and society?

    First, organizations now operate in a highly transparent world. Internal and external behavior is almost impossible to hide.2 In 2017, dozens of stories about gender bias, unequal pay, and poor executive behavior made the headlines. Any mistreatment of customers can be instantly filmed and shared with a global audience. And in 2018, for the first time, most US public companies will be required to disclose their “CEO pay ratio,” which compares the CEO’s compensation to employees’ median pay.3

    Second, it is now clear that millennials, who make up over half the workforce in many countries,4 tend to have sky-high expectations for corporate responsibility. A 2017 study by Deloitte found that millennials are becoming increasingly sensitive to how their organizations address issues such as income inequality, hunger, and the environment. Eighty-eight percent of millennials believe that employers should play a vital role in alleviating these concerns, and 86 percent say the business success should be measured by more than profitability.5

    Third, corporate citizenship now directly impacts customer and employee brand. A recent Nielsen study found that 67 percent of employees prefer to work for socially responsible companies, and 55 percent of consumers will pay extra for products sold by companies committed to positive social impact.6 The Deloitte millennial study mentioned earlier found that millennial employees who believe that their employer supports the local community are 38 percent more likely to stay at that employer for five years.7

    Finally, more and more businesses are becoming embroiled in issues of political, social, and economic controversy. These debates are challenging CEOs to take political positions on behalf of their employees and customers. Kenneth Frazier, the CEO of Merck, believes that “business exists to deliver value to society.” He has taken vocal political positions and redefined how the pharmaceutical industry contributes to society.8 High-profile global commentators such as Nicholas Kristof and Yale professor Jeffrey Sonnenfeld have called on businesses to seize their potential to help address social problems and improve lives.9

    Good corporate citizens outperform others financially

    An organization’s financial performance appears to be linked to its citizenship record. Watchdog groups have created hundreds of CSR and “best places to work” indexes, including Fortune’s Most Admired Company list,10 the Dow Jones Social Responsibility Index,11 and many others. A new meta-study found a direct correlation between CSR index ranking and profitability,12 and a longitudinal study of purpose-focused companies found that they outperformed their S&P 500 peers by a factor of eight.13

    The investment community is paying attention. A study of 22,000 investment professionals found that 78 percent have increased their investments in CSR-focused firms.14 Some investors also evaluate organizations through online rating platforms such as Glassdoor, understanding that employment brand correlates directly with the quality of hiring and retention.

    Many organizations are responding to the demand for good citizenship and the growing link between social impact and financial performance. Target recently announced that it would increase pay for all 320,000 of its retail employees to $15 per hour by 2020—twice the US federal minimum wage. The company also offers employees shopping discounts, tuition reimbursement, and flexible schedules in its efforts to “do well by being good.”15 Salesforce donates 1 percent of its profits to charities and gives employees a full week of “volunteer time off” each year.16 Unilever directs employees to avoid a singular focus on ROI and instead implement “USLP”: Unilever’s Sustainable Living Plan.17

    Organizations across many industries are putting citizenship at the core of their mission. Tesla defines its business as “accelerating the advent of sustainable transport.”18 This has helped the company broaden its value statement to give investors a sense of societal impact. CEO Elon Musk regularly speaks about the importance of electric vehicles in preventing “environmental catastrophe.”19 And Bank of America focuses on responsible growth, “guided by a common purpose to help make financial lives better through environmental, social, and governance leadership.”20

    Needed: An integrated, authentic citizenship strategy

    Despite these high-profile examples, many other organizations appear to be failing to effectively integrate citizenship into their overall strategy. In this year’s Global Human Capital Trends survey, while 77 percent of our respondents cited the issue as important, only 18 percent said that citizenship was a top priority reflected in corporate strategy. Another 34 percent had few or poorly funded citizenship programs, and 22 percent admitted to having none at all.

    Are organizations walking the talk?

    While 77 percent of global respondents cited citizenship as important, only 18 percent said that it was a top priority reflected in organizational strategy.

    Explore the data further in the Global Human Capital Trends app.

    In 2018, we believe that companies have a unique opportunity to make citizenship a core part of their strategy and identity. Moving beyond fragmented programs, CEOs and executive committees should communicate a single, comprehensive, and authentic strategy that defines who the company is, what it says, and what it does. Then, they should hold organizational leaders accountable for results.

    Some of the most successful corporate citizens are already moving in this direction. Such an effort is necessary to measure, understand, and improve the many impacts that make up corporate citizenship.

    The bottom line

    In the era of the social enterprise, stakeholders are taking an intense look at organizations’ impact on society, whether it is how well a product meets people’s needs, how a manufacturing plant affects the community, or how employees feel about their jobs. This mirror—held up to businesses by society—reflects an organization’s identity for all to see, and burnishing that reflection is now vital for success.

    What role does the C-suite play in pursuing citizenship? How can individuals adjust?

    Authors

    Dimple Agarwal, of Deloitte MCS Limited, is the global leader of Organization Transformation and Talent for Deloitte’s Human Capital practice. She is based in London.

    Josh Bersin, a principal with Deloitte Consulting LLP, leads Bersin & Associates, now Bersin, Deloitte Consulting LLP. He is based in Oakland, CA.

    Gaurav Lahiri, of Deloitte India, leads Deloitte India’s Human Capital consulting practice. He is based in Delhi.

    Jeff Schwartz, a principal with Deloitte Consulting LLP, is Deloitte’s global leader for Human Capital Marketing, Eminence, and Brand. He is based in New York City.

    Erica Volini, a principal with Deloitte Consulting LLP, is the US Human Capital practice leader. She is based in New York City.

    Acknowledgements

    Cover image by: Traci Daberko

    Endnotes
      1. Larry Fink, “Larry Fink’s annual letter to CEOs: A sense of purpose,” January 2018. View in article

      2. David Brown, Veronica Melian, Marc Solow, Sonny Chheng, and Kathy Parker, “Culture and engagement: The naked organization,” Global Human Capital Trends 2015: Leading in the new world of work, Deloitte, February 27, 2015. View in article

      3. Peter Eavis, “S.E.C. approves rule on C.E.O. pay ratio,” New York Times, August 5, 2015. View in article

      4. Deloitte, The 2017 Deloitte millennial survey: Apprehensive millennials: Seeking stability and opportunities in an uncertain world, 2017. View in article

      5. Ibid., pp. 6–11. View in article

      6. Nielsen, Doing well by doing good: Increasingly, consumers care about corporate social responsibility, but does concern convert to consumption?, June 2014, p. 2. View in article

      7. Deloitte, The 2017 Deloitte millennial survey. View in article

      8. Adi Ignatius, “'Businesses exist to deliver value to society,'”Harvard Business Review, March–April 2018. View in article

      9. Nicholas Kristof, “Is the business world all about greed?,” New York Times, January 24, 2018. View in article

      10. Fortune, “The world’s most admired companies,” accessed February 16, 2018. View in article

      11. RobecoSAM, DJSI 2017 Review Results, September 2017. View in article

      12. Harmony J. Palmer, “Corporate social responsibility and financial performance: Does it pay to be good?,” Scholarship@Claremont, December 3, 2012. View in article

      13. Rajendra Sisodia, David Wolfe, and Jagdish Sheth, Firms of Endearment: How World-Class Companies Profit from Passion and Purpose (Upper Saddle River, NJ: FT Press, 2007). View in article

      14. Schroders, Global investor study: Global perspectives on sustainable investing, 2017, pp. 3–7. View in article

      15. Target Brands “Target’s raising its minimum hourly wage this fall, and that’s just the beginning . . . ,” September 25, 2017. View in article

      16. Salesforce, “Take the pledge” and “Employee volunteering & giving,” accessed February 28, 2018. View in article

      17. Leena Nair (CHRO, Unilever), interview with the authors, February 2, 2018. View in article

      18. Tesla, “The mission of Tesla,” November 18, 2013. View in article

      19. Chris Woodyard, “Icons: Elon Musk doesn’t let up at Tesla, SpaceX,” USA Today, April 17, 2013. View in article

      20. Bank of America, “Responsible growth,” accessed January 24, 2018. View in article

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    Gaurav Lahiri

    Gaurav Lahiri

    Partner

    Gaurav Lahiri is a partner with the Consulting practice of Deloitte India. He leads the Human Capital service area based out of Delhi. He brings significant experience in consulting, focusing primarily on organization transformation, leadership development, and M&A. Gaurav works with clients to align their organizations with their strategic agenda— including reviewing strategies, designing organization structures, implementing talent management programs, and formulating reward strategies to drive performance and motivation. While Gaurav’s expertise is in Organization Effectiveness, he has also helped clients research and develop competency models for outstanding performance. He managed a seminal Indian CEO research study sponsored by Bharat Petroleum under the aegis of India’s Public Enterprises Selection Board and co-authored the book The Indian CEO: A Portrait of Excellence published in 2007. Gaurav has authored several papers on post-merger integration, change management, and has won several prizes and awards, including the McKinsey Best Management Paper of the Year. Gaurav is a graduate with Honors in Mathematics from Delhi University, and holds an MBA from the XLRI School of Management.

    • gauravlahiri@deloitte.com
    Jeff Schwartz

    Jeff Schwartz

    Principal

    Jeff Schwartz, a principal with Deloitte Consulting LLP, is the US leader for the Future of Work and author of Work Disrupted (Wiley, 2021). Schwartz is an adviser to senior business leaders at global companies, focusing on workforce and business transformation. He is the global editor of the Deloitte’s Global Human Capital Trends report, which he started in 2011.

    • jeffschwartz@deloitte.com

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