Corporate social purpose: The new business imperative has been saved
Corporate social purpose: The new business imperative
Business leaders’—and the board’s—role in driving a successful model
Corporate social purpose continues to be a rising priority in boardrooms across America. But what exactly is it, and how can companies and their corporate boards implement social purpose models that aim for the greater good, while also helping the bottom line?
- Corporate social purpose
- Initial steps taken to implement a social purpose policy
- Common traits found in a corporate social purpose model
- Benefits companies and boards realize
- Get in touch
The broadening of corporate social purpose
Corporate social purpose is broader than traditional corporate social responsibility; it is how a business makes a positive economic, social, and environmental impact in the world. It is how an organization devotes meaningful effort, time, and experience toward public well-being. It can help strengthen national economies, help people be healthier and better educated, and help societies become more resilient.
Blackrock Chief Executive Officer Larry Fink recently outlined the importance of corporate social purpose in a letter to fellow corporate leaders, saying people are “turning to the private sector and asking companies to respond to broader societal challenges” and demanding that organizations “serve a social purpose.”
A New York Times report suggests that Fink’s letter could be a “watershed moment on Wall Street” that raises questions about the “very nature of capitalism.” Executives seem to be noticing, as approximately 90 percent practice social purpose in some form.
But while corporate social purpose is gaining steam, there is still much work to be done. Deloitte’s 2018 Global Human Capital Survey found 77 percent of respondents said corporate citizenship is important, while only 18 percent saw it as a top priority. Further, as many as 34 percent had sparse or poorly funded citizenship programs, while 22 percent had none. In fact, Deloitte’s 2019 Global Human Capital Trends survey found that, when CEOs were asked to rate their most important success measure this year, the number-one issue they cited was “impact on society, including income inequality, diversity, and the environment."
What is clear is that the desire to implement corporate social purpose initiatives exists, but execution of such programs is still a challenge for many organizations. Four of our managing partners, Kirsten Rhodes (San Francisco Bay Area), Ed Thomas (Seattle), Steve Gallucci (New York), and Carl Allegretti (Chicago), discuss how corporate boards, along with business leadership, can create and shape successful corporate social purpose strategies.
What initial steps should a company take to implement a social purpose policy, and what role can boards play to support this?
Carl Allegretti, Chicago managing partner (CA): The initial step a company should take is to determine if social purpose is imperative to their business and their people. If it is, a corporate board can serve as a strategic advisor to guide how a company directs its advocacy and support as it pertains to business. It’s then up to local leadership to create a culture that implements the strategy on how to give back and support the communities where they live and work. This approach allows everyone within the company an opportunity to participate and be a part of driving social purpose at the grassroots level.
I have found this to be important because making an impact that matters, or having a social purpose model, is just as critical to our people as it is to our clients. When we mobilize Deloitte talent in the community, we can make an impact.
Ed Thomas, Seattle managing partner (ET): Great point, Carl. It’s also important to mention the role investors play in the growing influence social purpose holds. Investor interest in social purpose as a means to sustainable, profitable operations is becoming increasingly mainstream. Delivering positive social impact is drawing closer to strong financial performance in how investors determine where to allocate their money. A 2017 study of institutional investor trust revealed that 76 percent of investors expect companies to take a public stand on social issues and 69 percent of investors care about how a company treats its employees. Overall, 82 percent of investors say trust is important when considering whether to invest in a company.
Kirsten Rhodes, San Francisco managing principal (KR): Agree completely, ET. The good news is that it’s becoming increasingly apparent that the appropriate corporate social purpose strategy can create value, build competitive advantage, and enhance the organization’s brand and reputation, among other benefits that can boost the bottom line.
It’s also important to ask a very direct question: Who are the stakeholders? The short answer: everyone. Corporate social purpose expands the definition of a corporation’s stakeholders beyond investors to include employees, customers, suppliers, the communities where it operates, and the environment. But because state laws aimed at corporations dictate that US companies are first and foremost responsible to shareholders, they still generally need to demonstrate that pursuing social responsibilities benefits shareholders and other key stakeholders alike.
ET: As we look at stakeholders and how to implement a corporate social purpose, boards play a crucial role in devising and implementing these corporate social purpose policies as part of their strategic and risk oversight responsibilities. They have an important say in not only determining what commitments will be made and what actions will be taken to implement them, but in weighing the risks that could appear as a result of these strategies.
Steve Gallucci, New York managing partner (SG): To build on ET’s point, boards can also help hone management’s approach to corporate social purpose by asking what tactics have been developed and how extensive they’ve been in performing related activities. Boards can assess the answers to these questions and review the results. If the involvement is extensive enough, boards may consider implementing a separate committee to oversee it. And if a company has no social purpose strategy in place, boards can question management’s reasoning behind that choice.
What are some common traits found in a successful corporate social purpose model?
CA: A successful social purpose model is one where everyone within the organization is able to participate and allows the company to build on initiatives that are already important to it. For example, recruiting and attracting diverse talent, engaging in efforts that are important to specific markets, and building on client relationships where there is shared interest and commitment to the same social issues.
SG: And there is not necessarily a “one-size-fits-all” archetype for creating a corporate social purpose strategy. It’s important for an organization to identify its priorities and implement the appropriate strategy accordingly.
As more investors and consumers continue to prioritize social purpose, executives should understand where their industry is, where it is going, and how their organization fits into that trajectory.
KR: Different investors may prioritize different causes or initiatives, so there are several ways corporate social purpose can manifest itself, including:
- Prioritizing the human rights and environmental performance of the supply chain and vendors
- Supporting diversity in areas such as hiring, training, and pay equity
- Protecting the environment through strong compliance and sound practices
- Being active in their communities through educational, recreational, and cultural activities; advocacy of human rights; and other issues
- Demonstrating board oversight of the company’s role in political spending and government affairs
Finally, what are some benefits companies and boards can realize with a strong social purpose platform?
ET: Attracting and retaining talent is often a clear priority for companies, regardless of industry. Companies with a strong social purpose strategy usually experience higher employee engagement and have more success in attracting and retaining talent.
CA: It can often serve as a differentiator by demonstrating a commitment to the community. A successful corporate social purpose strategy also better positions a company to be a part of important civic dialogue that may impact business practices and encourage social change. An additional benefit is a more engaged and committed workforce. Essentially, it is a way to demonstrate a company’s core beliefs and connect employees to a larger sense of purpose so they can take pride in where they work.
SG: Agreed. On the other end of the spectrum, companies focusing on social purpose and their social image can improve its brand differentiation and possibly help it break into new markets. Companies that show a commitment to sustainability outperform brands that don’t buy fourfold in terms of average sales growth.
KR: Corporate social responsibility can also drive innovation. When you identify underserved social needs, you have the vision to hone in on opportunities to drive innovation. This enables companies to investigate models and technologies that could generate new market opportunities. According to separate, independent rankings, companies that are sustainability leaders are four times more likely to be considered innovation leaders.
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