The 'Social in Environmental, Social and Governance (ESG): Part 2
The ‘S’ in environmental, social and governance (ESG) introduces us to the theory that corporate social responsibility (CSR) is a way an organization demonstrates its commitment to the prosperity of its external community. It exists along a spectrum that varies from companies integrating social and environmental concerns into their business operations, to a more holistic level of belief that a company should play an active and positive role in society.
How a corporation chooses to practice CSR will likely be different for each organization. There are a few that chose the complementary path—buying local on an exchange basis.
A good example would be the Lush Corporation, a British cosmetics retailer which is headquartered in Poole, Dorset, United Kingdom. With a large presence in Uganda and the U.S., in 2014, Lush began investing in regenerative farms: agricultural projects that revitalize degraded land. Natural ingredients that Lush uses to make their handmade products spring from these farms.
The happy outcome of such a partnership is that the local population reaps the reward of a richer environment, increased employment opportunities and sales. And the corporation enjoys the lower cost and goodwill of doing business locally.
Southeastern Grocers, which estimates 30 percent of its in-season produce comes from local sources, recently announced a new policy that favors fruits and vegetables grown in the southeastern U.S. where the company has a physical presence. Meijer, a large grocery chain, spends more than $100 million each year on local produce grown within the six Midwestern states where it operates.
Another significant CSR community contribution comes in the form of volunteerism and the benefits are reciprocal. Numerous studies show that corporate community participation is good for the bottom line. When given the choice between two similar brands or products, 71 percent of consumers would rather do business with a “purpose-driven company.” It’s been frequently reported that corporate volunteering popularizes the brand, adds a cultural richness through exposure to diversity and contributes to better employee retention.
Perhaps overlooked but a tremendous factor is the monetary value of corporate volunteering to the local community. Based on the Independent Sector’s 2017 estimate of volunteer value at $24.14, Americans contributed approximately $193 billion in service to local communities.
Were I an executive for a corporation, the monetary value of my employees volunteering in the local community would be well highlighted.
But even as ESG becomes more prominent in the corporate profile, so too is CSR searching for its niche. The benefits of good relationships with the locals are not in question. How to practice that is up for debate in terms of recognizing and defending social mores or staying in the lane of a much more narrowly defined (sterile?) relationship characterized by unopinionated contributions.
Some corporations have adopted the more altruistic definition where the words social and society speak to lives and livelihoods.
Deloitte, an international professional services network, and a heavyweight in the ESG sphere, offers a more personal concept: “Deloitte believes business is at its best when it helps to build a better society.” “We believe we have a responsibility to be a force for good and lead the way on the increasingly complex challenges society faces.”
“A force for good,” and intentionally partaking in the fray of societal “challenges,” represents an intense commitment.
It suggests that CSR, when focused on the most central tenets of life, liberty and the pursuit of happiness, could make the world a better place and further, this should be the goal of a corporation.
But does making the world a better place fall under the purview of CSR? Should that be the responsibility of CEOs and corporations? In fact, for many corporations, no such depth of commitment is intended. Historically, altruism has not been part of the habits of running a company.
Issues of morality are sticky subjects for corporations. There is always the concern that what makes the world a better place might overlap into the religious and political sphere—historically considered no place for business. In fact, corporations have been famously aloof when it comes to what’s being discussed in the pulpit or at city council meetings, unless, of course, the subject is a tax advantage for doing business in their community.
Still, 71 percent of Americans believe companies have more responsibility than ever before to address social justice issues and they want brands to do more than just talk. They want to see action.
Current events present an opportunity to introduce a new paradigm in terms of the corporate/community relationship where local sentiment on political and even secular events make room for corporations to enter the social fray.
The perfect example of such a catalyst occurred with the murder of George Floyd on May 5, 2020. Corporate websites unabashedly admit that their efforts toward improving diversity, equity and inclusion began with that incident. It brought law enforcement and local officials who at first defended the behavior of the police that day, to be pitted against, well, most of the world in demanding consequences for the police officers involved. Public outrage, both locally in Minneapolis and nationally over the moral failing of an American institution thrust the issue of racism and the continued targeting of Blacks by law enforcement into the headlines and eventually into the C-suite.
JPMorgan Chase CEO Jamie Dimon, in a nod to Colin Kaepernick, took a knee with bank employees. Adidas said it would fill at least 30 percent of all open positions with black or Latinx candidates. Estee Lauder pledged to make sure the percentage of Black employees at all levels in the company would mirror the percentage of black people that make up the United States population within five years. And the company said it would spend double the amount on a supply chain from black-owned businesses. On it went.
The Dobbs decision reversing Roe v. Wade and the ensuing public pushback led many businesses to public and, some might say, drastic acts of disapproval. Disney, Comcast, Nike, PayPal, Amazon, Bank of America, Cigna, BuzzFeed, Citigroup, CNN, CVS Health, Goldman Sachs, Hewlett-Packard, JPMorgan Chase, Kroger, The New York Times, Lyft, Match Group, Mastercard, Meta, Microsoft, Paramount, Patagonia, Proctor & Gamble, Salesforce, Target, Starbucks, Tesla, Uber, Vox Media, Estee Lauder, Walt Disney, Yelp, Yahoo, Zendex and Zillow all committed to paying travel expenses for their employees who want an abortion but live in places where it is prohibited.
And just recently antisemitism became the center of conversation when Ye (formerly known as Kanye West) made despicable comments about Jews such as blaming “Jewish media” and “Jewish Zionists” for numerous alleged misdeeds, stating that “Jewish people have owned the Black voice” and that “the Jewish community, especially in the music industry…they’ll take us and milk us till we die.” He rounded out those comments with a Twitter post in which he referred to going “death con 3” on Jewish people.”
The reaction from his business partners was swift and costly. GAP, Instagram, Twitter, JPMorgan Chase, Def Jam, Balenciaga, the powerful talent agency CAA, MRC, Footlocker, Donda Sports, Peloton, T.J. Maxx, Madame Tussauds London and most notably Adidas, discontinued their relationships with Ye to the tune of millions of dollars lost for him and the companies as well. There may have been more since this writing.
Abortion, racism and extremist Christian nationalism: corporate America could hardly have chosen deeper social problems to dive into.
But big business has long had the power to disrupt communities, for good or bad. Just by virtue of their wealth and lobbying capability, big business has long played politics through their donations to politicians who can advance their corporate interests and likewise withholding financial support from those who take opposite views.
And although America’s 50 biggest public companies and their philanthropic partners have committed more than $50 billion to the cause of racism since George Floyd’s murder, including initiating their own DEI and CSR programs, some also contributed financial support to causes that would ultimately earn them revenue. Mortgage companies, for example set aside funds for home loans for minorities.
But CSR does not have to be a complicated venture. In fact, a plethora of nonprofits are already working diligently to support local communities and, for the most part, provide evidence-based reporting and solid outputs and outcomes that have been reliably measured—perfect receptacles for corporate investment.
Perhaps nonprofits don’t get as much credit for keeping society afloat as they deserve.
America's 1.3 million charitable nonprofits take on what many communities do unwillingly and not to the same high level of performance: providing medical services, feeding, educating, sheltering and nurturing people in need regardless of age, gender, race or power and influence.
And this: according to the National Council of Nonprofits, nonprofits spend nearly $2 trillion annually providing these services and employ 12.3 million tax paying citizens, with payrolls that rival those of major U.S. industries.
Nonprofits are businesses with a heart and a perfect example of how to provide quality care—a good product in corporate vernacular—with employees who share the same values.
However a company chooses to define corporate social responsibility, there is at the least intrinsic value in courting the relationship. And the impact of morals and money meeting at the intersection of societal well-being would surely constitute a beneficial shift in culture that proves of value to both.
If the public does indeed prefer to support companies with sympathetic values, and corporations can resist the profit-at-all-costs mentality, it sounds as if capitalism and compassion might get along very well.