by. Susan McPherson
Leadership Strategy

 

As corporate responsibility continues to mature, one of the key shifts we’ve seen in recent years is a move toward “values.” A company’s approach to impact is a reflection of that company’s values — and the values of its customers, employees and (increasingly) investors. It’s a shift that has been accelerated by the current political climate, in which companies have had to publicly stand up — both individually and collaboratively — for values like inclusion, empathy and environmental preservation in the face of questionable policy decisions. The result? Responsibility, humanity and impact are now more entrenched than ever in the corporate sector — and I am confident that this is not a passing trend.

I reached out to experts who are in the thick of this work to gather their insights on how corporate responsibility will continue to evolve in 2019. Here’s what they had to say.

 

Investor interest in ESG will continue to swell.   

Investor interest in environmental, social and governance (ESG) factors has gone mainstream, and the experts we spoke with believe this trend will continue into 2019 (and beyond), with socially responsible investing gradually becoming the new normal.

Tim Mohin, Chief Executive of the Global Reporting Index (GRI), explained: “In the past decade there has been a tremendous upswing in interest coming from the financial sector. With over 90% of the largest companies now filing sustainability reports (85% of the S&P 500), the data is plentiful. But that is not new. What is new is the interest in using the information for investment decisions. A recent study from Oxford University found that more than 80% of mainstream investors now consider ‘ESG’ – environmental, social and governance – information when making investment decisions. And the numbers are compelling – globally, there are now $22.89 trillion of assets being professionally managed under responsible investment strategies, an increase of 25 percent since 2014. This number is so large it needs context – it exceeds the GDP of the entire US economy.”

 

As investors continue to prioritize impact, measurement becomes a competitive advantage.

With investor interest growing, companies will need to prioritize impact measurement and work collaboratively to establish standards. According to Daniella Foster, Senior Director of Corporate Responsibility at Hilton: “The growth of ethical funds went mainstream in 2018 with the establishment of the JUST exchange traded fund by JUST Capital and Goldman Sachs and a record number of ethical funds established in the United Kingdom. This trend brings even more quantitative data to the field of CSR, helping further develop the business case for prioritizing social and environmental factors as an integral part of corporate strategy… In 2019, companies that invest in how to better measure impact, both environmental and social, will lead the way in rankings and help make ethical fund investing mainstream.”

Mohin cited the example of the Financial Standards Board — which was created decades ago to coordinate and harmonize financial reporting — as a sign of what’s to come: “As ESG reporting becomes more central to global commerce, the consistency and quality of these disclosures will also rise in importance and there will be similar harmonization in approach.”

Suzanne Fallender, Director of Corporate Responsibility at Intel, added: “In 2019, I expect we will see investor focus on ESG continue to evolve, including a greater focus on the quality and relevance of data and third-party rating, as well as the connection between ESG performance data and financial results. In response, we also will likely see companies take a more integrated approach to their disclosure and investor outreach activities, with tighter alignment between CSR, investor relations, and corporate governance teams.”

 

Impact is here to stay in the boardroom.

This upswing in investor interest, paired with consumer and employee demand, will bring impact to the top of the agenda at board and C-Suite meetings. “It will no longer be a choice for companies to embed social impact into their business and brand strategies – it will be required to thrive and compete for talent, customers and investors,” said Patsy Doerr, Global Head of Corporate Responsibility and Inclusion at Thomson Reuters.

Foster agreed: “Corporate responsibility will increasingly make its way into the boardroom as customers expect more from brands and new investor funds crop up exclusively for companies with strong ESG performance. As CSR continues to mature and become a part of business strategy, the surround sound created by customers, investors and competitors will echo through the boardroom in 2019. The bottom line: Sustainable and inclusive growth is good business and the companies that have aligned their business growth strategies to their ethics will be a step ahead in future-proofing their business.”

“Boards of directors across a range of sectors are learning quickly that they need to develop stronger competencies and strategies to manage ESG risks lurking in their business models/practice,” added Dave Stangis, Chief Sustainability Officer and VP, Corporate Responsibility at Campbell Soup Company.

 

Time’s up on meeting diversity and inclusion goals.

While most companies have caught on that diversity and inclusion (D&I) is more than just a “feel good” talking point, most still have a long way to go when it comes to achieving their goals.

Cecily Joseph, Vice President of Corporate Responsibility at Symantec, thinks employees will start to put the pressure on. She said: “I think a broad range of stakeholders are a little fed up that change around diversity and equity is not happening at a faster pace. This issue is not going away in 2019. We will see employees getting more vocal and demanding their employers take action on diversity related issues. We have already seen this with some companies in 2018 like Google, but I feel more employees will feel empowered and expect more from their employers in this regard. Investors will continue to see diversity as an indicator of a company’s long term success and its ability to attract the best talent and be more innovative and competitive, and will use their influence to push harder for gender and racial/ethnic diversity.”

Added Shannon Schuyler, Principal and Chief Purpose Officer at PwC and President of the PwC Charitable Foundation: “When a company isn’t meeting its employees’ needs on topics such as diversity and inclusion, expect employees to find new ways to encourage action by staging walkouts, starting social media conversations, and writing op-eds/blogs about how their employer is at fault.”

Employees take the wheel.

It’s not just D&I where employees will continue to shape companies’ impact strategies. Hilary Smith, EVP of Corporate Communications and Social Impact at NBCUniversal, explained: “There is a growing trend for companies to craft their corporate social responsibility strategy around their employees’ passions, first and foremost, as opposed to focusing mainly on their external brand reputation. Today, employees, particularly millennials, expect to work for a company that gives back. But they want to give back on their own terms and have a say in what causes their company supports and how and when they volunteer their time. It is important for companies to survey their workforce and forge relationships with non-profits in areas that their employees are passionate about, and with charity partners that allow you to customize employee engagement opportunities.”

In a blog post, Daryl Brewster, CEO of CECP: The CEO Force For Good, provided more context for this trend: “Low unemployment rates and the ongoing war for talent have created a new focus on the needs of the employee to bolster recruitment, training, and retention efforts. At the same time, people are finding opportunities to speak up in support of their purpose and values….The intersection of these two trends is employee power. Leading companies are listening to and supporting the needs of their employees, and providing tools and resources to elevate those voices.”

And get ready for the conversation to shift from millennials to Gen Z, says Symantec’s Joseph. “We talk a lot about millennials, but in 2019 we will also be talking more about Gen Z (born from 1995 on) and its impact on the workplace culture and society. It will be interesting to learn more about this generation’s views on climate change, diversity and the role a corporation should play with respect to social and environmental issues.”

As part of this shift, we are also seeing companies move from “diversity and inclusion” – which can come off as corporate speak – and toward the idea of “belonging,” which is less about checking boxes and more about shifting the culture to create an environment where everyone can thrive and feel engaged.

It’s the age of radical transparency.

Transparency has become the expectation for companies, and investor interest will accelerate action on this front. With that comes the opportunity for collaboration, says Foster: “In 2019, companies will be asked to provide even more transparency into their strategies and public goals—from the Dow Jones Sustainability Index to the Just 100 Index, companies will increasingly be ranked on their public transparency and disclosure. Companies that provide a transparent roadmap of progress—and challenges—will be poised to help drive collective impact. New industries will continue to rise to the challenge.”

New technology will make radical transparency possible. Campbell’s Stangis explained: “Accelerated digitization (IoT and the ensuing data) of the supply chain and marketplace will continue to advance radical transparency to uncover new risks, but also key opportunities.”

Fallender of Intel underscored this point: “We expect there will be increased focus in 2019 on opportunities to apply technology to help a range of industries drive smarter decisions and greater resource efficiency, develop circular economy solutions, and improve supply chain responsibility and human rights practices. We also expect to see increased discussions of how technologies such as artificial intelligence, internet of things, and 5G can be leveraged by multi-stakeholder groups to advance progress toward the UN Sustainable Development Goals.”

 

Companies must step up to address the opportunity gap.   

The future of work has arrived, and with it a number of challenges. Schuyler explains: “Companies will digitally accelerate to address the opportunity gap and prepare a more diverse workforce. Demographics are shifting and companies can no longer ignore the business imperative to build a more diverse and inclusive workforce. By 2030, majority of young workers will be people of color; Gen Z is the most racially diverse generation in American history: Almost half are a race other than non-Hispanic white. At the same time, there will be an estimated 1 million more open computing jobs than applicants in 2020. Business leaders must step up to help educate a more diverse group of students with the digital skills they will need to fill these open roles or their businesses will not survive.”

Aron Cramer, President and CEO of BSR, echoed this point: “2019 will (again) be a year when business will be well advised to assume leadership in creating and advocating for an economy that works for all.  For business, it will be necessary to live intensely in a challenging present and a fast-arriving future….My one ask of the private sector in 2019 is that business leaders get more deeply engaged in creating 21st century social contracts that are properly designed to enable economic opportunity and also security at a time when the world of work is changing fast; technology is reshaping our lives, and demographic change demands new models for the social safety net.”

 

Sources: https://www.forbes.com/sites/susanmcpherson/2019/01/14/corporate-responsibility-what-to-expect-in-2019/amp/