A New Era in Corporate Responsibility

​The Business Roundtable, a consortium of approximately 180 U.S. chief executive officers who lead some of the biggest companies in the world, is out to redefine the way companies operate. These CEOs want organizations to be more ethical and supportive to many stakeholders, while still delivering on the bottom line for shareholders.

The group's new vision statement places corporate responsibility (CR) at the forefront, with priorities that include investing in employees and supporting local communities. New principles, announced last summer, represent the business leaders' commitment to promote an economy that serves a broader constituency, including workers, members of the local community, local governments, suppliers, partners, union members and creditors, among others.

"This new statement better reflects the way corporations can and should operate today," says Alex Gorsky, chief executive officer of Johnson & Johnson and chair of the Business Roundtable Corporate Governance Committee. "It affirms the essential role corporations can play in improving our society when CEOs are truly committed to meeting the needs of all stakeholders."

Standing Up

For meaningful change to occur, the CEOs will have to back up their words with actions.

As a recent study on corporate social responsibility by Cone Communications puts it, companies "must now share not only what they stand for, but what they stand up for."

So job No. 1 for these high-profile decision-makers is to define a corporate responsibility mission that extends beyond shareholders and short-term profits. Right out of the gate, that may mean recasting the term "corporate responsibility."

"The Business Roundtable statement was about company purpose, as opposed to corporate responsibility itself," says John Bremen, managing director, human capital and benefits, at Willis Towers Watson. "That means each individual company serves its own corporate purpose, while sharing a fundamental commitment to all of its stakeholders."

The CEOs' updated corporate vision includes:

• Delivering value to customers.
• Investing in employees.
• Dealing fairly and ethically with suppliers.
• Supporting the communities where the companies operate.
• Generating long-term value for shareholders.
• Noting that each company stakeholder is essential.

In addition, each company should define its own mission, vision, values and business strategy as they relate to all of those groups, he says.

But the concept of companies seeking alignment with a broad range of stakeholders is not necessarily new.

"Management gurus and business schools have preached the benefits of stakeholder alignment for decades, as it leads to higher business performance," Bremen says, "which ultimately benefits shareholders through greater value creation and returns."

In fact, well-designed corporate responsibility programs "lift sales, increase shareholder value and improve employee productivity." That was the conclusion of a "study of studies" on the subject of corporate responsibility by IO Sustainability and Babson College (commissioned by Verizon and Campbell Soup).

The 2015 study, known as Project ROI, generated a worldwide review of CR policies and programs, as well as their substantial impact on company performance. Some of the findings:

• CR programs can increase revenue by as much as 20 percent.
• They can increase customer commitment by as much as 60 percent.
• Corporate responsibility nurtures, grows and protects brand and reputation value, potentially by up to 11 percent of a company's total value.
• Companies with effective CR programs can experience reductions in turnover by as much as 50 percent.
• Good CR programs can increase employee productivity by up to 13 percent.

"It is not enough for companies to simply conduct CR programs; they must do them well," noted an assessment of the study from Babson College. "Companies that fully commit to doing CR are rewarded by their customers and investors, while those that are viewed as insincere or dabblers do not benefit from CR or may lose market share and customer loyalty."

The Human Angle

As companies shift focus beyond shareholder return, the employment relationship may change.

The Business Roundtable statement laid out a commitment to:

• Compensating employees fairly and providing important benefits.
• Supporting them through training and education that help develop new skills for a rapidly changing world.
• Fostering diversity and inclusion, dignity, and respect.

These are all timely issues and are linked to superior company performance, Bremen says. "The fact that the Business Roundtable statement includes language about investing in employees is relevant and important," he adds.

And employees themselves may be pushing this approach. "The way we work has fundamentally changed over the last few years and has become more employee-driven," says Dania Shaheen, vice president of strategy and people operations at Kazoo, an employee recognition and performance management tech company. "With this change, it was time for corporate leaders to put the driving force of their companies at the forefront."

To stay true to the Business Roundtable's revised definition of corporate purpose, Shaheen says, business leaders will need to continue to promote employee-driven cultures, which will ultimately boost the quality of work produced by the organization.

"When employees feel empowered to do their best work through a steady stream of recognition, appreciation and motivation, productivity and profits improve right alongside employee morale and company culture," she says.

The formal commitment to workers, communities and other nonshareholder stakeholders could also mean new and better ways to track corporate performance, especially worker-related performance.

"We'll see companies lead with their humanity to create human-centric―versus profit-centric ―work processes, benefits, supports, systems and ways of collaborating," says Gail Bower, president of Bower & Co. Consulting in Philadelphia, who specializes in analyzing future trends.

A broader commitment to stakeholders and not just shareholders will allow workers to personalize their work/life experiences. "With that," Bower says, "comes new performance metrics and opportunities for individuals to explore opportunities, initiate new ideas, and find more flexibility to accommodate personal and professional responsibilities."

The Real World

Some companies had taken steps to recognize a broad range of stakeholders even before the Business Roundtable issued its statement of corporate purpose last summer. What the Roundtable has done, however, is formalize the movement with the support of its member CEOs. That could very well reverberate.

"Corporate responsibility takes many different forms, all of which boil down to being a catalyst for employees and customers to get out there and do something that resonates with them and has an impact on society at large," says Bryan de Lottinville, CEO of Benevity in Calgary, Alberta, Canada, a firm that advises companies on "social mission" practices.

Corporate purpose also means being an active and supportive member of the community where your business operates. "It means having the courage to speak out on the societal issues that your employees care about and the issues that are impacting your community."

Add it all up and here are examples of what corporate responsibility―the way the Business Roundtable describes it―looks like in the real world, according to de Lottinville:

• TripAdvisor instituting a program that enables employees to participate in refugee resettlement programs.
• PayPal creating game-based programs to encourage its workers to save energy in their daily lives.
• Levi's paying employees to participate in gun safety programs.

Companies that launch and sustain these types of initiatives fare much better than companies that don't, according to de Lottinville. "For example, in 2018, Levi & Strauss took a stand on the issue of gun safety, launching a new grantmaking fund that directs $1 million to relevant nonprofits, lending their CEO's voice to the issue and incentivizing participation from employees who share the concern," he says.

Also in 2018, Levi's advocated for protections for undocumented immigrants and refugees, and for broader voting rights. "That year, Levi's profits were up 14 percent over the prior year and generating $5.6 billion in revenue," de Lottinville notes.

The Price of Failure

No doubt, the Business Roundtable's commitment to corporate change is an eye-opener for many companies, communities and stakeholders of all stripes. In a world where the bottom line has historically ruled supreme, it's no wonder observers have their doubts about this new corporate commitment.

"I envision two major themes moving forward," says Rebecca Greenbaum, a professor in the Rutgers School of Management and Labor Relations who studies organizational behavior with a focus on ethical and unethical leadership.

"The more cynical view is that this act mainly serves as 'window dressing': Executives sign the agreement primarily to look good and only make superficial changes." From workers' point of view, this could lead to cynicism and charges of hypocrisy as it becomes clear that real, lasting changes are unlikely, Greenbaum notes.

"The more optimistic view is that companies follow through with this initiative and think strategically about their responsibilities toward a range of stakeholders," she says.

In this scenario, workers may find changes in how they're evaluated and promoted within organizations. "Performance metrics that were once used to track quarterly earnings, like sales, could be replaced with qualitative evaluations of performance—for example, educating customers on a range of products, even if it means less profits," Greenbaum adds. These types of changes could lead workers to experience a deeper sense of meaning on the job, she says. "These are motivational forces that could improve performance overall."

It's too early to tell whether real change will occur. "Pragmatically, it may be difficult for organizations to address all 'needed' changes, especially in the short run," Greenbaum says. But meaningful changes usually take time. And a change in the understanding of a corporation's purpose may be underway.

Brian O'Connell is a Bucks County, Pa.-based freelance business writer.

Volunteer opportunities can boost employee morale and grow workers' skills.

By Joanne Sammer

Employer-sponsored corporate stewardship programs—which fall under the corporate social responsibility or philanthropy umbrella—not only are a good way to help employees serve their communities, but also help them feel good about their work and employers. At the same time, volunteering opportunities allow workers to develop skills and gain leadership experience, while boosting engagement.

Here are four tips to begin and manage corporate stewardship programs:

 

1. Make Time

Employers can start by making it easy for workers to take part in corporate stewardship activities. In some cases, this means providing additional paid time off that workers can use only for community and philanthropic activities.

 

2. Tie Activities to Work Skills

Corporate stewardship can be built around activities that are completely different from the work employees do every day, or they can have direct ties to employees' skills. Professional services firm EY chose the latter approach. It has sent teams of junior-level professionals to countries such as Mexico, Brazil and Costa Rica to work with and support local entrepreneurs for one week. One team worked with a nonprofit in Mexico that helps local farmers analyze the costs and benefits of their marketing efforts and identify improvements.

 

3. Create a Good Experience

It's important to keep participants' capabilities in mind when designing corporate stewardship opportunities or experiences. At the same time, employees should be exposed to new situations and challenges that they might not experience in their daily work lives, allowing them to expand their horizons personally and professionally.

Employers can work closely with participating nonprofits to make sure an event is well-organized and employees are assigned tasks and activities that are interesting and meaningful. Nothing dulls enthusiasm faster than standing around waiting for something to do.

 

4. Make It Personal

Like most initiatives, stewardship programs may need to change over time. One way to drive that change is to ask employees to nominate organizations to receive financial and volunteer support. By focusing on what employees are passionate about, employers can keep the programs fresh while boosting engagement and promoting positive contributions to the community.

Joanne Sammer is a New Jersey-based business and financial writer.