I ncreasingly, consumers, employees, and investors are demanding that businesses act responsibly. Roughly two-thirds of millennials say they’d turn down a job offer if the hiring company does not have a strong commitment to operate more sustainably. Investment firm dollars are following that trend; according to Forbes, “Socially responsible investments grew by 34 percent to $30.7 trillion over the past two years, which represents more than $1 in every $4 under professional management.” So, can businesses strengthen themselves by leaning in? This expert is certain they can.
How do you see social impact as core to a company philosophy?
If you’re a business entity, social impact is defined as your culture and everything that you do. Generally speaking, the level at which companies are scrutinized is only rising as consumers, employees, and investors are expecting much, much more from companies and their leaders. There has been this erosion of trust in the government, and in turn, that is causing stakeholders to turn to workplace leaders to help make sense of incredibly complex issues, namely climate change and equity. What it comes down to is that all of your stakeholders expect a value-driven culture that delivers real, holistic impact to society at its core.
Years ago, it was about financial return—that was the obligation of the business to its investors. Fast-forward to today, and the expectation is much broader, incorporating perspectives from employees and consumers as well. It’s about not only providing a financial return and a good experience for employees but also moving the needle and helping society overall.
Traditionally, people might say that social progress and corporate growth are at odds with one another, but it seems like that’s not the case today. Can they work hand in hand?
My view is there’s a real and meaningful role that business does play and will continue to play, in terms of advancing society. Maybe 50 years ago, social progress and corporate growth were at odds. As trust eroded in other areas of society, businesses really stepped in to fill that gap.
One powerful example is around how businesses have focused more resources and efforts on furthering diversity, equity, and inclusion (DEI). I see this playing out as more companies set targets for entry-level jobs, promotions, and executive leadership teams. I think even 25 years ago, this was somewhat true, but it has accelerated over the past 5 to 10 years. Personally, I believe this is just good business, not because stakeholders are demanding it of companies, but because the data shows companies who employ more diverse teams are better set up for long-term financial success.
So social investments can help businesses grow more competitive—not just more charitable?
Absolutely. If you look at how the most innovative companies are moving the needle on climate change, they are benefitting from top-line revenue growth as a direct result of launching these initiatives. Green companies have up to 25 percent higher returns in terms of top-line revenue than non-green companies do, more opportunities for value creation, and greater cost savings. Now, of course, there’s investment required, but after the investment, companies working toward net-zero emissions are experiencing significant cost savings, and they’re being rewarded by the stock market for their efforts.
Talk to me a little bit about the businesses you work with. Do they view social impact as a charity or a competitive opportunity?
Boston Consulting Group encourages our clients to think through social impact in a few different ways, namely through the lens of society, humanitarian, financial, and DEI efforts—specifically with regards to leadership and talent development. All of these are critical initiatives for businesses to undertake as they work to build trust with their key stakeholders: employees, investors, and the public at large.
Trust is a source of competitive advantage, and unlocking the benefits lies at the core of a company’s relationship with its shareholders. It’s the trust you have with your employees and the people who work with you. It’s also the trust established with peers and partners. If you look at recent studies, they show that people trust business more than they do certainly political entities and even governmental institutions. One of the things that is certainly true is that trust is correlated with a company’s social impact work, including climate, diversity, and resilience. The connection between the latter and maintaining trust with stakeholders is very, very high.
What do you mean by “resilience”? How can companies ensure they are more resilient?
We’re heading into turbulent times. Will there be a recession? I think the consensus argument is yes, and all companies need to be prepared. Some will just need to adapt, but others will need to transform, and that’s hard, especially for poorly performing companies. It’s even harder for companies that are performing well, but I think it’s going to be an important focus for 2023.
So what do companies need to do? They need to map out scenarios that ask “What might the future look like?,” then think about their competitive position within each of those scenarios.
These are very volatile and dynamic times, and the best companies are going to have a forward-leaning, positive view of both adaptation and transformation.
In these turbulent times, how do companies think about giving back internally? Particularly if we are talking about the issues of talent retention and the labor market.
Make no mistake about it, there is likely to be a recession and volatility, but if you look at the labor market and jobs report, the competition for all talent and top talent has never been hotter than it is today. To gain strategic advantage and attract the best people, companies have to reinvest in their employees.
A key part of that is going to be how they pay their people, how they treat their people with respect to family leave, maternity leave, paternity leave, and other benefits.
When it comes time for transformation, how do the best businesses not only execute but also communicate those shifts?
In turbulent environments, the best companies change by excelling at communicating with three things: head, heart, and hands.
I think years ago, in terms of change, it was about the hands. It was about collating the timelines, workbooks, templates, and saying, “We’re going to manage the change process.” I think we’ve always been decent as a consulting industry, BCG and other businesses, in terms of the head parts. So, “Why are we changing? Why do we have to change? What’s the strategic rationale?”
The companies able to foster strong, impactful, and fundamental change get the heart piece by engaging their employees in answering these questions: Why are we changing as a company? What is in it for you? What is the benefit it will deliver to you and your family? And what is the benefit it’s going to deliver to society? When those three components are working together—the head, the heart, and the hands—then I believe a company has really nailed its transformation.
