The conversation about the role and responsibility of large corporations in society isn’t new. Companies, including financial institutions, have long been talking about their CSR and social impact efforts. In doing so, they’re hoping to better connect with their stakeholders and demonstrate that their business is a source of good in their communities and throughout the world.
But talk alone doesn’t work. While there have been a lot of new buzzwords over the years — with “stakeholder capitalism” being the latest manifestation — and slight changes in the narrative, there’s been very little change in actual behavior for many organizations, including some of the world’s largest and most influential companies.
Why Contemporary Corporate Social Responsibility is Not Working
Let’s look closer at the latest business responsibility trend. Peter S. Goodman highlights in his 2020 New York Times Op-ed that the executives that have joined the Business Roundtable, a group of almost 200 executives from the world’s largest and most influential companies who, in 2019, committed to, “lead their companies for the benefit of all stakeholders — customers, employees, suppliers, communities, and shareholders,” are failing to follow through on their commitment. This failure to follow through on this exhibited by their short-sighted behavior — exercising layoffs and benefit slashing to trigger immediate gains in their stock prices, objectively favoring shareholders over all other stakeholders, in the midst of the COVID-19 pandemic.
To better understand the impact of these large organizations amid the pandemic, The Test of Corporate Purpose was conducted to assess “how purpose-driven companies respond in a time of severe global crises” and found that the Business Roundtable statement “has failed to deliver fundamental shifts in corporate purpose in a moment of grave crisis when enlightened purpose should be paramount.”
Why Values Alignment is the Key to Leading by Example
Yet, there are organizations that practice what they preach — Unilever, Starbucks, Mastercard, Danone, and Chobani are all “hailed as model global citizens,” and their priorities are aligned with the larger society and have the best interests of their hundreds of thousands of employees in mind.
A couple of values-aligned examples. Through the creation of the Starbucks College Achievement Plan, Strabucks employees can earn a degree online through ASU with full tuition coverage, making the dream of earning a college degree for many of their employees a reality. Realizing the impact of nutrition on overall health, cognitive development, access to education, and future lifetime earnings, Mastercard has partnered with World Food Programme to offer school meals to children around the world. Neither of these companies had to offer these programs, but they know that choosing to improve the lives of all stakeholders — not just shareholders — has a long-term ROI beyond the bottom line.
But it’s not just the well-known large corporations that are getting it right — smaller organizations and financial institutions alike have also repositioned focus to live out their values.
As Andrea Olsonin suggests in a recent article about banks and credit unions that to better connect with their customers, these organizations “must be as serious about values as they are about valuation, and just as passionate about culture as they are about capital.” This struck me more than anything else I’ve read this year, because it’s the exact articulation of what I’ve been trying to say all year about our customers.
At Pinkaloo, we work with leaders at banks, credit unions, and corporations that are committed to having a positive impact on their communities through charitable giving. These companies are inviting their different stakeholder groups to participate in their efforts. All the while, they’re engaging and attracting their current and future customers and employees, hitting key business KPIs and positively impacting the bottom line. They make a difference in their revenues, for their employees, and their communities. They live their values.
So, what do all of these organizations that are doing it right have in common? Their mission statements communicate their commitment to people and society, and they use them as guides for everything that they do. Most importantly, their behavior backs this up.
To better connect with customers and to be in a better position to do good, institutions must first look inward and carefully examine their own mission, values, and culture and determine if they’re aligned with those of their stakeholders, including their customers and employees. They must take that internal alignment and evaluate how it’s lived externally, and today that means embracing the effect of new generations.
Why Millennials and Gen Z are Today’s Most Important Decision Makers
The bottom line is that businesses need to evolve to reflect not only the current times but the future, and a great first step is to take a look at the generations who are leading that shift — Millennials and Gen Z.
According to Pew Research Center, Millennials are now the largest generation in the U.S. labor force, and combined with Gen Z and younger generations, they account for more than half of the U.S. population. These generations have grown up in a hyper-connected world, with the internet, smartphones, and access to information about almost anything in a matter of seconds.
These generations care deeply about social impact, do their research, and use that information to guide their decisions about “where to work and what to buy based on whether a company is CSR-conscious, and they’re going out of their way to support organizations that align with their values, even if it means spending more.” As Nicholas Kristof notes in his 2018 New York Times Op-ed, “Increasingly, a company that ignores social value loses shareholder value.”
Organizations have a real chance to affect meaningful change, but the window of opportunity is closing. The sustainability of organizations will increasingly depend on whether they attract younger generations as customers and employees, leaving them with only one path forward. They must align their internal mission and their external actions with the values of those generations for the next generation of their business.