Last month, 181 CEOs in the Business Roundtable (BRT) agreed to new principles for how corporations should act. But how can we develop policies, strategies and programs that really do “support the communities in which we work,” as the principles state?
The statement cements a welcome shift away from shareholder primacy to a recognition that a company’s commitment is to multiple stakeholders — including customers, employees and communities.
With its updated definition of corporate purpose, the BRT and its members locked away Milton Friedman’s 1970s doctrine that a business’s “one social responsibility is to use its resources and engage in activities designed to increase its profits,” and hopefully threw away the key.
But how can companies develop policies, strategies and programs that really do “support the communities in which we work,” as the principles state? It’s easier said than done, but here are three ways you can start:
1. Don’t go it alone
Work with internal and external partners. Part of “investing in employees” is giving them a voice in identifying ways your company can positively impact communities. Whether that’s through supporting employee resource groups, developing policies that facilitate philanthropic activity or allowing employees time to think up new ways your core product or service can drive societal impact, employees need to be directly involved.
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External partners are just as critical. Consider developing or refreshing a materiality assessment — which identifies what economic, social and environmental topics are most critical to both your business and your core stakeholders. It provides guidance for what topics to focus on, as well as program strategy and ESG (environment, social and governance) reporting.
2. Bring your unique resources to the table
Supporting communities doesn’t mean just check-writing. While philanthropic giving must be a part of your social impact work, it’s important that companies think beyond that. All companies have broader resources, such as the products they develop or services they provide; along with the passion of their employees, suppliers and customers.
To think more strategically about what resources your company can bring to bear, remember the “Four Ps:” philanthropy, people, product and partnerships. In addition, leverage those resources that truly make your company unique. Do your employees have a specific expertise? Do you provide a unique service that can be applied to a community need? How can you align what you do best as a company to help solve societal challenges?
3. Be transparent
Transparency brings credibility; yet, reporting your ESG activity is more complex than ever. With multiple frameworks and standards, reporting can be a big challenge. Today, 86 percent of the S&P 500 publish some type of ESG report. Done right, ESG reports can be immensely helpful for companies to apply for awards and rankings, such as the Dow Jones Sustainability Index or Fortune’s Change the World List, and provide diverse stakeholders with access to frequently requested information and insight into priority issues and actions.
It’s critical that companies are as transparent as possible about ESG risks, how they act to mitigate those risks, and how they generate business value through engaging in social impact activities.
The new BRT purpose statement has drawn both praise and criticism. Whether you think the time was right or the shift was long overdue — or question whether the vision reaches high enough — we can all agree that companies need a roadmap on the steps they can take towards progress. Directly involving the stakeholders you aim to serve, being strategic in the resources you can uniquely bring to the table, and reporting on your ESG activities are great places to start.