By Gary R. Levante on November 6, 2019
Earlier this year, nearly 200 US CEOs came together at the Business Roundtable and redefined what it means to be a business. No longer can a business's sole focus be to generate profits for its investors. Businesses must balance the needs and drive positive returns for all their stakeholders and not at the expense of one another. This monumental statement represents an evolution in thinking and recognizes the interconnected dependencies that make up a successful 21st-century business. There is also growing recognition that at the heart of this shift is the need for business to become more socially responsible, purpose-driven, and develop a conscience that is reflective of the values of its stakeholders.
How should businesses start to think about the future in this new area of transparency, consumer and employee activism, and rise in stakeholder expectations? I've pulled together some of the most compelling data and offer some actionable insights on the future of business.
Employees Crave Purpose
According to America’s Charities' Snapshot employee engagement research, 71% of employees said it’s imperative to work for companies with a culture that supports giving back, 70% said they want to work for a company whose mission and value align with their own, and 55% would choose to work for a socially responsible company even if it meant a lower salary. Those percentages only grow for Millennials and Gen Z. People crave purpose and want to have the opportunity to pursue their passions when they go to work. If you’re not creating a space for this occur—think employee volunteer and giving programs—you’re losing the race for top talent.
Capital Markets Are Shifting
$12 trillion. That is the amount invested in socially responsible investment funds according to US SIF: The Forum for Sustainable and Responsible Investment. That number is only expected to grow in the future. Environmental, Social, and Governance topics (ESG) are now seen as strong indicators of a company's long-term, sustainable performance. Socially responsible businesses trade at higher multiples, more effectively manage strategic and reputational risks, have stronger human capital plans, and are more profitable. You better have that corporate social responsibility (CSR) or sustainability report ready and ensure you walk the walk—not just talk the talk—if you want to tap into the next generation of capital markets.
Consumers Expect More
According to the Cone/Porter Novelli 2018 Purpose Study, 78% of Americans believe companies must do more than just make money. 77% feel a stronger emotional connection to purpose-driven brands, 66% would switch to a new product, and 88% would stop buying a product or service if they felt the company was an irresponsible or deceptive corporate citizen. The bottom line is consumers want to do business with brands that share their values and will reward those brands accordingly. You don’t have to look far to see companies like TOMS, Ben & Jerry’s, and Patagonia to see how purpose and profit go hand in hand. Even Dick’s Sporting Goods, who eliminated the sale of firearms in their stores in response to mass shootings, has seen its highest sales growth since 2016.
Diversity, Equity, and Belonging Drive Performance
Did you know that a whopping 89% of all businesses opened last year in the US were started by women entrepreneurs of color? That's according to the recently released State of Women-Owned Businesses Report commissioned by American Express. Not only are more businesses being started by women of color, but companies themselves are also seeing the benefits of a more diverse and equitable workplace. Gender-diverse companies are 21% more likely to experience above-average profitability and 27% more likely to create long-term value according to a McKinsey study. Gallup also found that the combination of employee engagement and gender diversity resulted in up to 58% higher financial performance. Forbes demonstrated that inclusive teams make better decisions up to 87% of the time and make those decisions two times faster with half of the meetings. You can easily see why focusing on diversity, gender pay equity and the creation of safe spaces where different backgrounds and opinions are embraced and valued remain key strategies for the leading 21st-century companies.
Business has already changed and will need to continue to evolve to meet the rising tide of expectations. If you're looking to future-proof your business, focus on aligning your values with the expectations of all your stakeholders and becoming more socially responsible. It's not only the right thing—it's also more profitable.
Gary Levante is Senior Vice President of Corporate Responsibility & Culture at Berkshire Bank, accountable for the company’s corporate responsibility, sustainability, and culture performance. He is a Board Director for America’s Charities, America's Charities-Children First, and America's Charities-Health First.
Gary recently spoke on a panel, "Closing the Social Good Data and Information Gap," moderated by America's Charities' Vice President of Business Development Kim Young, at bbcon 2019 in Nashville. A leading expert on human capital investment and community engagement, Gary has been featured at conferences throughout North America, on social media, and in national publications.