September 29th, 2020
The need for companies to operate in a socially and environmentally responsible way is already an undeniable reality. Those who don't understand it today will have a hard time surviving, as citizens and client’s awareness is growing fast, led by two “accelerators”: globalisation and technology. As per the environment, the scientific evidence of its degradation is more than evident and is an area where it is easier for companies to move quickly into action - it is an "institutionalised" theme, few doubt the need to act. In other words, few companies dare to forget these challenges and act accordingly. The same is not entirely true for social concerns, where there still is much to be done in order to achieve the same status as their environmental counterparts. Social concerns have a decade of delay versus environment. As I like to say, Sustainability has two “daughters”: one called “Environment”, the other “Social” – “Environment” being ten years older than her sister. That said, there are several social trends that are making their way. I would highlight five, in the form of questions to which the near future will answer:
1. Should companies anticipate the next unacceptable social issue?
Companies will feel the need to include in their investment decision processes the answer to the following question: "What we are deciding today is socially acceptable. But will it be in the future?” Anticipating the next unacceptable social issue can become a source of competitive advantage. Or, at the very least, a way to mitigate the risk and destruction of value. A great example is Lego who anticipated the “plastic challenge” more than a decade ago, “full power” into R&D to replace plastic, at the time a purely emerging and now truly "institutionalized" subject. It is now on the market with its "core product" reinvented – organic plastic.
2. Should employability be accepted as social responsibility of Corporations?
Jobs for life is a feature of a distant past. Companies have no obligation to ensure that. But there is something I truly believe: it is social responsibility of the Companies to ensure employability of its employees. In other words, socially responsible companies should ensure that, whenever an employee must leave (for whatever reason), they should leave as better professionals and human beings than they were when they joined. Companies who voice and practice this value are genuinely a force for good in society – education is everything.
3. Is globalisation changing the role of Corporations in social local issues?
An interesting new dimension of Corporate role in this "new sustainable world" is emerging: in places where Governments do not do their "job" (regulate, control and sanction key sustainable issues) who can their citizens rely on? The answer is obvious: on big Corporations operating worldwide, who cannot ignore these challenges anymore. If a NIKE factory is exploiting child labour in Cambodia, if you are an offended local citizen what would be more effective to change the situation: complain to the local authorities or just post on social media what NIKE is doing? There is no more space for “dual standards”. Moreover, Corporations choosing to address these issues in less developed countries in a more “sustainable way” are very likely to attract customers in more developed markets.
4. “Soft is the new Hard” should be part of the “way we do things around here”?
Values, vision, leading from the heart, sense of purpose: practices that will become, more than ever, key sustainable leadership skills. With most of the professional activities being replaced by machines, those are the practices that will remain for leaders to follow and excel. Those we lead are, first of all, human beings. Nobody gets into a head office leaving at the door the skin of parent, son/daughter, wife/husband, golfer, dog lover... It is the whole human being that gets in, and it is that whole human being that one leads. If you decide to lead an accountant (or whatever professional category your employee holds) and not the human being behind the accountant, then all you can expect is to have a...direct report. If you decide the latter, then you have a great chance of having...a follower.
5. Will Companies and CEOs be able NOT to speak up?
Globalisation and Technology are channelling all key environmental and social issues into the global public arena. Human rights, child labour, water scarcity, air quality, poverty, you name it, critical issues that we, citizens and consumers, are not anymore willing to let go. It will be increasingly difficult for Companies and CEOs to try and stay neutral. They will be “forced” to speak up and take a stance...or will see consumers brand loyalty to vanish. Patagonia is a great example of this with their CEO Rose Macario: since they have opposed last year’s Trump's tax cut, they have committed the $10 million saved from those tax cuts to non-profit groups who work on conservation and climate issues. “Taxes protect the most vulnerable in our society, our public lands and other life-giving resources", she wrote at the time in her Linkedin page. “In spite of this, the Trump administration initiated a corporate tax cut, threatening these services at the expense of our planet”. In the same tone they have decided to give a day off for employees to go and vote on Election Day (in US elections are on Tuesday).
Daughter “Social” will grow up very quickly, she will be loved by a lot of people. You'd better be on good terms with her...
Have a great and impactful week.
Nuno Moreira da Cruz
Center for Responsible Business and Leadership at Católica-Lisbon School of Business & Economics