Forrester’s Samuel Stern picks through pledges made by US corporations and outlines the steps he believes they can take for the benefit of business in society.
In August, nearly 200 chief executives representing large American corporations pledged to fundamentally change the purpose of a corporation. Their goal is to redefine the role of business in society, pushing back against mounting criticism from both the left and right of the political spectrum.
No longer is it enough for corporations to maximise shareholder value alone, ignoring other stakeholders such as customers, employees, partners and their communities. While these words are welcome to those of us who have long advocated for more focus on other stakeholders, I hope the CEOs will forgive my scepticism that this is anything more than a press release.
With that said, I don’t want to be overly cynical. So here are the steps I’m watching for that would indicate companies are following through on their commitments to a more balanced form of corporate governance.
1. Delivering value to customers
One way for corporations to do this would be to take public stands in alignment with their corporate values on issues that matter to their customers.
By no means am I saying that companies have to wade into every debate or political issue, but taking sides in some conversations has become unavoidable. Why? Because, globally, 64pc of consumers “choose, switch, avoid or boycott a brand based on its stand on a societal issue”, according to the 2018 Edelman Earned Brand report.
CEOs who want to take their commitment to “exceeding customer expectations” seriously must recognise that customers now expect the companies they do business with to mirror their values.
2. Investing in employees
Companies need to act to curtail the crisis of workplace burnout, which is officially a medical condition now. Burnout rates have escalated in recent years, and nearly a third of workers say that their stress level is high to unsustainably high at work.
What to do? From the top, organisations must start resetting norms around availability to respond to email or other communications in the evening, on weekends or on vacation. Executives would do well to model this behaviour themselves first.
Initiatives such as Macy’s ‘Time Is Money’ campaign, which curtailed the number of meetings employees had by four hours per week, give employees time back in their working day to get things done, lessening the expectation to work at night or on weekends.
3. Dealing fairly and ethically with suppliers
Companies could start by committing to a living wage for employees of the suppliers and contractors they work with. Prominent apparel companies such as Adidas, Nike and Primark have made these pledges but haven’t followed through to ensure it’s actually happening.
In contrast, Chobani, through its use of the Fair Trade USA programme, has helped farmers get stable and above-market prices for their milk.
4. Supporting communities
I will look for companies to take tangible steps to become more rooted in their communities. That should start with swearing off business relocation incentives.
The billions spent by US states and local governments for economic development initiatives are a deadweight loss, just moving companies and jobs around between different states and municipalities.
Instead, take a page from Chobani again. Operating the largest yoghurt facility in the world, it has revived the dairy industry in upstate New York and hired hundreds of refugees from communities near both of its production facilities in New York and Idaho. Its commitment to both old and new local communities is a wonderful example for other companies to emulate.
5. Generating long-term value for shareholders
CEOs should know that taking better care of the previous four stakeholder groups doesn’t have to mean sacrificing shareholder value. But it does mean refocusing on long-term value creation rather than short-term focus.
The good news is that there are so many benefits from treating customers, employees, suppliers and communities well. Some of the highest-performing firms have long committed themselves to these principles.
Soon, hopefully, they won’t be such a rare breed.
By Samuel Stern
Samuel Stern is a principal analyst in Forrester’s CMO research practice. His research topics include employee experience and customer-centric culture. He is also the co-host of The CX Cast, Forrester’s weekly customer experience podcast.
A version of this article originally appeared on the Forrester blog.