Culture & Community: cultivate these company assets with ESG as your guide
Last year we saw striking examples of companies taking a public stance on controversial issues, from the Nike + Kaepernick campaign to Twitter’s suspension of Alex Jones and InfoWars accounts. The question is; did these moves will increase the value of these companies in the eyes of their customers and shareholders? Nike’s stock dropped almost 3% on the day it announced the campaign, but online sales went up 31% the same week. Twitter’s move, on the other hand, came after months of criticism from consumers and the media that the social network was not taking action in accordance with its abusive behavior policy. Twitter’s stock price, however, stayed flat.
It used to be considered risky to take a public stance on anything that could be contentious, as this could alienate customers and shareholders. Now it can be risky to stay silent. Customers and employees demand that companies stand for something and take positions on high profile matters, such as equality and diversity, and that they do so with purpose and authenticity.
Culture and community are precious company assets that need to be managed with intention, aspiration and oversight. Using ESG (Environment, Social, Governance) criteria as a framework to guide these efforts, is one way to ensure that the “issues” you support are prioritized based upon what is core to your business, community and company culture, and that these assets are cultivated and protected for long-term value.
As a former ESG leader, I believe it’s valuable to use ESG as a framework for defining company culture and community stewardship.
The “S” (“Social”) in ESG includes the way in which organizations engage with all stakeholders, such as partners, suppliers, customers and communities. This interaction has changed dramatically over the last few years, forcing companies to take ownership and accountability for the impact their business has on their community.
In this last year alone we’ve seen great examples of organizations vocally supporting matters that are material to their business and aligned with ESG criteria. Elon Musk quit the White House Advisory Council when the U.S. President decided to pull out of the Paris Climate accord — in direct connection with their focus on the Environment. Tesla has stated its unequivocal support for climate change mitigation, and their support for a renewable resource based economy. Customers, investors and the Tesla community applauded this stance.
Similarly, Dicks Sporting Goods took a stand on gun control, where Social impact is core to their company credo. For Dicks, whose mission is “to support sports as a way of teaching our children fundamental values like a strong work ethic, teamwork and good sportsmanship,” eliminating the sales of assault-style rifles was a bold yet authentic move that was consistent with their core social values. Dick’s executives were ready to take a loss, but announced a 27% increase in stock price in May, and their customers responded positively to their decision.
The pressure for companies to make their culture public, and to take an authentic and measurable stand with their communities (stakeholders), will only increase in 2019. Issues such as data privacy, surveillance and freedom of information are taking a larger role alongside environment, diversity and inclusion. Most importantly, all stakeholders, including Boards of Directors, are putting more emphasis on company culture and its alignment with an organization’s operating systems. A recent report published by the National Association of Corporate Directors (NACD) entitled “Culture as a Corporate Asset,” calls specifically for companies and their leaders (Boards of Directors) to take a proactive approach to the oversight of culture as a means to drive sustained success and long-term value creation.
In this ever-transparent, always-on world, companies must proactively determine their culture, their impact and engagement with their communities, and the governance systems necessary to manage supporting initiatives. The principles and criteria of ESG serve as a 21st century guide for developing (or refreshing) a company materiality analysis, integrating company values into your strategy and operating models, and defining how you will gain clarity and stakeholder alignment for long-term shareholder value.