The talk of the business world last week focused on a big announcement from Business Roundtable: shareholder value is no longer the sole business objective of the nation’s top CEOs and the companies they lead.
This shouldn’t come as a surprise to anyone who has seen the news, read a tweet, or had a conversation about Corporate Social Responsibility (CSR) in the past few years. From Dick’s Sporting Goods’ stand against assault rifles to Nike’s bold statement with the Kaepernick “Dream Crazy” ad to the day-to-day conversations companies need to have about CSR, it’s clear people are demanding more and more of companies and products. In fact, this focus may just be the driving force for profit generation moving forward.
We may have millennials to thank for this shift. Many millennial employees expect their employers to stand for something beyond profit. More and more companies are including CSR efforts on their website and LinkedIn employment sections. Highlighting employee volunteerism, offering employees time off to get involved in the community, and emphasizing a commitment to diversity and inclusion have become a major components of the recruitment process.
Millennials are also demanding consumers. Research has made it clear that millennials are more likely to align themselves with brands that have an “authentic cause” and “show [they] provide something of value to the world.” They demand more than just basic CSR, they want brands to pay attention to social causes and passionately engage with them, not just throw money at them.
In reality, this announcement from Business Roundtable is not a big surprise. Corporations have to grow and adapt with time. Many of them have already started to make this switch so this announcement could be seen as an afterthought or the formalizing of an operating behavior.
Now, this doesn’t mean that profit doesn’t matter anymore. In fact, profit is honestly still the driver of all of these actions. Consumers still have the power. The difference is, they’re exercising that power to make social and political statements.
If corporations are concerned about how to get shareholder buy-in for this new perspective, they can easily put part of it into monetary terms. Investing in cause marketing and CSR initiatives, and strategically engaging with causes that align with their business objectives, is good for business. Not only does it help sell the brand to consumers and potential employees, but it also helps build customer loyalty and important political and social capital that can be cashed in when a crisis strikes.
The bigger challenge is going to be convincing investors and stakeholders that investing in employee benefits, such as offering a higher minimum wage and flexible hours, will also be good for long-term profit. This is an area where you’ll especially need focused messaging and strong examples. If you need somewhere to start looking for those proof points, company review website Glassdoor dove into some helpful research on this topic in a 2017 article.
The four new primary objectives outlined by Business Roundtable (deliver value to customers, invest in employees, deal fairly and ethically with suppliers, and support the communities in which they work) can drive a company’s financial success. Taking steps to prove to investors that these priorities help deliver on the fifth most important objective (generate “long-term value for shareholders”) should be the top priority of investor relations and communications teams across the country.