Arun Sudhaman 28 Sep 2021 // 1:00PM GMT
In an era of increasing polarization, it is perhaps unsurprising to find people looking to corporates to help them make sense of divisive political and social issues. After all, companies wield power. And, while this power can sometimes come at the expense of gridlocked governments — the expectation that brands weigh in on social issues is not one that can easily be ignored, no matter how challenging its implications for those charged with overseeing corporate engagement.
The latest compelling evidence of this trend comes from the Brands in Motion study, conducted by WE Communications and YouGov, which found that 50% of consumers and B2B decision-makers expect brands to create stability in uncertain times, a 30% jump since the survey was last conducted in 2019. That proportion, significantly, puts the corporate world on par with educators (51%) and friends and family (49%), suggesting that the Business Roundtable made the correct call when it belatedly acknowledged the primacy of 'stakeholder capitalism' in 2019.
It is a finding that takes on heightened prominence amid the continuing pandemic and civil unrest in numerous countries across the globe. "Where society previously looked to government to provide stability, there is now growing skepticism around government’s ability to play that role," explains WE Australia and Singapore EVP Rebecca Wilson. "There is both an opportunity and expectation for brands to step in and provide the leadership and moral compass to navigate our current environment."
The idea that companies should remain apolitical may be something of a red herring to begin with. Businesses, from as far back as the East India Company and the Medicis, have long been an active participant in government — and a glance at US lobbying records is enough to remind us of the gargantuan sums that corporates spend in their efforts to influence policymaking. But much of this activity has remained behind the scenes; it is not so much the politicking that counts as a new development as the controversy that comes with it, especially when business is being called on to fashion a credible stance on particularly divisive issues.
Whether it is voting rights, abortion laws, racial justice, gun control, housing policy or the geopolitical fissures between the US and China, there are now any number of issues on which brands are less likely to be afforded the benefit of doubt. 83% of Brands in Motion respondents said companies should listen to stakeholders to decide what issues or impacts to address, and 71% believe there is an obligation to engage with social/global issues when they impact the business and stakeholders.
"There is now a much broader understanding and acceptance in the business world that companies have a major role to play on social issues and need to look after a much wider range of stakeholder and not just their investors," says Tata Consultancy Services chief communications and marketing officer Abhinav Kumar. "Hence the very classical and narrow definition of 'agency theory' now stands as defunct. If you look at what is the defining long term challenge of our times — tackling climate change — there is again no denying the immense role that businesses must play in being part of the solution."
Companies may wish they could run from these expectations but this kind of data makes it increasingly clear that they cannot hide. Particularly when the agenda is being driven from within — with employees rated as the most important stakeholder group while the war for talent intensifies amid the pressures of a global pandemic.
"It’s clear from the research that consumers gravitate toward brands that do more than just make money for their shareholders but go beyond to address issues that are relevant to their company’s expertise and employee needs," says Barri Rafferty, Wells Fargo's head of communications and brand management. "Very large financial institutions like ours are expected to take a position and be a leader on issues such as banking inclusion, environmental, social and governance (ESG) issues, and more. We are committed to support and protect ideals that make this country what it is and ensure there is equal opportunity. It’s what Wells Fargo’s stakeholders deserve and expect."
"Quite frankly, the motives don’t matter"
For big businesses, all of this poses something of a quandary. Economies of scale allow companies to replicate their processes and maximize sales. But, when it comes to issues management, it seems clear that a one-size-fits-all approach — based on offending as few people as possible — may no longer be fit for purpose. Speaking up may please some stakeholders while alienating others, as many companies are only too aware. Whether companies are willing to carry these kinds of costs may well determine how effectively they can thread this particular needle.
The Brands in Motion study makes this tension clear. 52% of respondents said they believe brands take stands on societal issues as a means of boosting business. One-third don’t believe brands should weigh in at all. And consumer perception of the impact brands can have on society has remained flat.
"Not every brand needs to weigh in on every issue, and both art and science are required to determine whether to take a stand," says Hannah Peters, WE's EVP of corporate reputation and brand purpose. "The brands that succeed are those that build on their core brand promise and speak to issues that are relevant to their key constituents."
In particular, adds Peters, companies need to be willing to truly listen to employees and external stakeholders. "It requires the bravery and the conviction to take a stand — knowing full well that not everyone will agree with you," she points out. "There are many great examples of this but a recent one has been the range of brands — from Bumble to Salesforce to Lyft — that have taken a vocal stand to support women in Texas following the passage of the recent abortion bill. All three of those brands have a history of supporting women’s issues and gender equity that has become part of their brand purpose and identity and that no doubt helped them take a calculated risk around this particular issue."
Calculating those risks, furthermore, is a long term game that requires an honest assessment of a company's credibility. General Mills senior director of corporate and brand storytelling Erica Sarakaitis, for example, points out that the food giant focuses its activism on areas where it can "credibly and consistently make meaningful progress", specifically "planet, food, people and community."
"Brands should seek to make an impact on issues where they have license to engage and the ability to affect positive change," says Sarakaitis. "This work takes diligence and focus. Doing good can be good for business, but our commitments and investments are grounded in a fundamental belief we can leverage our size and scale for good."
Kumar, meanwhile, believes the risks are probably overstated, noting the finding that 70% of GenZ, 70% of Millenials, 64% of GenX and 58% of Boomers will buy a product if the company takes a stance on issues of importance to them.
"The marginal returns from their preferential behavior are likely to supersede the diminishing one from those that do not wish for a brand to take a stance," explains Kumar. "Also a brand’s lack of embracing an issue that has growing momentum of acceptance, like LGBTQ inclusion, may make them stand out as companies that are not doing their share to bring in progressive change, and consumers are potentially likely to penalise them for it."
Indeed, scepticism about commercial motivations should not necessarily dissuade brands from taking a stand. "It’s important for brands to understand that their customers are very sophisticated and wary of purpose-washing," admits Wilson. "At the same time, we must call out that there is a clear intersection between purpose and commercial objectives in business. Increasingly we see that the way companies are doing business — from the products they are putting out in marketplace to how they are setting up supply chains and operations – reflect an approach that is responsible, positive and purpose-driven."
"Frankly it's like saying that politicians only make policies to win elections. Is that true?" asks Kumar in reference to concerns about corporate motives. "Probably partially. The fact is that as a politician you need to win elections, but when you are in government you also need to govern for the larger good."
Kumar, points to the example of CVS Health, which stopped selling cigarettes seven years ago — a decision that cost them $2bn in annual sales. "Quite frankly, the motives don’t matter if the outcome is good for society," he adds. "Whether a CEO takes a pledge to get her business to net-zero in carbon emissions because she deeply believes in it, or if she does it out of peer pressure or to sell her products to Gen Z — on a societal level it’s a great outcome, irrespective of the driving motives."
"Get comfortable with being uncomfortable"
Meanwhile, the collision of business and politics has rarely seemed more personal. 70% of Brands in Motion respondents say executives should convey their personal positions to at least one of five different audiences (employees, social media, customers, shareholders or the media) with very high frequency—from “almost constantly” to every three months. For C-suite executives, raised in the risk-averse culture of boardrooms, this must count as a significant rethink of the job description.
"This insight makes many C-suite executives uncomfortable because it shines a light on their new reality of greater exposure and vulnerability," says Peters. "Social media has become the new accountability tool — for all audiences. So, leaders need to get comfortable with being uncomfortable. Those who believe that communicating on societal issues distracts from the core business are missing a key point: most of their stakeholders want to hear it."
Kumar is less convinced, pointing to the primacy of the corporate position when considering individual activism. "In their capacity as agents for their employers their words have a bearing on their business, and they have a responsibility to project and protect the accepted party views of their business," he asserts.
"For example, one executive in a company may be pro-life and another one may be pro-choice, and its fair for them to hold their individual views and their faith. However, when representing their business, they need to convey what is the accepted position of that business — which may be either of those, or may be to stay neutral and not express any opinion on that particular topic."
No one said being a CEO would be easy. But today's business leaders require not just the courage to elucidate a clear point of view, but to accept that blunders will be inevitable. "In this fast-moving world, we can’t know everything all the time," explains Peters. "The issue is less about the blunder and more about how a leader responds and recovers from it. To maintain long-term trust, executives need to be vulnerable and own their mistakes immediately."
That task is hard enough for business leaders who are not interested in activism, as Lenovo Asia-Pacific head of communications Genevieve Hilton discussed at PRovoke Media's Asia-Pacific Summit earlier this month. Yet, it is further complicated by the speed and commitment that companies are expected to demonstrate on these issues.
For example, according to Brands in Motion, 72% want brands to make long-term investments in one issue or cause rather than switching each year. However, nearly three out of four stakeholders say brands should reassess their communications in light of social issues at least every six months. Can a communications function truly be expected to reconcile these competing demands?
"For businesses this is not a case of 'either/or' but of 'both'," says Kumar. "Just like a portfolio investor, businesses need to decide what are the one or two issues of long-term importance that they wish to commit to and at the same time build in agility on some short-term ones that can be constantly evaluated. For example, a business can decide that, for the next 20 years, their long term focus is climate action and that will remain a consistent track, but the next six months they will work on funding Covid vaccine deployment to underserved regions. Subsequently, once that action is complete, [they can] move their short term funds to the next short term priority."
Peters advises companies to think of this challenge using the popular business nomenclature of marathons and sprints. "Keeping pace in the marathon requires making long-term investments and commitments around core issues that matter most to your stakeholders and align with who you are," she notes. "Once you do that, you then gain the authority to speak out in the moment on emerging issues – to 'sprint'."