The months and years ahead will test whether American companies live up to their ESG and corporate social responsibility commitments as we head into recession. The authors, members of three organizations that work with leaders engaged in social impact in sectors and regions, cautioned against retreating from these commitments and and cutting costs. They give four reasons why supporting ESG and CSR is important to long-term success: 1) Your workforce makes employment decisions based on corporate purpose commitments and actions; 2) your customers make purchasing decisions based on corporate purpose commitments and actions; 3) your investors make decisions based on the purpose and actions of the corporation; and 4) your company’s reputation is tied to corporate purpose and actions.
2023 will be a test for corporate America — the year we find out whether corporate social responsibility (CSR) commitments and environmental, social, and governance (ESG) principles are deeply rooted values or in fact, they are only entertainments that can be enjoyed in economically fair times.
As members of three organizations that work directly with thousands of leaders involved in corporate social impact in every sector and region, we encourage you, corporate executives, not to retreat from the gains you have made in the community and global investment and employee engagement we are close to recession. It takes a lot of corporate commitment, years of dedication and investment, to see the benefits of your leadership.
With the possibility of a recession in 2023 increasing every day, corporate leaders are tasked with navigating turbulent times, and cost cutting is a common strategy to deploy. Unfortunately, history has shown that CSR, ESG, and purpose initiatives are often first on the list to freeze or underfund during recessionary times. This test comes at a time when CEOs have made significant strides in tying ESG to profitability, with 70% of US CEOs acknowledging that ESG improves financial performance, up from 37% last year. year, every new. KPMG survey. However, 59% of CEOs say they plan to stop or reconsider their ESG efforts.
This is a mistake. Here are four reasons why prioritizing an investment in corporate citizenship is critical to the long-term success of profitable businesses.
1. Your workforce makes employment decisions based on corporate purpose commitments and actions.
Recruiting and retaining talent continues to be a challenge in every sector, despite the weak economy. While job security and fair wages are top of mind during an economic downturn, employee engagement and corporate commitment to social impact, driven by most CSR teams, remain which is critical. Special report by Edelman “Trust in the Workplace” found that seven out of 10 employees want their work to have an impact on society, calling it a strong expectation or deal breaker when considering a job. Your employees will leave to find a purpose-driven employer if your company isn’t one.
2. Your customers will make purchasing decisions based on corporate purpose commitments and actions.
Consumers are more discerning in times of uncertainty, making reputation and transparency key. While consumers are more attuned to rising prices, the difference is brands that uphold their social commitments in good times and bad. In fact, according to 2021 Porter Novelli Purpose Premium Index (PPI)“73% of consumers say [that] To get their support, companies must show how they support communities and the environment.
3. Your investors make decisions based on the purpose and actions of the corporation.
One of the core strategies of ESG investing is risk mitigation. ESG-related issues are material and may cause financial or reputational damage. Especially during volatile market times, investors want to know that these social risks are tracked and managed at the highest levels of the company. In March 2022, Merrill Lynch released a report to its investors on the importance of S in ESG, where it stated that since social factors underpin key inputs to economic development, the management and monitoring of social indicators is never the same you are important now.
4. Your company’s reputation is tied to corporate purpose and actions.
The Edelman Trust Barometer shows that trust in companies is waning; all it takes is a bad choice to ignore a company’s view of contempt. Community needs only increase during economic downturns, including basic needs such as shelter, food, and education. The continued support corporations provide to nonprofits through financial investment, employee volunteerism, product donations, and nonprofit board service – the S of ESG – is critical to maintaining strong relationships with your key stakeholders. Your corporate responsibility team is your offense and defense for ensuring that your reputation remains strong.
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Your “why” doesn’t change when things get too uncomfortable. In fact, it has become more important. So, where do you start?
You start from the inside out, by restating – and maintaining – your commitments to corporate social impact. As leaders, understand what it takes to keep your commitments, maintain your company’s reputation, and clearly follow up on the effects. Then, support your corporate social responsibility functions and leaders through social investment for the long-term. Leading companies invest 1% of pre-tax income in society, with top-quartile investment 2.3%. What is your number?
Systemic change requires a long-term view of where a company and society is headed. When corporate leaders commit to serving communities of color, invest in their own CSR teams, and provide meaningful ways to engage their employees in their commitment to purpose, we can continue to create momentum to address our most challenging societal issues and drive meaningful and lasting change.
Companies have established themselves as an important member of the community, and those most successfully incorporate social innovation into their business strategies. If companies cut their social investment, employee volunteer programs, and other corporate citizenship strategies today, companies and society as a whole will emerge from a recession with much worse challenges than today.
The choice is clear. Don’t default to a short-sighted cost-cutting strategy. Strengthen your commitment to corporate purpose and emerge from the impending recession, together with your stakeholders, positioned for long-term success.