Solving the most pressing issues of our time has a colossal price tag. Today, the global impact investing market has reached $502 billion – which is excellent – but that’s nowhere near the $5 to $7 trillion that’s needed to achieve the United Nations’ 17 Sustainable Development Goals over the coming decade. Whether it’s feeding the 821 million undernourished people around the globe, or preventing the million plant and animal species that are at risk from going extinct – our imminent challenges are too vast and too expensive for governments to solve alone.
The good news is that more CEOs are realizing their companies can play a significant role to address these challenges. In fact, research by YPO shows 93 percent of leaders agree business should have a positive impact on society beyond pursuing profits. What’s more is that three in four respondents acknowledged they have changed their perspective on the role of their leadership over the past five years by looking at the impact of their company on society at-large, not just their shareholders.
In light of these challenges, it’s critical for companies to identify and stand up for causes that meet their customers’ expectations and align with their business goals. In the age of purpose-driven business, CEOs must prioritize social impact, but more importantly, they need to show how their business practices create tangible change to positively impact the world.
CEOs: It’s Time To Take A Stand
There’s a growing sense of urgency for companies to give back to society given the imminent threat of issues like climate change and social inequality. This, coupled with the public’s diminishing trust in the government, is another reason why more people are turning to businesses. With only 17 percent of Americans who say they can trust Washington at all, more people are turning to CEOs, expecting them to use their voice and platforms to advocate for social causes.
According to the 2018 Edelman Trust Barometer, 64 percent of people believe CEOs should take the lead on change rather than waiting for government to impose it. Even more compelling, 56 percent of respondents said they have no respect for CEOs who remain silent on important issues.
There’s also a shift in workplace mentality as more millennials enter the labor market. By 2025, 75 percent of the workforce will be comprised of millennials, who actively seek companies that uphold a greater sense of purpose. According to a Cone Communication study, 83 percent of millennials would be more loyal to a company that helps them contribute to social and environmental issues. Even more compelling, 75 percent said they would take a pay cut to work for a socially responsible company.
In light of these trends, a company’s social impact strategy – or the lack thereof – will undoubtedly affect its long-term success.
Awareness Without Action Is A Missed Opportunity
Employees, consumers and other stakeholders can quickly detect ingenuine social impact commitments. While we need more business leaders to advocate for social and environmental issues, we also need action, investment and tangible corporate commitments. Even executives are admitting there’s a disconnect between their purpose-driven PR tactics and the action they’re taking to back these claims. According to a survey carried out by The Economist Group at Cannes, 78% of executives believe their businesses are failing to deliver on their social purpose pledges.
A company’s social impact strategy isn’t only essential for its brand image, it’s also imperative for its bottom line. From an investment standpoint, a company’s environmental, social and governance (ESG) metrics matter. According to research by Morgan Stanley and Bloomberg, nine in 10 asset managers overwhelmingly agree that sustainable investing isn’t a fad; it’s here to stay. More investors are factoring ESG performance into their decisions as they recognize these scores will influence other outcomes like long-term profitability, scalability, and market share. That’s why CEOs must identify innovative ways to leverage social impact into an agent for social good and business transformation.
Turning Talk Into Action: A Cross-Company Approach
All too often, CEOs hand off the company’s social impact efforts to its CSR team. Corporate social responsibility is table stakes for long-term viability, but that doesn’t mean that other departments are off the hook when it comes to addressing these social issues. Rather, corporate responsibility needs to span the entire organization and act as the North Star for other departments to ensure the company fulfills its social or sustainable pledge.
For example, take procurement. As more consumers demand companies operate ethically, procurement teams need to ensure that their purchasing patterns align with the company’s overarching social goals. If a company is truly dedicated to protecting the environment, it needs to ensure it is buying from environmentally conscious vendors with sustainable supply chains. In addition to vetting vendors, buyers can also source from companies that underwrite social impact incentives into their B2B deals. In fact, conjoint analysis conducted by Givewith and the Boston Consulting Group showed that leveraging social impact as a sales differentiator is 13 times more valuable than traditional sales incentives like free shipping or rebates.
The same concept can be applied to marketing. Cause marketing as we know it is dead; simply telling your consumer that you care about a cause isn’t effective, nor compelling for advertisements. Rather, brands should partner with nonprofits who are tirelessly committed to solving the issue and tell the nonprofit’s story as it relates to their brand.
This idea came to life during the launch of Lexus’ UX model, designed for the “modern urban explorer.” Taking a contemporary take on luxury cars, the UX was engineered for city folks with an imaginative lifestyle who explore, experiment and defy. To bring this idea to life, Lexus partnered with Beautify Earth, a nonprofit empowering artists and instilling community pride by funding community art projects. This partnership enabled three local artists to revamp an urban community with the development of engaging art murals around Los Angeles, the city that inspired the UX design. Ultimately, the campaign not only raised awareness around Lexus and Beautify Earth’s dedication to creating a world worth exploring, it also helped Lexus increase overall favorability towards the UX. In fact, Lexus witnessed an 80 percent increase in brand sentiment following this campaign.
Taking into consideration the scale of today’s challenges, changing consumer sentiments and the shift towards purpose-driven business, we need more companies to contribute to the social and sustainable causes of our era. Given the fact that corporate giving only accounts for 5 percent of the total charitable donations in the U.S., there’s an enormous opportunity for CEOs to leverage their voice, platforms and operations to generate new sources of funding for the world’s most impactful programs. Not only does the world depend on it, the future of their business does, too.