Balancing people and profit when engaging in social issues

We tend to be loyal to banks. In the UK, three in five adults have had the same current account for more than ten years—and a third, for more than 20. I was with my bank since the age of 16, but I recently switched. I did so because I was disappointed with how leadership responded to public accusations of unethical operating practices.

This is just one example of consumers more closely aligning their wallets to their values. It’s behavior which challenges organizations to balance people and profit when making decisions.

As recently as 2017, leadership teams heard that taking a stance on social or political issues “typically [involved] more risk than benefit.” But this advice has dated fast. The proportion of consumers like me who want companies to take a stand on issues such as sustainability, transparency or fair employment practice rose from 62% in 2018 to 72% in 2022. And while most leadership teams say they recognize that things need to change—trust in them to “walk the talk” is still relatively low.

Take the 2020 racial injustice protests. As centuries of anger poured out onto the streets in the US and beyond, corporate bosses heeded a warning: “The fight for equality doesn’t exist in some vacuum outside your organization.” Many companies rushed to show their support through traditional and social media. But some were accused of cosmetic support for the protests when, for example, past actions or the ethnic homogeneity of their workforce—especially in leadership—were exposed.

In contrast, other organizations were well placed to respond quickly and authentically. One example is ice cream maker Ben & Jerry’s, which first asserted its support for Black Lives Matter in a 2016 blog post. As board member Daryn Dodson noted, the company’s reaction to the 2020 racial injustice protests didn’t come out of the blue. It came “from a muscle that was continuously being developed from the board and management team over time.”

Another is Nike. Their anti-racism campaign, launched in late May 2020, was consistent with previous messaging, like an advert featuring Colin Kaepernick in 2018 and their significant commitment to funding for Black community initiatives. Speaking in June 2020, CEO John Donahoe pointed to progress made by the company internally on diversity—but also to the need to accelerate progress.

Consider all stakeholders

So how do companies constructively engage in potentially divisive social issues in a way that balances people and profit?

The problem for many organizations is that stakeholder-centricity remains somewhat superficial. Too often, we see the perspectives of customers, employees, suppliers and other stakeholders “bolted-on” to existing business practices instead of being “built-in”: properly embedded, measured and incentivized. The result is weak stakeholder relationships which deliver neither the insight nor the sense of shared ownership needed to drive behavioral change.

The antidote to this challenge starts with a set of leadership qualities we identified with the World Economic Forum called the “Five Elements” of responsible leadership. But values and intentions don’t equal action. So, we see high-performance leadership teams infusing stakeholder-centricity down through their organizations via a set of 21 management practices we call “Sustainability DNA”.

Two groups of practices are particularly important as companies try to balance their response to important, potentially divisive issues with demands for financial growth: Human Dignity and Tangible Empathy.

The concept of Human Dignity is enshrined within the UN Universal Declaration of Human Rights. It requires leadership teams to consider inequalities inside and outside their organization. For example, ensuring that pay and working conditions are “just and favorable” or that “basic human needs” of local communities are met.

These values are then consolidated through actions we call Tangible Empathy. These answer stakeholder calls to “put your money where your mouth is” through clear, public commitments that embed stakeholder inclusion deep into the organization's fabric. [Read more here].

Getting the balance right

Thinking back to the drivers behind my bank account switch, Tangible Empathy practices were sorely missing. The bank talked a good game—but their actions suggested that profits trump(ed) stakeholder welfare and environmental impact.

I won’t pretend this is an easy balance for leadership teams to get right—remember that profits can, for instance, fund higher wages or more R&D, which benefit employees and consumers, respectively. But as demands for business to operate more sustainably grow—and regulation moves in tandem—the risks associated with inaction grow. Companies with stronger Sustainability DNA outperform their peers by 21% on financial and sustainability performance.

The roadmap for change is clear. The time to act is now.