Corporations have made significant progress on the sustainability front, but the work done to date mainly focused on making sure companies do less harm, protecting reputation and managing risk. In other words, the work focuses on ‘minding the gap’ between society and corporations.
However, given the disconnect and fragility of the relationship between society, business and institutions, minding the gap is simply not enough. Business needs to tread carefully and thoughtfully as it works out how to start mending the gaps and reconnecting with society more effectively.
On March 9, Salterbaxter decided to bring great minds together during the U.S. Sustainable Business Forum to discuss the changing role of business in society, the need for business to radically reconnect with stakeholders, and how to do this. If you missed the discussion with speakers including McKinsey, BNY Mellon, DSM and Novozymes, we’ve compiled some of the highlights for your reference.
Adopt the “connected leadership” model
Lack of trust in the business community is not a new trend. In fact, it extends back over 2,000 years. However, there is no doubt that anti-business feeling has increased since the global financial crisis of 2008. Corporate social responsibility (CSR) has failed both companies and society because the initiatives are almost always detached from the core commercial activities.
Breaking this anti-business sentiment is possible, but it requires reconnecting corporate social responsibility with real commercial activities and rethinking what leadership means. The ability to effectively connect with society — and its real needs — and to integrate societal and environmental issues deeply into the business model is crucial and can boost profitability and competitiveness for corporations.
Robin Nuttall, partner at McKinsey & Co. and co-author of “Connect”, said the shares of companies that connect outperform those of competitors by 2 percent every year, amounting to a performance boost of 20 percent over a decade. The book also identifies four tenets of “connected leadership” that companies – and leadership — can adopt to improve profitability and relationship with society.
Map your world: Start by quantifying the economic impact of external issues on your company and stakeholders as businesses perform better when they have a good understanding of the world around them.
Define your contribution: Ask yourself the following questions: what do I want my contribution to the world to be as a corporation? What’s my long-term purpose?
Apply world-class management: Integrate these considerations into your business strategy.
Engage radically: Proactively and regularly engage and communicate, regardless of immediate need and interest.
CSR reporting and partnerships can effectively involve your stakeholders
That’s right. Engaging and reconnecting with your stakeholders is key to business success. But what are effective ways to do so? Partnership building and CSR reporting are powerful options to explore.
Let’s start with partnerships. BNY Mellon, for instance, just released a new study in partnership with the U.N. Foundation, one of its stakeholders, entitled Return on Equality. “This is a great story of stakeholder engagement and partnership at its best,” said Heidi DuBois, global head of CSR and social investing at BNY Mellon. “We have had a partnership with the UN Foundation for several years now and together, we decided to focus on Goal 5, which focuses on achieving gender equality and empower all women and girls.”
Another interesting example is Novozymes. Claus Stig Pedersen, head of corporate sustainability for Novozymes, spoke about how partnerships and the U.N. Sustainable Development Goals (SDGs) have guided the company’s long-term targets for fulfilling the company’s stated purpose of finding biological answers for better lives in a growing world. The SDGs helped companies prioritize their activities and attract the right partners. Similarly, working with the right partners helped Novozymes develop better, more sustainable products.
Finally, we all know that CSR reporting is important for transparency and communications purposes but it’s also a great way to engage with stakeholders. It can be both the culmination and kickoff of a year-long engagement process with experts, managers and employees, and external stakeholders with different stages that bring the company and its different stakeholders together, from the materiality analysis through to engagement around the results.
Set sustainability goals – and incorporate them into compensation structures
If corporations have serious sustainability ambitions, then they must incorporate sustainability goals (whether environmental or social) into their senior executive compensation structure, otherwise, these targets will never be prioritized.
Indeed, linking executive bonuses exclusively to short-term financial targets will incentivize executives to deliver short-term results – results that are not sustainable.
Hugh Welsh, president of DSM North America, spoke about the company started to link all managers’ compensation to sustainability in 2010, with targets related to greenhouse gas emissions, energy and water usage, eco-friendly product development, and employee engagement, besides traditional revenue targets. The result was real, measurable progress.
Gain greater understanding of consumers to change behaviors
Sometimes even sustainability-driven businesses aren’t successful at providing consumers with the right environments in which to meet their sustainability aspirations. Sille Krukow, founder and chief behavioral designer at Krukow, thinks behavioral economics is one of the answers.
Behavioral economics analyzes how choices are presented to consumers and the environments in which choices are made. Supermarkets, for instance, are usually focused on incentivizing consumer decisions that will maximize revenue. In other words, products that bring the greatest profits are those that are in the “hotspots,” where purchases are most likely to occur.
With behavioral economics, stores and supermarkets have the power to influence consumer choice architecture to focus on sustainability. By placing sustainable products in these “hotspots” or incorporating specific labels to recognize these products, supermarkets can make it easier for consumers to select and buy sustainable products. Thus, by better understanding consumer behaviors, we can incentivize the sale of sustainable products.
Whether it’s a connected leadership model, effective partnership with stakeholders or better understanding incentives and behaviors, one thing remains certain: the business community needs to Step Up and reconnect with society. And there are some great examples of companies out there who are taking the lead and doing just that.
Original article published on TriplePundit