Climate change, gun violence and sexual misconduct.
Historically these are not topics that would make up the top tier of discussions at corporate board meetings. That has changed. Corporate Social Responsibility (CSR) has become a hot boardroom topic thanks to a growing lack of confidence by taxpayers, who also happen to be investors, in government’s ability to deal with these issues.
Social media, workers and the afore-mentioned investors have all led the charge in forcing companies to take stands on everything from immigration to sexual harassment to all forms of discrimination and more.
Winds Of Change
A desire for corporations to “take a stand” has not developed due to pressure from one group. Many interest groups are calling for a change to the social compact between private enterprise, government and citizens.
These winds of change create real problems for companies unwilling or unable to wade into political or societal issues. After all, these are areas long thought taboo for corporations that avoided taking sides in order not to alienate half their customer base when it came to controversial issues.
Initially CSR was conceived as a way for companies to have a positive impact on employees, stakeholders, communities and the world. This broad definition was used by some to, in effect, try to make the world a better place. For others it became a way to build a company’s reputation rather than to foment change.
Now, consumers and other stakeholders are demanding proof to trust corporate officers and the companies they represent. When customers speak with their values, companies are forced to listen or lose business. It isn’t enough to offer a high-quality product at a fair price. Companies today must stand for something. And what that something is matters to those who vote with their wallets.
Related: 3 TRADER TYPES
What Investors Care About
Investors obviously care about the bottom line. They want return for their invested dollars. But in addition to earnings, increasingly investors want to feel as if their investments are serving a greater purpose of social responsibility.
There is some distinction based on age. Wealthy older investors tend to care more about government gridlock, national debt and the overall political environment. Younger investors focus on what a company is doing for the environment and in terms of being a good corporate citizen.
The net result is that corporations must focus on more than just generating a profit and that means a portion of corporate earnings and profits must be funneled to those efforts. All this is making the jobs of CEOs and board members much more difficult.
Whether this renewed focus on CSR is here to stay or temporary is something that will be revealed over time. Until then expect more and more willingness on the part of companies to take a stand on a variety of public issues.