On April 14, full page ads in The New York Times, The Wall Street Journal and the Washington Post declared: “We Stand for Democracy.” Signed by 107 CEOs of publicly traded corporations, the statement itself was essentially a generic endorsement of the right for all American citizens to vote. The statement does not refer to specific laws or initiatives. It simply declares support for democratic traditions and opposition to “any discriminatory legislation or measures that restrict or prevent any eligible voter from having an equal and fair opportunity to cast a ballot.”
Motherhood and apple pie, yet the pushback by some political leaders was harsh and immediate. They understood that the statement was in direct response to Georgia’s recently passed election integrity law, viewed by many as a means of making it more difficult for many African Americans to vote.
There were at least two immediate catalysts, and one powerful trend, behind the CEO statement. The first catalyst occurred on March 31, when an open letter signed by 72 African American executives of Fortune 500 companies was released. Spearheaded by Merck CEO Ken Frazier and former CEO of American Express Ken Chenault, the letter challenged other corporate leaders to condemn deliberate voter suppression initiatives in several states.
Two days later, Rob Manfred, commissioner of Major League Baseball, announced the league would not hold its annual All-Star Game in Atlanta, Georgia, as originally planned. “I have decided that the best way to demonstrate our values as a sport is by relocating this year’s All-Star Game and MLB Draft,” Manfred said.
2020 was an inflection point for corporate ESG and DE&I policy and action
Underlying all of these actions is a growing trend toward incorporating proactive Environment, Social, and Governance (ESG)—including Diversity, Equity and Inclusion (DE&I)—measures into corporate goals, KPIs and culture. Previous economic crises have tended to reduce corporate emphasis on sustainability and social initiatives in order to focus on financial recovery. The coronavirus pandemic had the opposite effect.
COVID-19 is a uniquely people-centered crisis magnified by uneven economic impacts and a surge in social justice efforts to address racism and other systemic societal issues. Even as many companies struggle for survival, corporate leadership is experiencing intensified interest in their ESG and DE&I policies and actions by all stakeholders – employees, local communities, investors, government, and the general public.
Early this year, G&S asked a cross section of U.S. adults aged 18 and older for their thoughts on company purpose. The results, in the chart below, demonstrate that millions of Americans want to know if the companies they work for, depend on and choose to buy from have articulated and demonstrated a mission, a vision and values that align with their own.
We also asked Americans what they perceive to be the country’s most urgent issues besides ending the COVID-19 pandemic, as shown in the chart below. Allowed to check all that apply, 58 percent selected economic recovery, followed by 48 percent who said affordable healthcare. No surprise since both issues are paramount pandemic concerns. What is notable are the next three priorities, concerning the environment and social justice.
Wall Street is paying attention
One of the most telling metrics of the rise in importance of ESG issues in 2020 was the dramatic increase in ESG-based investing—originally a minor specialty led by dedicated “green funds.” According to a global survey of institutional investors released by MSCI in February, 77 percent of investors increased ESG investments “significantly” or “moderately” in response to COVID-19. This figure increases to 90% for the largest institutions with over $200 billion of assets.
The MSCI survey also revealed that 2020 saw a significant shift in ESG investing in the U.S., where interest had previously lagged behind Europe and Asia. Among U.S. respondents, 78 percent said they would increase ESG investment either significantly or moderately in a response to COVID-19. The figure for Asia-Pacific was 79 percent; in Europe-Middle East-Africa (EMEA), it was 68 percent.
The business case for ESG and DE&I
One reason for intensified investor interest is mounting evidence that companies with outstanding ESG and DE&I scores tend to outperform their peers. A sampling:
- Research by McKinsey shows that the most ethnically diverse companies are 35 percent more likely to outperform the least ethnically diverse companies.
- Inclusive companies have a 2.3x higher cash flow per employee over a three-year period.
- According to Deloitte, inclusive teams outperform their peers by 80 percent in team-based assessments.
- Firms in the top tier for DE&I are 1.8 times more likely to be change-ready and 1.7 times more likely to be innovation leaders.
- According to research from Glassdoor, 67 percent of job seekers said that a diverse workforce is an important factor to them when considering companies and job offers, and that 57 percent of employees want their company to increase diversity.
With metrics like that, it’s a safe bet that ESG and DE&I practices will remain important long after the pandemic has ended.
Crucial days for the PR function
As more C-suites embrace the social and performance advantages of balancing corporate purpose with immediate and long-term profits, public relations professionals will play an important role in shaping company direction. With one ear attuned to corporate priorities and the other to social demands and perceptions, PR needs to serve as a company’s antennae, interpreter, and compass as we help navigate foggy, uncharted territory.
Clearly defined company purpose is no longer a “nice to have.” It is a business-critical imperative for corporate leadership to define, live, infuse and connect purpose to their day-to-day actions. Regardless of a company’s progress in that regard, it boils down to answering, and constantly affirming, two essential questions.
- What is our reason for being?
- What would the world lose if our company no longer existed?
Public relations is an important discipline to help guide senior management through this process of defining, embedding and living company purpose. It is critical that PR pros help assess potential risks and benefits, prepare for inevitable push-back, and steady nerves when necessary.
No precedents to guide us
“Corporations have to figure out who they are in this moment,” said Sherrilyn Ifill, president of the NAACP Legal Defense and Educational Fund shortly after the CEO statement ran. “If people feel like it’s a been a week of discomfort and uncertainty, it should be, and it needs to be.”
This is an unfamiliar new landscape for big companies whose natural instinct may be to remain neutral. While neutrality may not always be wise or possible, caution is always necessary. But achieving the higher performance metrics of ESG-savvy companies will involve tradeoffs. None of Atlanta’s big-four corporations—Delta Airlines, Coca-Cola, UPS and Home Depot—signed the April 15 letter. However, they did issue their own statements affirming support for unhindered voting rights, which ruffled many feathers while gaining new allies.
In 1953, Charles Wilson, president of General Motors, testified before congress that: “What’s good for GM is good for the country.” This became a much repeated, universal sense of “purpose” for private business for many decades. Today, this statement has been reversed. What’s good for the country – and the world – is good for business.
* The February G&S Snap Poll exploring attitudes around corporate purpose, ESG and DE&I was administered online. It was completed by 422 adults aged 18+ in the U.S. on February 10, 2021, and was balanced for age and gender.