Why Corporate Responsibility Matters to Investors — and Your Business’s Long-Term Success
Building a solid reputation for corporate responsibility (CR) takes a commitment to community, a fair and engaging workplace for employees, and an honest governance structure. Equally as important, it takes communicating these efforts to investors so there’s awareness of the brand’s social and environmental initiatives and successes in this area.
Investors — and society as a whole — are placing increasing importance on a brand’s social impact beyond business success. Brands with the most effective CR strategies balance making a positive impact with their brand promise and being transparent about the progress and impact of their efforts, while not contradicting their business goals.
Industry leaders, including Adobe, Microsoft, and Symantec all have successfully launched and maintained corporate responsibility programs, landing on the Dow Jones Sustainability Index (DJSI) World list, the gold standard of corporate responsibility reporting for the investor community. However, even as companies turn their focus to sustainability and other social impact initiatives, reporting standards is still evolving in this area, making standardization inconsistent for the time being.
For companies to be successful with social impact initiatives, they need to put mechanisms in place for tracking their efforts and be clear and open about their results and progress. Doing so can help them achieve long-term success and a better relationship with their customers and investors.
Social impact matters more than you might think
Increasingly, investors are taking note of environmental, social, and governance (ESG) initiatives — and rewarding companies that do a good job by investing in them. According to the second annual Corporate Social Responsibility Survey from Aflac, FleishmanHillard Research, and Lightspeed GMI, more than 80 percent of professional investors prefer to invest a company known for its social responsibility.
Michelle Crozier, director of sustainability and social impact at Adobe, explains the reasoning for this preference: “From an investor standpoint there is an increased interest in ESG reporting, as it shows that companies are ultimately becoming more transparent by disclosing key ESG metrics and decreasing the risk in a particular investment.”
CR reporting often answers those questions, suggesting that companies are more open in their operations and financial reporting. Openness implies lower risk for investment.
CR indices promote progress
For some companies, however, CR can be an afterthought. In these organizations, there’s often a large gap between perceived CR and actual CR. Indexes like DJSI or Reputation Institute’s annual ranking help investors and consumers identify companies that are making true progress.
Adobe, for example, has made the Dow Jones Sustainability Index (DJSI) World list for two consecutive years. Sustainability and social impact have been an essential part of our culture since it was founded. Our holistic approach involves our employees and operations, customers and products, and the communities where we work and live. Since 2014, our company has included information on our sustainability practices in our proxy statements.
“Our strong environmental, social, and governance policies and programs have helped us consistently rank high on indexes like DJSI,” says Jenn Crutchfield, measurement and reporting lead for Adobe.
Symantec, which has ranked on DJSI for 11 straight years, has released a corporate responsibility report annually for the last decade and supports the UN Sustainable Development goals. The company wants to reduce greenhouse gas emissions by 30 percent by 2025.
Indexes like DJSI keep companies accountable by externally tracking and measuring their efforts. As investors focus on companies’ social impact, these indexes will have a larger effect on their reputation in the marketplace. For example, the Reputation Institute builds profiles of companies based on seven factors. Of the seven, three — governance, positive influence on society, and treatment of employees — drive nearly 30 percent of an organization’s overall reputation and tie back to the core tenets of CR. In this way, CR and corporate reputation are connected, adding to CR’s impact on investors’ perceptions.
Aligning social initiatives with business goals
To be effective, companies can’t embrace just any social initiative. Instead, they need to ensure their social efforts align with their existing business objectives and strategies. From there, they need to ensure that these initiatives have an ongoing focus that is integrated into the company’s culture.
James McGregor, CEO and founder of Blue Tribe, which works with companies and governments to help them develop innovative business models to deliver positive social or environmental impacts, says that authenticity is key.
“CR becomes a problem when companies bolt on solutions because they feel they need to. This is disingenuous, and the public sees through the efforts,” James says.
When this happens, CR can actually backfire and hurt a company by making it look dishonest. To gain the benefits of CR, companies need to fully invest, and then they need to be transparent about the impact of their initiatives. That transparency will translate into a positive relationship with the public — and with investors.
Transparency also means relevancy, Jenn says.
“In the CR space, we are currently facing a crisis of being asked to disclose too much data, some of which may not be relevant to a company’s actual business operations,” she says. “Disclose the facts that actually matter to your main stakeholders. Transparency is about asking what your stakeholders are requesting, and then continually pushing the envelope internally to provide relevant data externally.”
Transparency also impacts public perception. According to a Nielsen Global Survey on Corporate Social Responsibility, 50 percent of global consumers are willing to pay more for goods and services from companies that have implemented programs to give back to society. This shift in public opinion means that the company behind a product is more important than the product alone in driving consumers to be loyal to a brand.
Cultivating your company’s social impact
Social impact initiatives can improve reputation in the investor community and in the marketplace, but making an impact — and measuring progress — is an ongoing responsibility. Jenn says she and her team at Adobe learned this when they first began to track and report on the company’s sustainability efforts.
“Taking that first step is the most important,” Jenn says. “The process of creating a corporate responsibility report takes time and can be intimidating. The first year is always the hardest, as it is when so much internal education needs to occur. After that, each subsequent year has been easier.”
James says every company should focus on three things when it launches social impact initiatives:
“First, make sure there are top-down drivers for corporate responsibility. You need to have an executive reinforcing the objectives,” he says. “Second — and most important — make sure the initiatives align with and directly support the core business. Third, link all CR values back to brand values. That alignment is a core element of success in sustainability initiatives.”
Jenn says the hardest part is just getting started.
“I strongly encourage any company to begin the process of reporting — even if the first year’s report isn’t published externally. There is always a hurdle to overcome with simply getting internal stakeholders comfortable with the idea of public disclosure.”
As you look to make your own programs more transparent, keep in mind these lessons from a successful corporate responsibility program:
- Be honest and transparent about social causes and environmental sustainability initiatives.
- Be aware of legal regulations specific to the industry.
- Be involved with your audience at a social level.
- Create a culture built on making a positive impact.
- Get your customers involved.
- Make philanthropic efforts a regular occurrence.
- Let employees lead the cause.
As you begin, set both long- and short-term goals.
“It’s important to show small wins — especially as you are building momentum within a company to hit those lofty targets,” Jenn says.
James agrees: “Long-term goals are aspirational and promote initiative and innovation. Short-term targets are as important as small wins to keep people motivated.”
James adds that social impact initiatives ultimately communicate to the larger world what a company stands for — and clearly conveying this message can help a business achieve long-term success.
“A company’s brand is all about the ‘why’ a company does what it does,” James says. “Customers and investors want to buy into a vision, a cause, and belief system that aligns with their values or desires. Corporate social responsibility speaks to the heart of a company’s ‘why.’”
Read more content from our complete sustainability and social impact series here. For more on sustainability and social impact at Adobe, please visit this page.