Demands on companies and their CEOs to take stands on social issues ranging from immigration to climate change, gun rights to gay rights, Brexit to global trade, have accelerated rapidly in the past two years.
Additionally, companies are now being urged by many investors to demonstrate positive social impact. In his widely reported letter to CEOs this past January, BlackRock’s Larry Fink wrote, "Society is demanding that companies, both public and private, serve a social purpose. To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society."
The pressure on CEOs to take stands on social issues comes from customers, employees, even the president – just ask the NFL. However, when deciding whether to engage, companies must weigh risks and benefits that are often difficult to identify and even more difficult to quantify.
To thread this needle successfully, companies must use a more structured, thoughtful, and effective approach to all forms of social engagement. Professor Paul Argenti of Dartmouth’s Tuck School of Business, suggests there are four key questions to ask.
The first deals with strategy and values; "How relevant is this issue to our core business and values?" The second, with risk; "How controversial is this issue and how might our firm gain and what might we lose?"
The third addresses methods. "How can we take action, tie our motivations to our business or share our beliefs?" And the final question deals with urgency. "How urgent is it that my firm respond?"
Urgency is likely to be closely related to how closely the company is already associated with the issue, particularly if the company is under attack in a crisis.
The NFL, for example, could not avoid dealing in some way with players anthem protests because of the level of public interest in the subject and the dispute with Colin Kaepernick over whether he’d been effectively banished from the league in retaliation.
President Trump only upped the ante. But Nike’s dramatic engagement in the issue, making Colin Kaepernick the face of the brand in its "Believe in Something" campaign, was purely voluntary, the result of a calculation that it has more to gain than to lose. It's a calculation that initial sales reports seem to indicate was correct.
Sometimes, a company needs to engage on an issue that becomes magnified by a much larger public policy debate. The controversy that erupted this year when Cambridge Analytica was found to have collected personally identifiable information of more than 87 million Facebook users, and then used the information to influence voters, became inextricably linked to the larger debate over data privacy, manipulation of content, "fake news," and alleged Russian interference in the 2016 election.
In yet other instances, a company may engage on an issue not because of a crisis but because it’s related to the brand. Patagonia, the maker of high-end outerwear, prominently criticized the administration’s order to shrink two national monuments in Utah, and although the move was well-received by many of its customers, it also generated a boycott effort.
Determining if, when, and how to engage on a range of issues is a challenge every company now faces. In my next column, we’ll dig deeper into how to make that calculus.