Welcome to the Fall CSR Newsletter!
Why the Debate Over Stakeholder Value vs. Shareholder Value is All Wrong
This article by Maureen Kline, Vice President of Public Affairs and Sustainability at Pirelli Tire North America originally appeared on inc.com. Kline is an engaged member of the Council community and we thank her for allowing us to share here.
The Business Roundtable, a coalition of America’s leading corporate executives, caused a stir with its August 19 announcement calling for corporations to create value for all stakeholders rather than just their shareholders. A debate ensued over whether Milton Friedman was right or wrong in 1970 when he famously declared that the social responsibility of business is to increase its profits. Some commentators accused the executives of abandoning shareholders; others decried that they were “green-washing” or “purpose-washing:” making themselves look good without authentic action.
In reality, large corporations have long understood the importance of creating value for all stakeholders, including their employees, customers, suppliers and communities, as well as their investors. The Business Roundtable statement just confirmed a trend that is both underway and unstoppable.
- The business case for creating stakeholder value has already been proven. Creating value for stakeholders, when managed strategically, doesn’t take away from enhancing profits for shareholders, it adds to it. It is part of good management. This is not a zero-sum tradeoff.
- The U.S. economy is suffering from fallout from short-termism, investors squeezing profits out of companies with a shorter time horizon. Companies pressured to deliver greater profit margins to their financial owners in the space of a quarter, or less, might not be making the investments and strategic decisions that will allow them to thrive in the longer term.
The Business Roundtable statement begins: “Americans deserve an economy that allows each person to succeed through hard work and creativity and to lead a life of meaning and dignity. We believe the free-market system is the best means of generating good jobs, a strong and sustainable economy, innovation, a healthy environment and economic opportunity for all.”
For a long time the U.S. was known around the world as a “meritocracy.” U.S. policy aimed to provide citizens with equal opportunity, for example through public education or public libraries, and to reward those who worked hard and applied their talent.
But Michael Young, the U.K. Labour Party strategist who coined the term “meritocracy,” knew that once the most talented workers rose through the capitalist system, over time this new elite would naturally consolidate its power, leaving behind those less equipped to succeed, and eventually stratifying society.
It is widely known that this has occurred in America. Most political campaigns on both sides of the spectrum discuss addressing societal stratification.
The Business Roundtable has recognized that while corporations must be well-managed for the benefit of their owners, U.S. capitalism needs to find ways to ensure a longer-term vision than the one that has morphed out of the automation of stock trading, the rise of passive investing, and the power of activist shareholders wanting to squeeze value out of a company no matter the broader context. The investor community itself has been alarmed, as evidenced by the rise of a movement subscribing to “Principles for Responsible Investment,” which promotes inclusion of environmental, social and governance (ESG) criteria in evaluating investments, and which now has more than 2300 signatories representing more than 80 trillion dollars in assets under management.
Tensie Whelan, director of the NYU Stern Center for Sustainable Business, notes the difference between value extraction from a company (through “maximizing short-term profits and boosting stock price, often at the expense of stakeholders other than shareholders”) and value creation for a company. NYU research shows a positive financial return on sustainability investments, with many long-term benefits.
Attention to ESG factors creates value for the company, and therefore for all stakeholders including shareholders. A European Union directive now requires companies to provide non-financial (ESG) reporting to investors as well as financial reporting. Creating value for all stakeholders isn’t a foreign concept to European companies, whose cultural context has historically favored this idea.
Kudos to the Business Roundtable for bringing its statement on purpose into line with 21st century practices. The statement is a signpost that will most certainly make it easier for companies to implement purposeful strategies.
If you have an article that you’ve had published, or would like to pitch an article for this newsletter, please email Policy Communications and Corporate Responsibility Practice Manager John Brandt.[/vc_toggle][vc_separator]
Two New Member Benefits: Council Connect and the CSR Book Club
We have two new member benefits to share with the Council’s CSR community, Council Connect and the CSR Book Club.
Council Connect is an online, members-only community. This platform gives you access to the expertise of your public affairs peers through brainstorming ideas, crowdsourcing questions and challenges and downloading the Council’s resources in real-time. We’ve started a few open threads in the CSR Community that we hope will become a base for intelligent discussion of best practices and real-world examples.
Over time, many of the requests for information, surveys and resources from the PIN network that have historically been shared through email will shift to Council Connect, allowing you to get information and access expertise faster.
We’ve announced a date for our first CSR Book Club event. On November 21, we’ll be discussing be The Battle to Do Good: Inside McDonald’s Sustainability Journey by Bob Langert, the former head of corporate social responsibility and sustainability for McDonald’s. We were looking for an in-depth case study that had sustainability solutions at scale and concrete examples of how to get buy-in from senior executives for our first book. This one fits the bill.
If you’re interested in meeting your peers in the CSR community or just love reading, join us in November!
CSR for Small Businesses
Our next piece comes from Joe May, CSR Manager at State and Federal Communications. Joe shared his company’s CSR experience to help other small- to medium- sized companies think strategically about sustainability and philanthropy.
In October 2017, State and Federal Communications began a coordinated CSR program. Were we too small to consider such a project? For President and CEO Elizabeth Bartz, this was a question of leadership. Elizabeth always had a vision that we could be profound agents for change in our community. The time was right for us to structure our CSR.
We began with the understanding that the needs in our community are real and we could make a difference. But how could we address those needs? What type of CSR would make sense for our organization? We started with what we already had in place, and sought a CSR program that would make a measurable impact on the community.
With the help of smart partnerships, here are the main areas we have focused on:
We generate a great deal of paper waste, so recycling paper has been in place for a long time. In order to minimize the waste from single-use plastic bottled water, the company installed reverse osmosis water dispensers in the break rooms. State and Federal Communications responsibly disposes of spent fluorescent bulbs and replaces the spent fluorescent lights with LED units, which lowers our use of electricity and last much longer. We just began a campaign to recycle aluminum cans in partnership with the Akron Zoo’s Cans for Corridors program. The revenue from every 50 recycled aluminum cans plants one tree in the Brazilian rainforest.
Strategic philanthropy
State and Federal Communications has a 20-year relationship with United Way of Summit County. Their goals target key issues like education, by bolstering grade school literacy and college preparedness; financial empowerment, offering services to those living paycheck to paycheck; and reducing emergency room visits caused by drug overdoses. State and Federal Communications matches every dollar donated by its employees in its annual United Way campaign. We have 100% participation in the campaign nearly every year, and we always receive the “Highest per Employee Giving” award from United Way for our size category.
State and Federal Communications is concerned about the alarming rate of hunger in our community, so we have partnered with the Akron-Canton Regional Food Bank and a local church’s Good Samaritan food outreach program. In 2019, we raised the equivalent of 2672 meals to feed the hungry.
Community engagement
Every employee that gives one percent of their income to the United Way campaign receives 30 hours of charitable service time per year, where they can leave the office and volunteer at a nonprofit. Every employee that contributes half of a percent receives 12 hours. Our staff have participated in 10 United Way Day of Action events. We have served at food pantries, and on various nonprofit boards, like the Court Appointed Special Advocates Volunteer Board, helping children in the court system.
Let the stakeholders know
We work hard to share our CSR efforts via social media and our annual CSR report. I also maintain internal communications with a digital newsletter called Engage, which goes out to our employees every other week.
What is the secret to our success?
There are four reasons for our CSR success. First, the vision comes from the very top. Corporate social responsibility has always mattered to Elizabeth Bartz. Second, we listened to our employees and what causes they care about. Many of the ideas for our philanthropy and community engagement projects have originated from employees. Third, we found excellent partners who were aligned with our goals and who are doing work with real impact. And last, I think it is important to step out in faith before your ducks are in a row. The ducks are never going to be perfectly in a row. Just get started.
I believe any organization, no matter how small, can develop a remarkable corporate social responsibility program. No project is insignificant, and you never know where the partnerships may take you![/vc_toggle][vc_separator]
Don't Miss These Upcoming Programs
Workshop: Strategic Communications | November 14 | Public affairs and advocacy campaigns fail in no small part due to their communications strategy. With distrust in institutions growing, organizations need a plan to share their story authentically.
Workshop: Stakeholder Mapping and Engagement | December 3 | Advocacy agendas don’t exist in a vacuum. Achieving success for your goals often requires understanding and engaging all your stakeholders.
Workshop: Public Affairs Writing:| December 4 | Polish up your prose with our renowned writing workshop. We’ll show you how to craft more powerful and persuasive copy with real-world examples and exercises.
One Last Thing
We always want feedback from our members. What CSR issues do you want us to explore in 2020? What resources would help you in your day-to-day operations? Tell us in Council Connect, or send an email to John Brandt, the head of our CSR Network.