A new study [PDF] released by the Committee Encouraging Corporate Philanthropy (CECP) and McKinsey and Co. reveals the growing importance of company leadership in corporate-social progress, given current trends and uncertainties, and where they appear to be heading in the next decade.
According to Margaret Coady, Director of CECP, “This report provides today’s business leaders with an urgent vision of what business could look like in the next decade.” She explained, “By going beyond historic levels and models of corporate community involvement, the zero-sum tension faced by corporate executives of increasing shareholder returns and doing the right thing for society can be dissolved.”
The study, “Shaping the Future: Solving Social Problems through Business Strategy,” highlights five current trends expected to influence global corporate and social relations over the course of the next ten years: The Great Rebalancing (shifting centers of economic activity), The Productivity Imperative (talent shortages), The Global Grid (new levels of technological interconnectivity), Pricing the Planet (increased scarcity of natural resources), and The Market State (a new era of government action).
The research also highlights two points of uncertainty expected to frame corporate-social conversation and collaboration as we move into the future: first, a climate of mistrust toward corporations, and secondly, the responsibility public corporate leadership has toward shareholders to deliver the highest possible returns to investors.
Taken together, the researchers claim, these trends and uncertainties lead to four potential outcomes regarding the progress corporations can make in the social/philanthropic realm.
Four Visions for Corporate-Social Involvement
The preferable outcome for corporate-social involvement during the next decade is that of “sustainable value creation.” The study explains “In this scenario, society’s expectations rise consistently and become more globally consistent, and consumer trust in business’s motives rises, while business proactively engages in social issues, creating a win-win situation. A self-reinforcing cycle of trust in business and trustworthy and pro-social corporate behavior prevails.”
The second outcome is that of “dual capitalism,” in which, while businesses do work toward social progress, they compete with one another, governments, and NGOs. Resultingly, “there is a lost opportunity for collaborative innovation and collective action on issues—such as talent and resource scarcities—that affect many players yet are dealt with individually.”
The third and fourth outcomes aren’t as productive. The third outcome is the “dangerous mismatch,” in which corporations are reactive to government regulations on social issues, rather than proactively working toward social progress. This means “progress is made on social issues due to strict—and strictly enforced—rules, but trust in business declines because corporations are perceived as apathetic.”
And finally, the worst outcome is the “vicious cycle,” in which “Inconsistent societal expectations and a disengaged business community combine to create a toxic downward spiral that is difficult to reverse.”
Achieving Progress through Strategic Vision
The top outcome can be achieved, and the least productive outcomes avoided, the study says, through engagement by company leadership and a strategic approach to social progress.
First of all, the report stresses the importance of the CEO’s vision on these topics – to influence shareholders to take take the longer view and move their focus beyond quarterly returns. One of the CEOs interviewed for the study, Marilyn Carlson Nelson of Carlson, explained, I don’t think that many companies think generationally, but increasingly we’re going to have to.”
Next, those in charge of social ventures must have the credibility and authority to move their project forward. The report explains, “As with any other new venture, progress on sustainable value creation will not succeed if execution responsibility is relegated to a small team hidden within a larger department or, worse yet, individual contributors scattered around the globe.”
And finally, the report emphasized the value of planning small pilot programs to demonstrate the value of social philanthropic ventures to shareholders, before moving forward.
Companies need to change their logic – social project should no longer be seen as a viewed as philanthropy alongside business ventures, but as an integral part of business strategy.
According to Charles Moore, Executive Director of CECP and Coady, “This model goes beyond simply aligning philanthropy with business objectives or creating smart signature programs in relevant funding areas; instead, it requires synthesizing core values and financial goals into a single corporate strategy.”
Corporations need to select “issues that drive growth or reduce costs, all while demonstrably helping local communities and broader societies address their own development priorities.” And leadership needs to take a strong strategic approach to framing these projects.
As Ken Powell of General Mills explained, “Done right, social engagement is incorporated into the mission of the company, which means that the CEO must be the person who shapes the agenda and communicates the message around it.”