You feel it, and they feel it too. Anticipation over the policies of the new administration has sparked a national conversation on the importance of individual contribution to the common good. Corporations have a voice — and business leaders are considering whether to commit their companies to participate in this conversation.
“Corporate citizenship” refers generally to the business practices of an organization that position it to proactively and positively contribute to both the communities it serves, and to society as a whole. It’s not a new concept; it’s been around for awhile but overshadowed by the focus on more formal, and more regulated environmental, social and governance investing.
But the prevailing political environment has re-ignited questions whether companies should commit material resources to addressing societal challenges. Are companies better off leaning in, or sitting on the sidelines? There are both pros and cons to this question.
A recent report from The Conference Board posits that corporate citizenship makes an important, if discreet contribution, by addressing societal opportunities that align with corporate purposes. Among those opportunities cited by the report are employee engagement, partnerships with government, education, geopolitical concerns and even democracy and the rule of law.
Employee Retention. For example, younger employees are increasingly interested in working for companies they believe support socially responsible practices. Corporate citizenship initiatives such as including employee volunteering and matching gift programs within employee benefit programs can further social goals while simultaneously influencing the important goal of employee retention.
Humanitarian Assistance. A similar benefit arises from corporate responses to geopolitical crises (e.g. wars and natural disasters) through various humanitarian efforts. Such citizenship offers opportunities for employee and consumer participation, as well as building relationships with communities and “on the ground” partners that collectively enhance the company’s reputation.
Government Partnerships. Corporate citizenship also encourages targeted collaboration with government. These efforts combine the flexibility and efficiency of the private sector with the resourcing and programming of the public sector to address specific concerns (e.g. rural development, disaster response and economic development). They often lead to greater alignment between the long term goals of government and of business.
Democratic Principles. Particularly relevant to today’s environment are nonpartisan corporate citizenship initiatives intended to strengthen the rule of law and democratic principles. These could include support to nonprofit organizations that focus on issues such as voting rights and civic participation. It could also extend to providing human capital and technical expertise in support of more efficient operation of municipal government and law enforcement.
Certain internal-to-the-company initiatives can also be seen as consistent with corporate citizenship objectives. These include, but are not limited to:
Truthtelling. Business leaders can support “the credibility bar” for leadership discourse by making transparency an organizational imperative, with respect to non-confidential financial statements, corporate policies, communications and expressions of strategic direction and purpose—and by penalizing employees who practice falsity and prevarication.
Ethical Conduct. Business leaders can support rules intended to support procedural fairness by strengthening their internal codes of ethical conduct in matters of human capital and resource allocation, reasonableness in matters of compensation, and equity in matters of individual evaluation and promotion.
Culture of Compliance. Business leaders can support respect for law and regulation by re-energizing efforts to promote an organizational culture that encourages ethical conduct and a commitment to compliance, and assuring the hierarchical importance of the chief legal officer and compliance officer.
The primary “con” of corporate citizenship initiatives is the risk that they may be misinterpreted by internal or external sources as partisan or provocative in one way or another. A particular concern is that such initiatives might be offsetting to a company’s consumer base, which would prefer that the company stick to what it does best, and to stay away from controversial topics.
These risks are real and significant, especially given the decline in public and government support for ESG-styled programming. Yet, as The Conference Board report notes, corporate citizenship seeks to address societal challenges that align with a company’s strategy and purpose by “building reputation, driving innovation and engaging employees.” If pursued correctly, corporate citizenship achieves a “win/win” by supporting identified priorities of senior leadership.
The board and management are thus encouraged to consider corporate citizenship opportunities in the context of their impact on the company and its business. This may well include the various opportunities cited by The Conference Board. It may well exclude issues that are overtly controversial in the public milieu, regardless of the interest of their stakeholders.
Corporate citizenship is more than “ESG-lite.” Rather, it’s a less formal, less controversial, less partisan and less regulated way to align identified corporate goals with recognized social needs.