Hard-wiring Corporate Purpose in the Age of COVID-19
May 15, 2020 | By Nate Wong and Audrey Voorhees
Nearly two months into quarantine, we’re seeing a shift in tone of company press releases from generic COVID-19 responses to something different. Beyond donations to relief and assistance, Target is investing over $300 million in employees with added wages, paid leave, and back-up childcare. Intel granted researchers and scientists open access to its global IP portfolio to pursue an end to the coronavirus pandemic. Actions like these no longer seem like window-dressing, but deeper commitments which may signal how some companies see themselves in a post-pandemic world.
A newer model of capitalism is emerging– acknowledging that “companies, workers, customers and communities are the engines for achieving success,” says Kavya Vaghul from non-profit JUST Capital. Real commitments to positive social impact are taking center stage as leaders know publicity ploys alone will not attract customers, and certainly won’t keep existing employees or their supplier base safe and healthy. COVID-19 is a litmus test for corporate leaders to think beyond maximizing profit and instead reimagine their relationships with workers, communities, and natural systems. Reimagining will require hard-wiring and building impact into their DNA, not just tinkering on the edges of CSR or marketing.
Enter born-socials with a playbook
Thankfully, a playbook for this new model of capitalism exists. “Born-social” companies put impact into everything they do, and model how to improve social and environmental outcomes while turning a profit. Patagonia and Ben and Jerry’s committed to community-oriented principles early. Warby Parker and Bombas embedded impact through non-profit partnerships. As corporate leaders make the shift from COVID-19 triage to strategic scenario planning, they should be intentional about how they re-form their corporate purpose, taking lessons from their “born-social” peers.
(Re)define what truly matters and measure it. Born-social companies set clear environmental, social, and governance (ESG) goals alongside financial metrics. Sustainable footwear startup Allbirds’ includes carbon as an expense line item on the balance sheet, helping the company reach carbon neutrality before any corporates pledged to do so. Allbirds also plans to reduce the carbon footprint of each shoe produced by investing a portion of the $75M raised in their most recent funding round in regenerative agriculture for raw materials. Prioritizing environmental goals may reduce Allbirds’ profits in the short-term, but it will pay off as they scale a sustainable supply chain that supports their competitive advantage. Even in a constantly changing environment like now, ESG measures can be dynamic in a time of COVID-19.
Create a stakeholder governance structure to “bake” it in. Leaders both loathe and respect governance. Its true value comes from how these structures help guide decision-making toward shared goals. The B Corp certification provides structure for born-social companies to demonstrate their commitment to creating public benefit and sustainable value for consumers, employees, and investors. Now, with over 3,000 certified B Corporation companies across 70 countries and 150 industries, these born-social companies have tied social and environmental performance to how they make decisions, who’s involved, and how they report it. Others created their own internal structures. Airbnb recently added a new Chief Stakeholder Officer role to execute its commitment to stakeholders in an effort to tie the company to specific principles, for example linking its compensation structure to guest safety and strengthening communities. As COVID-19 ushers in a surge of voluntary executive pay cuts, there’s an opportunity moving forward to better align compensation and incentives with holistic performance rather than stock price.
Bring your entire supply chain into the picture. Born-social companies know that each link of their value chain is critical for their long-term success. Sweetgreen carved a fast-casual niche by building a transparent “farm-to-table” supplier network. Rather than just an RFP process, Sweetgreen sees sourcing as long-term partnerships that allow customers to trace back their foods to the farm it was sourced. As this pandemic has made clear, supply chains are inherently linked. Unilever set aside over $500 million for early payment to small and medium-sized suppliers and extended credit to small-scale retailers, reinforcing their long-term value to their operations.
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Not why, not how… but when
As corporate executives reckon with complex future demands, the question is no longer why value a stakeholder lens (last year’s Business Roundtable corporate purpose statement made that clear). And as the examples above highlight, it can no longer be a question of how to do it. Born-social companies are raising the bar for improving society while turning a profit. It’s just a question of when others will catch up.
Successful corporate leaders see their actions today as a way to lay the groundwork for tomorrow. These vanguards will use this pandemic to re-tool how they treat their employees, work with community partners, create a resilient supply chain, and source in a regenerative manner. When we emerge on the other side of COVID-19, most if not all companies will need to embed social impact into their ethos to thrive. They will value stakeholders and measure their financial and non-financial performance. Leaders will re-form their corporate governance structure to align compensation with these new performance measures, emphasizing pay equity. Companies will integrate their supply chain more fully into their business with a sustainability-lens, including disaster response and continuity. Let’s start now. A more resilient and inclusive economy depends on it.
Nate Wong leads the Beeck Center for Social Impact + Innovation at Georgetown University. He previously helped launch social impact units at Boston Consulting Group and Deloitte Consulting LLP and is passionate about using business assets for the greater good. @NathanielKWong
Audrey Voorhees is a 2020 MBA Candidate at Georgetown University with a focus on private sector social and environmental impact who is passionate about designing innovative solutions across public, private, and social sectors. @VoorheesAudrey