Ipsos Corporate Reputation

Taking a stand – do the rewards of corporate activism outweigh the risks?

Corporate activism is both an opportunity and risk, with Council members acknowledging both sides of the debate in equal measure.
There is widespread acknowledgement that corporate activism is expected by consumers, but is also very hard to do well.
Authenticity is the key, with campaigns that are true to your corporate values having the greatest chance of success.

In 1966 Robert F. Kennedy made a speech in which he referred to a Chinese curse “may he live in interesting times”. The world was an uncertain place in the 1960s, with risk and opportunity both abundant.

It seems history is very much repeating itself as social and political disruption gathers pace, alongside the myriad opportunities being created by the digital economy.

So what’s the role of business given this backdrop? Can it be a force for progressive change in a world where anti-establishment beliefs are in the ascendancy? Or, indeed, will more companies choose to adopt a tone of ‘regressive activism’, for equally pragmatic or idealistic motives? More fundamentally, can the voice of business even be heard when the prism of fake news is applied to so much communication?

Well, Council members believe that businesses do have a licence, or even an obligation, to speak out on the big socio-political and cultural issues of the day (the environment, tolerance and diversity, and social justice are most often mentioned).

"BUSINESSES ARE PART OF THE COMMUNITY SO THEY SHOULD HAVE A VIEW. LEADERSHIP SHOULD NOT STOP AT FINANCIAL ISSUES."

This is nothing new – think of Lever Brothers, or Carnegie and Rockefeller in the US. In a world that seems more connected, but more polarised, than ever, the pressure is growing on businesses to connect with people in an authentic and meaningful way — to tackle issues that really matter to society as a whole rather than focusing purely on the bottom line.

In large part, Council members attribute this pressure to the growing expectations of customers, opinion formers and especially employees, who want to understand more about a company’s purpose and values, before they invest their money, time or goodwill. Nowadays what your business stands for is as important as what it sells. People want reassurance that businesses can be on their side, understand their issues and be prepared to fight their corner.

This is borne out by a 2016 Ipsos study across 23 countries, in which 63% of the public said they tend to buy brands that reflect their personal values – up from 54% in 2014. And in fast-growing economies such as India, China and Indonesia, the proportion was higher still.

Council members tend to agree. More than half (56%) say their consumers expect them to take a stand on socio-political issues, against a quarter (23%) who disagree.

"THEY ARE MORE SOPHISTICATED CONSUMERS AND THEY PERHAPS SEE THERE IS NOT MUCH FUNCTIONAL DIFFERENTIATION BETWEEN BRANDS, AND MAKE THEIR DECISIONS MORE ON WHETHER IT IS THE SORT OF COMPANY THEY WOULD LIKE TO BE ASSOCIATED WITH."

In reality, of course, decisions about when and how to take a particular stand are complex. But we can distil the views of the Reputation Council into five guiding principles.

1. Above all, be relevant and authentic.

Any public position must reflect the genuine purpose, values and actions of the company. To paraphrase Mark Zuckerberg, focus on the fundamentals. Trust in businesses (along with other elites) is low, there’s lots of noise, and people are quick to sniff out self-interested, trivialising or opportunistic positions.

On the other hand, a stance which is aligned with a strong social purpose that is true to your values can bring benefits beyond the purely altruistic – creating a real connection with customers, helping to attract the best talent and leading to better engagement with influencers. A clear social purpose also acts as a road map, clearly outlining the issues a business will, and will not, engage on (particularly useful guidance when resources are limited).

"AS A BUSINESS YOU NEED TO FIND THE AREAS THAT ALIGN WITH YOUR PURPOSE AND YOUR BRAND AND, AS LONG AS YOU HAVE A POLICY, IT IS EASIER TO DEFEND THE AREAS THAT YOU ARE SUPPORTING AND THE AREAS THAT YOU DON’T WANT TO GET INVOLVED IN."
2. Practice what you preach.

Any stance will lack credibility if the business can’t show a track record of action. If you’re taking a stand on diversity, you’d better be sure you measure up within your own business. And wherever possible, show the tangible value of your work to people’s lives.

The companies which Council members most admire are agents of change, not bandwagon-jumpers. Qantas’ campaign in support of same-sex marriage in Australia, despite opposition from some influential stakeholders, is cited by a number of Council members as a genuine, powerful example.

"I THINK THE CHALLENGE FOR BUSINESS IS TO COMMUNICATE THEIR ROLE IN THESE SOCIAL POLICY DEBATES IN A MEANINGFUL WAY AND NOT LOOKING PERHAPS SELF-INTERESTED, AND BEING CREDIBLE AND BEING IN IT FOR THE LONG TERM AS WELL. AND ACTUALLY BEING ABLE TO DEMONSTRATE THE VALUE OF WHAT YOU ARE DOING."
3. Don’t get party political.

Council members are strongly of the view that companies should avoid
issues which are closely aligned with party political agendas – at least publicly. In the main, such themes (Brexit and the Trump presidency are mentioned a lot) are seen as too polarising, too short-term and above all too risky for corporates to get embroiled in. But as major social and cultural movements become increasingly politicised, this may be a fine distinction for activist companies to negotiate.

"I DON’T THINK THAT COMPANIES SHOULD GET INVOLVED IN POLITICS, THAT IS NOT WHAT WE DO AND IT IS NOT WHAT WE SHOULD DO… I DON’T WANT TO BE TOLD BY MY EMPLOYER OR BY THE COMPANIES I INVEST IN HOW I SHOULD BE VOTING."
4. Understand the risks.

Taking a bold stand will be inherently divisive, and can be a bruising experience. It might bring rewards, but it will definitely carry risks. Three in five Council members (59%) believe the benefits of taking a stand are greater than ever. But three quarters (77%) say the risks are greater too. So it’s important to be selective. But if an issue lies at the heart of your corporate purpose, and the expectations of your stakeholders, then not speaking out may be the bigger risk.

 

5. Not every company has to be a direct social activist.

Council members often have to think about how a particular position will play out in different global markets, or among stakeholders with conflicting expectations, or have to work within regulatory restrictions on what they can say.

These businesses may have less of an appetite for controversy, perhaps preferring to engage collectively via trade associations or industry bodies. However, is important to bear in mind that they still feel they are engaging constructively on important issues – perhaps not taking such an overt, confrontational stand, but still having a principled point of view and being part of the discussion.

"FOR GLOBAL ORGANISATIONS, YOU HAVE TO WEIGH UP THE CONSEQUENCES TAKING A STAND IN ONE PART OF THE WORLD WILL HAVE ELSEWHERE, AND ONE ALWAYS HAS TO DEAL WITH THAT AMBIGUITY."

Final thoughts

Activist consumers and stakeholders increasingly demand to know where corporations stand on the issues which matter to them. They are looking for leadership that places social progress (in whatever way they define it) at the heart of the corporate agenda.

However, speaking out carries risks and can be divisive. But if it genuinely reflects the social purpose and values of the business, and is backed up with evidence of action, the reward can be a powerful, positive impact on reputation and relationships.

Methodology: 127 interviews conducted with Reputation Council members between April and August 2017.

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It’s the environment, stupid!

ENVIRONMENTAL CONCERNS ARE NO LONGER JUST PRESSING ETHICAL ISSUES, BUT QUESTIONS OF FINANCIAL PRUDENCE. OVER HALF OF BRITISH CONSUMERS FEEL WE ARE EXPERIENCING A CLIMATE CRISIS, AND OVER ONE THIRD SAY THEY WOULD SWITCH OR BOYCOTT A FINANCIAL ORGANISATION IF ITS INVESTMENTS HAVE A DETRIMENTAL ENVIRONMENTAL IMPACT. DESPITE BIG CONCERNS AROUND COVID-19, THE ENVIRONMENT REMAINS A PRIORITY FOR THE PUBLIC, AND BUSINESSES WILL BE EXPECTED TO CONTINUE THE TRANSITION TO A SUSTAINABLE ECONOMY IN THE POST-CRISIS PERIOD.

Whilst it doesn’t roll off the tongue with as much zest, James Carville’s ‘the economy, stupid’ slogan is aptly modified for Larry Fink’s announcement earlier this year that BlackRock would base future investments with environmental sustainability as a central goal… ‘It’s the environment, stupid!’. If anyone could ‘wake up’ the market to the tipping point which has now been reached around the environment, it is the Chief Executive of the world’s largest asset management firm. “Awareness is rapidly changing” wrote Mr Fink in the company’s annual letter, “and I believe we are on the edge of a fundamental reshaping of finance”. This has been compounded more recently, with the announcement that the UK’s biggest pension fund, the government-backed National Employment Savings Trust (Nest), will begin divesting from fossil fuels, and BlackRock “launching a selection of ESG multi-asset ETFs, to provide investors with a cost-efficient, transparent and sustainable way to invest”.

Data from Ipsos’s 2020 Sustainable Business Monitor survey amongst the British public echoes these sentiments. With a majority of the public now feeling we are dealing with a climate crisis, it appears that cash may no longer be king in investments. Only 21% now claim to care more about financial returns on investments than on whether the financial provider is ethical in how it invests money. This is compared to 28% of the public who prioritise ethics over financial returns and 26% who feel they should be given equal footing. Even allowing for the possibility that consumers may not be quite so ethical when faced with this trade-off in reality, it is clear that there has been a change in the drivers of investment decision making.

Returns on investment or ethical considerations?
Views on Climate Change

The growing imperative for investors to prioritise companies with a good sustainability track record is brought into sharper focus when looking more closely at the attitudes of millennials. Findings from the Ipsos Sustainable Business Monitor show that 54% of 18-34 year olds would be concerned about investments in Oil and Gas, compared to 47% for the UK public overall. This isn’t limited to the UK either; sustainable investing interest among US millennial investors jumped from 84% in 2015 to 95% in 2019, according to Morgan Stanley’s Institute for Sustainable Investing.

Which sectors concern the public regarding investments?

So, what does this all mean? Unsurprisingly, that Fink is right.

Over one third of those asked said that investment in projects or companies that have a detrimental environmental impact would lead them to ‘switch from’, ‘stop using’, or ‘boycott’ a financial organisation. Indeed, sustainable investing is ranked alongside executive remuneration – an issue that has a long track record of being a strong driver of negative opinion for the finance sector.

Switching / Boycotting financial organisations

This sentiment is further reflected at a global level when looking at Ipsos data from the recent Earth Day 2020 report, highlighting that even when set against the crisis situation that COVID-19 has presented, concerns around the environment remain steadfast. Over 7 in 10 people around the world agree that climate change is as serious as the pandemic, whilst 65% agree that in the economic recovery from COVID-19, it’s important that government actions prioritise climate change.

Seriousness of climate change in comparison to COVID-19
Support for a 'green' economic recorvery from COVID-19

Recognising the growing commercial opportunity facing the sector, and the long-term risk of investing in environmentally unfriendly industries, Fink notes that “as a fiduciary, our responsibility is to help clients navigate this transition [the reallocation of capital]. Our investment conviction is that sustainability and climate-integrated portfolios can provide better risk-adjusted returns to investors”.

But where does this leave industries which have been traditionally harmful to the environment, such as the oil and gas industry, for a long time the bedrock of investment portfolios and still an essential service despite growing environmental concern?

In light of BlackRock’s position, The Economist wrote: “[t]o cynics, all the climate-friendly noises amount to little in practice, since few people are ready to make carbon-cutting sacrifices that would force oil firms’ hands. But noises are sometimes followed by action. Should they be this time, the 2020s may be do-or-die for the oil industry”.

It isn’t a case of ‘adapt tomorrow or die’ for fossil fuel companies however, and Fink makes this clear, forecasting “the energy transition will still take decades”. Citing fairness and justice, “we cannot leave behind parts of society, or entire countries in developing markets, as we pursue the path to a low-carbon world”. The demand for energy will continue whilst technology works to bring cost-effective replacements to conventional fuel sources, but it is incumbent on the sector to aggressively pursue cleaner energy; not only from an ethical perspective, but also in order to remain an attractive investment. The same is also true for a number of other sectors which have for a long time been harmful to the environment, and must adapt with the new way of sustainable investing.

Companies from within the fossil fuel and investment sectors which are leading the transition to a more sustainable future are on the right path, reinforced by public support. This should not be derailed. Communicators in these sectors therefore have the opportunity to maintain messaging around this transition, but with fairness in mind, should also remain sensitive to the societies whose energy programs are not as developed as some of the leading world economies. The transition to sustainable investing will need a collective effort – innovation from industry, reallocation of risk, government support and sustained societal scrutiny, but in adopting Fink’s position, it should be worthwhile effort for investors, producers, and consumers, from both an environmental and a financial perspective.

Contact: Alex Russell - Email | LinkedIn

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