Can businesses combine ‘doing well’ with ‘doing good’?

Strategic CEOs are finding a place for social championing within the context of business performance, connecting “urgent” issues with “commercial logic” in the pursuit of value creation.

Moving beyond virtue signalling and risk mitigation, forward-thinking organisations are adopting a sustainable stance on environmental, social and governance (ESG) topics through linking company activity with four key stakeholders – community, customers, employees and suppliers.

“The companies that lead on social issues, such as DEI [diversity, equity and inclusion] and socially responsible supply chain practices, don’t view these efforts solely as risk mitigation,” said Karthik Venkataraman, Partner in DEI at Bain & Company.

“It’s the opposite, in fact. The leaders in this space have found ways to directly tie their social efforts to the commercial logic of their businesses, opening new opportunities for value creation by better serving all of their stakeholders. They see a symbiotic relationship between the concepts of ‘doing well’ and ‘doing good’.”

According to Bain & Company findings – surveying a base of almost 300 high-performing CEOs – 85% of business leaders view social issues as “urgent” concerns for the companies they run. Within that context, 60% of executives believe the primary role of their organisation is to either create “positive outcomes for society” or “balance the needs of all stakeholders”.

For the cynical minded, pursuing social causes is a luxury given the daily weight of responsibility to customers, employees and stakeholders.

Yet for those seeking a business case, the data suggests organisations leading on social outperform competitors across revenue and EBIT growth – at 78% vs. 47% and 74% vs. 41% respectively. This also extends to acquiring new customers (68% vs. 38%) and attracting talent (60% vs. 37%) as well as the ability to raise capital (64% vs. 49%).

“Most business leaders are well aware of the risks of violating the new social expectations for business,” Venkataraman added. “Certainly, they do not want to find their brands and companies attacked on social media or named in the press in damaging contexts.

“Companies that have taken the lead in addressing social issues report that doing so drives better business outcomes in a variety of ways.”

Another key consideration for CEOs is that one of the most influential stakeholder groups in the charge for change is in fact, customers.

“Customers have made it clear that they care about the social ramifications of their brand and product choices,” Venkataraman added.

So much so that 52% of consumers are more likely to buy from a brand that commits to combatting racism and more than half are more likely to buy from a brand that commits to human rights.

“When it comes to engaging in social issues, the challenge for many executives lies in figuring out how exactly to transform action on these issues into economically sustainable business performance,” noted Jenny Davis-Peccoud, Partner and Global Head of Sustainability and Responsibility at Bain.

“The ‘S’ in ESG comprises a wide range of issues, which vary by organisation. We recommend starting with a focus on four critical groups of stakeholders – local communities, customers, employees, and suppliers – and identifying actions that both address social issues for these groups and deliver results for the business.”

Key questions for CEOs to ask include:

• Community: Do the communities we do business in see us as a positive force? If our business doubled (or if it disappeared), how would these communities assess the gains (or loss)?
• Customers: Who does not have easy access to our products or services? How might we expand our offerings to attract new, often overlooked customer groups with economically viable value propositions?
• Employees: What can we do to become a talent maker vs. a talent taker to create opportunities for employees while developing the pipeline we need for long-term business growth?
• Suppliers: How equipped are my suppliers to meet new criteria for socially responsible practices? Am I doing my part to influence their practices and build resilience in my supply chain?
• All stakeholders: Do our communities, customers, employees, and suppliers see us the way we see ourselves? Would they say we are living up to our declared purpose and values?

Delving deeper, Davis-Peccoud outlined four areas of opportunity to help CEOs translate action on social issues into an economically sustainable business performance:

1. Improving social and economic conditions in local communities: Communities where companies operate are increasingly critical stakeholders for business. Some companies are looking at these stakeholders through a social lens and discovering how to materially improve conditions in their communities in ways that boost business performance.
2. Identifying new sources of customer value: Applying a social lens to customers and markets can reveal opportunities to create value for whole new customer segments, including in underserved markets.
3. Investing in the current and future workforces: Given the challenges companies now face in attracting and retaining the right talent, businesses can shift from being “talent takers” to “talent makers” by investing in employee learning and development.
4. Enhancing supply chain resilience by building socially responsible supplier relationships: By examining their supply chains through a social lens, companies can work effectively with suppliers to ensure fair and equitable practices while also making their end-to-end supply chains more resilient.