Our World, Our Work: Purpose and Impact in a Time of Change

Posted on September 9, 2018 by jeffhoffmanassociate

Populism, nationalism, trade wars, March for Our Lives, and the #MeToo movements, among others, are reshaping how people, governments and nonprofits respond and interact with companies, and with each other. In a recent speech to corporate citizenship professionals in New Orleans, I painted a picture of how our crazy world is impacting our roles as corporate philanthropists and responsibility practitioners, as internal and external stakeholders put more pressure on us to show value.

With company performance no longer being based on just financial reports and stock price, the craziness around us can be an opportunity to better position CSR as a partner to the C-Suite to help navigate these externalities and anticipate responses when we know situations are on the horizon. Companies have an opportunity to create stronger outcomes targeting some of humanity’s most challenging issues.

How a company interacts with society impacts areas like talent acquisition, employee engagement, product development, customer affinity and investor relations. Employees want purpose in both life and work. Customers and employees expect the values of companies to align with theirs, often pressuring companies to take a stand. Stakeholder engagement has moved beyond working with groups we want to inform to engaging those we need to inform. Whereas companies used to stay away from controversial issues, over the last two years we are increasingly seeing companies, often led by the CEO, engaging on issues that don’t necessarily have a direct impact on the business.

It’s not just about public positions. Issues such as the #MeToo movement have triggered additional funding for shelters and services for battered and abused women. While these types of organizations might not have been previously part of a company’s giving focus, corporate philanthropists are looking more broadly to impact issues that are currently in the spotlight.

Eroding trust

Populism, and other factors, has eroded trust in “the establishment” and with it business (corporate bashing has become common). But businesses produce and sell the goods and services people need and want, while creating jobs that provide income, injecting money into the economy for others to have the same opportunities.

Of course, some people have been left behind by this system and the widening income gap is problematic. Businesses are not perfect, and there is a history of some that have not operated with integrity. But most businesses are good and those working in the corporate philanthropy area have an obligation to demonstrate that through our companies’ actions and directly through our social purpose, financial and in-kind contributions, and employee engagement.

While these are challenging times, I look at it as an opportunity to step up our game by seriously taking a look at the impact our initiatives are making, and using new tools, such as The Conference Board’s benchmarking project with Mission Measurement, to help us make better decisions about what programs are most effective in achieving results.

While it seems like we wake up every morning to a new obstacle, we as a field have a unique responsibility to help our companies navigate and focus on what counts so we can create value for the business and society.

Originally published by The Conference Board on August 15, 2018.

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If You Don’t Measure Yourself, Others Will Measure You

Posted on August 31, 2018 by jeffhoffmanassociate

Whether it’s the 24-hour news cycle, social media, annual reports, internal messages, or stakeholder requests, the need for clear, understandable, and relatable corporate social responsibility (CSR) information from companies is increasing.  Some stakeholders want metrics, others want stories. Either way, timeliness and transparency are key. So, which data and disclosures are relevant and/or required? These were questions, among others, that were answered at the CSR Council meeting in Chicago, IL, in June.

The Conference Board’s CSR Council met earlier this month in Chicago to discuss measurement, reporting, and new ways to get your information out and break through the clutter. We were hosted by PwC and members had robust discussions with speakers from SASB, Sustainalytics, Addison, Edelman, Mission Measurement, and VOX Global.

Taking a position

More and more companies are taking positions on social issues that are important to them as a company and to their employees. We live in polarized times and taking a public stand can upset parts of a company’s customer base and employee base. Decisions to speak out are usually made through a business lens with an eye on the future needs of the company and its employees.

Often, we hear “it’s the right thing to do,” which it usually is, but more often than not there is a solid business case for the decision.  As recently as two years ago, companies were caught in a reactive mode, but today, through issues management, company statements are ready because they know when, for example, a Supreme Court decision will be handed down or, when possible, legislation will pass.  And now companies are weighing in with amicus briefs and other tools to help influence decisions.  Whereas previously such influence would have been considered “government relations,” today it is as much about relations with employees and customers.

Many companies fear transparency, but they also fear what others might say about them. Often, what others say about you is not accurate because they are not privy to the full story. So, it’s important for companies to control their message, back it up with data, and to be forthcoming, which will often result in better reactions from stakeholders, even when the message might not be positive. People, and the media, can be more forgiving when information is proactively shared with them, rather than when they search and discover it themselves. Remember, most of the world’s data is self-reported, whether it’s your income tax filing or your company’s financials, so companies should always be able to provide evidence and attribution to support their messages.

Data reporting and ratings agencies

Environment, social and governance (ESG) issues have become more material to company value. For example, Blackrock, Vanguard and State Street, which collectively own 18 percent of the S&P 500, have placed more emphasis on ESG and others are following (all signatories of the Principles of Responsible Investment (PRI) have agreed to consider ESG in all their investing). As a result, there has been corollary growth of ratings organizations seeking data to provide investors information about corporate ESG activities.

The way in which companies present this data to ratings agencies is critical to an accurate rating, so even though “survey fatigue” is prevalent in the CSR world, companies still need to pay attention and respond in the format that ratings agencies request.  CSR reports, which should contain highlights, stories, policies and data, are nice, but real-time data that is comparable and consistent, when available, is the future. The Conference Board recently explored the prevalence of ratings agencies further with a research piece called Business Perspective on ESG Rating Agencies.

Impact measurement

What should you measure with the programs you conduct in the community?  Jason Saul, CEO of Mission Measurement and The Conference Board’s partner in a new annual benchmark on social outcomes, says to “measure outcomes that are appropriate for the intervention. Don’t measure things that are not.”  One of the goals of the Impact Genome Project® is to standardize the data that is collected from companies and nonprofits regarding social impact. This will provide organizations better, more consistent data that can be benchmarked.  It will also ease the burden of reporting as organizations will not need to customize data to every request; instead, they will be able to provide agreed-upon metrics.

Changing communications

The huge generational shift taking place in society has major implications on how companies communicate. Values are evolving and with them the expectations people have of companies and the information they provide. People expect companies they do business with to be aligned with their values. They feel businesses should have a conscience and that they should act on that conscience. Technology is also changing those expectations. For example, blockchain will radically change the way we validate information and communicate about it, and we are already seeing companies using this new technology, particularly in their supply chains, and are using the digital truth in their storytelling.

People want more information but have less time to read it as well as seemingly infinite sources. There are 200 million active websites in the world. Your company’s might be great, but in a click, people can go to an even more interesting one. At the same time, companies have many audiences: customers, employees, investors, regulators, media, and advocacy groups, to name a few.  So, how do we best meet their needs as well as those of the company?

Previously, reporting and communicating were handled separately in companies, but today they are intertwined. In a data-driven world that expects words to be congruent with the numbers, corporate citizenship professionals face a new level of scrutiny over data quality and the manner in which it is presented that has almost caught up to the level that finance groups have lived with for decades. This presents many opportunities to better distinguish our work.

Originally published by The Conference Board on July 10, 2018.

 

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A Culture of Responsibility

Posted on June 24, 2018 by jeffhoffmanassociate

“Culture” is the word of the moment: societal culture, organizational culture, corporate culture. The media blames culture—and rightfully so—when things at an organization go bad, referencing it as the reason for why people break the rules, disrespect others and go against societal values. The media often cites a “win-at-any-cost” attitude within such organization that leads to bad behavior. But culture is also a good thing that leads to innovation, accomplishment and integrity. Managing culture is the responsibility of everyone in an organization and the board should set the tone.

“Responsibility” is another important word in society and the business world—taking responsibility, being responsible to yourself and others, or corporate social responsibility. The world would be a better place if we all took responsibility for our own actions and felt a responsibility to be truly engaged. Few people actually engage to change a situation they’re not happy with, and even fewer do so in a way that is responsible (for example, by using data or evidence to build an argument, rather than deferring to emotional reactions). We experience this everyday on social media. Unfortunately, “responsibility” is not always taken seriously by corporate leaders and infused into corporate cultures. For example, if there was a stronger culture of responsibility with certain tech companies, they might not be facing such intense scrutiny.

Culture is how the work gets done. “While it is often perceived as a ‘soft issue,’ it is actually a hard issue—both in the sense of concrete impact, and in the sense of being difficult to assess,” says the National Association of Corporate Directors in a new report called Culture as a Corporate Asset. “The idea that an appropriate corporate culture boosts performance by providing a framework that encourages behaviors aligned with goals for long-term creation would seem to make it an obvious topic for regular, routine discussion among corporate leaders. Yet, in many organizations, culture does not get the level of boardroom attention it deserves until a problem arises.”

Boards, executives and managers need to ask questions, the right questions. The days of not asking questions because you don’t want to know, can get you into big trouble.  These leaders should be asking their teams: “How did you get it done?” Often, results-driven cultures fail to ask this question, but ignorance is no longer an excuse—you are still responsible. 

Last month, issues at my alma mater came to a head. The University of Southern California (USC) is results driven, as it should be. But, after a range of issues, including recruiting violations for sports, ignoring a top fundraiser’s abuse charges, and allegations against a doctor at the student medical center, coupled with a deliberate lack of transparency, called into question the results-driven culture and whether it led to these and other incidents.

Within one week, the faculty council asked for the resignation of the university’s president. In response, the president issued a report detailing how the university would address the aforementioned issues, and the chairman of the board of trustees issued a statement saying the trustees had full confidence in the president and his “leadership, ethics, and values and is certain that he will successfully guide our community forward.”

Three days later, the chair of the trustees executive committee released a statement saying that they had “agreed to begin an orderly transition and commence the process of selecting a new president.” The next day, a new board chair was also announced.

The USC situation is an example of primarily internal matters that could have been dealt with appropriately, transparently, and in a timely manner, if the board had closer oversight of culture and risk. But, instead, the issues were left to fester, resulting in a big public scandal that tarnished the reputation for the university led to the removal of a president that I have admired. 

My colleague and top reputation risk and ethics expert, Andrea Bonime-Blanc, wrote in her recent article Culture & ESG Governance: Inseparable in the #MeToo Era: “Internal organizational culture and external environmental, social, and governance (ESG) matters are, and should be, intimately and inextricably interconnected. They’re two sides of the same coin. I believe that it is not only time for boards to get cracking on internal culture governance, but that it is also a core part of good modern governance for directors to know the key ESG and corporate responsibility issues relevant to their companies. By tying the two together, boards can proactively and carefully oversee management’s efforts to act on these often siloed, disparate, or even ignored and untreated parts of a more resilient organization.”

Corporate culture and its effects have been long integrated into my career. Long before I headed philanthropy at The Walt Disney Company and started the corporate social responsibility council, I was part of The Disney University. Frank Wells, Disney’s President and COO at the time, called The Disney University “the keeper of the corporate culture.”  I taught ethics at the university and was involved in an initiative to bridge the cultures of “old Disney” and “new Disney.” I was also part of the cultural integration team, led by PwC, when Disney acquired Capital Cities ABC.

I have seen both the positive and negative aspects of culture up close and personal and I truly believe what Peter Drucker once said: “Culture eats strategy for breakfast.”   

Many of us in both the corporate citizenship and corporate governance fields view culture and responsibility as intertwined. Management and boards need to spend a little more time on the “how” and what the implications of the “how” are on our employees, customers, shareholders, community, and the world. It’s just not because issues become public quickly, but because it is good for business to act responsibly and is the right thing to do. 

First published by The Conference Board on June 15, 2018

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What Matters in the Board Room? Mellody Hobson talks with NACD SoCal

Posted on March 29, 2018 by jeffhoffmanassociate

 

“It all comes back to the questions.  Peel back the layers of the onion to learn more. What Matters?”  These were some of the comments made today by Mellody Hobson, President of Ariel Investments, to members of the Southern California Chapter of the National Association of Corporate Directors.  She talked about the importance of asking the right questions at the right time to gain the insight needed at the governance level.   She talked about how some really good boards were not asking the right questions that ultimately led to situations such as Enron.  “If I was on the board of Wells Fargo, I would be asking myself what questions should I have asked that I didn’t.”  As she prepares for a board meeting, she ensures that during the meeting that she will have “a truly original thought, or an original question.”  She noted that good questions, hard questions, should be appreciated by a good CEO. 

Mellody Hobson has a lot of board experience and gave examples from her current seats on The Estee Lauder Companies and Starbucks Corporation boards and her former role as a board member and chair of DreamWorks Animation.  She was recently elected to the JPMorgan Chase board, has not yet attended her first meeting, but talked about her meeting with CEO Jamie Dimon earlier this week.

The topic of diversity was woven through the whole discussion.  The session was moderated by Jennifer DiGrazia, Senior Vice President of Ariel Investments.  DiGrazia called Hobson her mentor.  Hobson brought her to Ariel from DreamWorks.  This was an example cited about the importance of women mentoring women.   Hobson spoke of the risk of no women on a board in the “Me Too era.”  Hobson said that diversity is more than gender and ethnicity.  She often asks “Is everyone in the room.” Meaning are all perspectives and points of view present when making decisions.  Diversity of thought, skills, experiences and even intelligence levels.

She stressed that the long term view is important to their investment strategy.   Companies should not continue to evolve.  “We’ve seen so many companies disintermediated.  They have been coasting and don’t want to see change coming.”  “Focus in on core competencies, core strength and don’t be distracted and pulled into other directions.  Most successful companies understand their genius.”

“These are the tenets of how we invest at Ariel:

  1. Patience
  2. Focus
  3. Experience
  4. Team Spirit
  5. Independent thinking”

She mentioned the importance of the company’s culture.  “Team spirit. If you can’t play nice with others, what would make me want to work there.  Would I want my child to work there?”   I have been a longtime fan of Mellody Hobson and appreciate the perspectives she gives.  Her comment on Team Spirit really resonated with me.  Her approach to being a board member is thoughtful.  She is even more impressive in person which leads me to a one word description of her: Quality!

https://www.arielinvestments.com/  #CorpGov #ESG #CSR

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Proxy Proposals on Charitable Contributions Are Rare, but Will We See More?

Posted on March 14, 2018 by jeffhoffmanassociate

Socially responsible investors have become a bigger part of a company’s ownership.  Large funds, such as Vanguard, BlackRock, pension funds and others are exerting their influence for better ESG (Environment, Social, Governance) performance. Various nonprofits are also flexing their muscles. Will the increased scrutiny lead to more proposals on charitable contributions?

In 2017, there were four proposals regarding companies’ charitable contributions, at Alphabet (Google), Apple, General Electric, and McDonald’s. Each of these proposals received a very low number of votes in favor of the resolution (0.5 to 3.5 percent) and as a result failed.

In general, the four proposals posed a similar request regarding the reporting of a company’s charitable contributions. One example stated: “Company shall provide an annual report of charitable contributions, omitting proprietary information and at reasonable cost, disclosing: the company’s standards for choosing recipients of company assets in the form of charitable contributions; the business rationale and purpose for each of the charitable contributions, if any; personnel participating in the decision to contribute; the benefits to society at-large produced by company contributions; and a follow-up report confirming the contribution was used for the purpose stated. The report should be published on the company’s website.”

One area of confusion among voters, which is evident in some of the lists of companies’ giving, is the difference in reporting regulations for corporate funding versus company foundation funding. In the US, foundation giving is public knowledge and contributions may be reviewed on the foundation’s IRS Form 990.

Public disclosure of non-foundation company giving is not required. However, many companies now disclose the organizations they give to in CSR reports, for example, with some including the amount, and some the purpose of the gift. Conversely, some companies still don’t publicly disclose their non-foundation total giving statistics at all.

The inconsistency of reporting across the spectrum can be frustrating to certain advocacy groups. And when companies do not disclose the data, these groups and other stakeholders often presume the company is purposefully trying to hide information. Some investors believe that they need to have a complete understanding of where all corporate contributions are going, because there might be an impact in other areas of the business.

For example, philanthropy officers need to be careful when they’re making decisions about the nonprofit organizations they support, because these organizations could be affecting other parts of the business in a negative way. I have seen nonprofits request charitable support from a company while the same organization is waging a protest against one of the company’s business units or products. I had two instances of this while I was at Disney. These are conflicts that can significantly affect a company.

It will be interesting to watch if companies’ stances on issues such as immigration, racial inequity, sexual misconduct and guns will lead to a deeper look at charitable contributions by some, particularly those in the ESG investment community.

Heightened focus on corporate citizenship issues

“The volume of environmental and social proposals at Russell 3000 companies has consistently gone up in the past five years,” according to The Conference Board report Environmental and Social Proposals in the 2017 Proxy Season. “Although such proposals received average support of only 21.4 percent of votes cast in 2017, support levels for these proposals continue on an upward trend. The uptick in successful E&S proposals can largely be attributed to a shift in the voting policies of traditionally passive investors.”

The Interfaith Center on Corporate Responsibility is a group of shareholder advocates who press companies on ESG issues. Their coalition of over 300 global institutional investors currently represents more than $400 billion in managed assets. They leverage their equity ownership in some of the world’s largest companies to engage management to identify and mitigate social and environmental risks resulting from corporate operations and policies.

The center focused on 10 issue areas in its 2018 Proxy Resolutions and Voting Guide.  The number after each category is the number of resolutions by issue:

  1. Climate Change – 61
  2. Inclusiveness/Diversity – 57
  3. Lobby/Political Contributions – 45
  4. Human Rights/Trafficking – 26
  5. Corporate Governance – 25
  6. Environment, Health & Sustainability – 23
  7. Health – 12
  8. Food – 8
  9. Water – 7
  10. Financial Practices & Risk – 2

The report is available at: http://iccr.org/iccrs-2018-proxy-resolutions-and-voting-guide

While the proposals submitted don’t specifically target charitable contributions, many of the issue areas are important to a company’s corporate citizenship strategy. And although most shareholder proposals for social and environmental issues don’t pass, they do often prompt changes in company policies.

Originally published by The Conference Board on March 13, 2018

 

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Creating Business Value through Social Impact is More Effective when Corporate Citizenship is Built-in, not Bolted-on

Posted on February 28, 2018 by jeffhoffmanassociate

Positive social impact, the result of a company’s efforts to do good directed towards solutions to important problems, is more impactful when a company integrates those efforts with their core competencies and through their products and services. Many corporations’ efforts have been adjacent to the company’s business, or “bolted on.”  A “built-in” ethos, where the company works to create value for both the bottom line and the outside world has strong long-term success implications for both.

This was the discussion of The Conference Board’s Corporate Social Responsibility Council at their recent meeting in San Francisco. Council Members from some of the world’s largest corporations gathered at Google’s Community Space on The Embarcadero to look at how actions of their respective companies can both create bottom-line and societal value. While there has been much talk, there is significant opportunity for companies to broaden their approaches.

A company’s tool box for doing good has long included philanthropy, employee volunteering and local community engagement. That toolbox is rapidly expanding to include shared value, impact investing, and products and services with purpose, not to mention many of the other components of ESG (Environment, Social Governance).   Whereas much of the work was done for reputational reasons or risk mitigation, it is the value creation for the business that is the bigger opportunity. This includes: brand differentiation; talent recruitment, retention and productivity; operational efficiencies; product innovation; and new business prospects.

The big question at the council meeting considered how CSR is organized at companies. For example, are product/innovation staff leading CSR initiatives on their own and are responsibility/sustainability/social impact employees knocking on the doors of those innovation employees to get on their agenda? The answer was a combination of both.

But to really scale CSR within a company, corporate citizenship executives need to be intrapreneurs: internal entrepreneurs who encourage those in the business units to innovate with social purpose. Younger employees tend to develop new products with sustainability and social impact in mind. Corporate executives will now need to be less risk averse and open their minds to the possibility of what is being proposed internally.

Social entrepreneurship

Social entrepreneurs target societal problems and provide innovative solutions by using market mechanisms. Elizabeth Gore, chairwoman of Alice, cited three attributes that are changing what corporate success looks like: “Digital transformation, authenticity and the entrepreneurial nature of work.” Alice supports an entrepreneurial ecosystem that provides equal opportunity for all with a focus on women and minorities.

Gore asked council members how their companies are partnering with entrepreneurs. She noted that today 70 percent of jobs created are from entrepreneurs and their small and medium sized enterprises (SMEs). Many of tomorrow’s new products and services will be created by these entrepreneurs. She challenged the members, by asking: “Will your company be left behind by not engaging with them early?”

Impact investing

Impact investing often means different things to different people, but it is a trend that is gaining momentum with capital markets and companies alike. Many financial investors are looking for blended value—the old triple bottom line with financial, social and environmental performance.

Companies are beginning to invest a part of their portfolio is socially responsible funds and companies. When doing so, investors should be clear about the financial return and the social impact they want to have. We have seen some of this where a foundation will make program-related investments utilizing funds from their corpus. The ability to scale social good can be exponentially larger through impact investing versus traditional philanthropic means.

If everyone in the company has the responsibility to act responsibly, then if taken a step further to incorporate positive social impact in both business decisions and product design, the outcome will most likely be one of both improved financial performance, as well as helping our world be a little better.

 

First published by The Conference Board on February 27, 2018.

www.conference-board.org/philanthropyvaluecreation

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Book Review—”Climate of Hope: How Cities, Businesses, and Citizens Can Save The Planet”

Posted on July 5, 2017 by jeffhoffmanassociate

Michael Bloomberg and Carl Pope have written an informative and compelling book about climate change and our opportunity to slow and halt its progression. Throughout it, the authors note the importance of philanthropy moving both public policy, and public opinion—as evidenced by the actions of Bloomberg Philanthropies, which has offered up to $15 million to support the operations of the UN Framework Convention on Climate Change Executive Secretariat, including its work to help countries implement their commitments under the 2015 Paris Agreement on climate change.

I was not familiar with Carl Pope, former executive director and chair, of the Sierra Club, but I am a huge fan of Michael Bloomberg, former New York City Mayor, and founder of Bloomberg L.P. and Bloomberg Philanthropies. These two men, while coming from different worlds and sometimes different opinions, came together around this issue with the optimistic belief that we have the solutions necessary to make the world healthier and more prosperous.

This paragraph from the last chapter, titled “The Way Forward,” encapsulates the spirit, and hope of the book: “We can stop global warming. Not by slowing economies but by speeding them up. Not by depending on national governments but by empowering cities, businesses, and citizens. Not by scaring people about the future but by showing them the immediate benefits of taking action. If we accomplish this, we will be healthier and wealthier. We’ll live longer and have better lives. We’ll have less poverty and political instability. And while we are at it, we’ll pass on to our children and theirs a brighter future.”

The book is not all rosy and it gives the facts needed to understand the issues, which is important to better understand the solutions. For example, there are some highly technical pages devoted to the sources of climate change, which include methane, nitrous oxide, halocarbons, black carbon particles and two different sources of CO2: fossil fuels/industry and forestry/land use. These sources are a result of industry; fossil fuel production; electricity and heating production; agriculture, forestry and land use; building heating and cooling; and transportation. The stakes include rising seas, severe heat, drought, and other consequences.

To me the most exciting aspects of cleaning up the planet are the positive economic implications. More clean energy jobs are being created every day. The circular economy is showing how products are being designed with the afterlife in mind. Buildings are being built smarter and cars are running on batteries. Agriculture has better systems for how we grow food using less water and reducing methane and CO2 emissions. The green economy is booming.

“Cooler heads can produce a cooler world,” write Bloomberg and Pope. “National governments are not the best places to create these solutions. Rather, it is the mayors, CEOs, entrepreneurs, activists, concerned citizens, and other local actors who truly have the power to win the battle against climate change in ways that will also generate economic growth and improve public health—and many, in fact, are already making substantial progress.”

While the US Federal Government is pulling out of the Paris Agreement (COP21), businesses and local governments are staying the course, exemplified by Bloomberg Philanthropies’ offer. It is critical for the future of the human race that we listen to and take care of Mother Earth. Companies are partnering with nonprofits such as The Nature Conservancy and Conservation International, using their philanthropic dollars to address various aspects of climate change. Climate of Hope provides a roadmap of what needs to be done and how to approach the issues. Much work is already taking place, but we have a long way to go. We need to all start the journey now and there are few better places to start than in the corporate philanthropy world, where funding and partnerships can be unleashed to make huge strides.

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