Sustainability to Social Change

Lead Your Company from Managing Risks to Creating Social Value

Philip Mirvis, Bradley Googins

• Publisher: Kogan Page
• Year: 2022
• Print ISBN: 9781398604353
• eBook ISBN: 9781398604360
• Edition: 1
• Topic: Business
• Subtopic: Business Ethics
• Index: Business

Is your company using its talent to create social value? Or is it simply managing risks? To address the problems facing society and business today, sustainability is not good enough. Instead, companies need to do their part to lead social change. In Sustainability to Social Change, leadership and social innovation experts Philip Mirvis and Bradley K. Googins share their hands-on research to reveal how leaders can design and guide their companies to create more inclusive prosperity and become agents of social change. The book reveals the inside story of how socially innovative companies are making the strategic shift from minimizing risk to creating social value. It then outlines the strategies and practices that leaders can use to address the five biggest problems facing companies and society today: Purpose, Prosperity, Products, Planet and People. Filled with real life examples, hands-on guidelines and self-assessments to rate your company's performance, Sustainability to Social Change helps you pivot your company's mindset and practices in order to enhance society and the environment, and fuel its own success. Online resources include a guide to help employees become socially conscious, operate in a purposeful company, become allies for equity and social justice, add social value at work and establish "green" habits.

Part One

Where We Are Now, Where We Are Going, and How To Get There

01

Sustainability: The End of the Beginning

For several decades, we have tracked the journey toward sustainability for companies around the world. Early on we observed how a set of eco- and socially conscious trailblazers—Ben & Jerry’s and Patagonia in the US, the UK-based Body Shop, India’s Jaipur Rugs, and Brazil’s Natura, among others—embraced greening and sought, from the get-go, to use their products and profits to improve conditions in society. They set an example that social businesses emulate to this day. Their influence is seen in both mid-size players like buy-one-donate-one TOMs shoes, Warby Parker eyewear, and the social media platform Hootsuite as well as in smaller shops such as Oakland’s educational toymaker GoldieBlox, Madrid’s clothing recycler Ecoalf, a London consultancy, The Social Change Agency, that helps its clients get going on crowdfunding, and CarePro in Japan that provides on-the-spot health checks in train stations and shopping centers.

In 2007, we chronicled how big companies got on this track. In Beyond Good Company, we reported that mainstream business worldwide had accepted the idea that “business as usual” was no longer viable. CEOs understood that society expected more responsible conduct and that their operating environment had changed.¹ Activists and investors were holding them to account for their business “externalities”: pollution, waste, harmful additives, unsafe products, exploitation of people and land in global supply chains, false or misleading marketing, and “bad” behavior generally. Complex social issues—rising rates of obesity, youth unemployment, a digital divide, and declining trust in business—posed new challenges and threats. A top-down mandate emerged: clean up our operations and dress up our image with philanthropy. And a new agenda was set: minimize our negative impact on people and the planet, mitigate risks to our business and brands, and protect our reputation, all guided by this cautionary ethic: “Do less harm.”

We also saw some leading-edge businesses taking a more affirmative approach and framing their strategies in terms of sustainability and a brand-driven approach to corporate social responsibility (CSR). To gauge their progress, we introduced a model of the sequential “stages” that most companies go through as they progress toward more sustainable and responsible ways of doing business. Some firms, like Nike and Shell, were thrust into this journey by public protests and shaming over their abuse of human rights and the environment. Others, like British Telecom, La Farge, Microsoft, PepsiCo, NEC, and even Walmart “woke up” and began making solid, incremental progress. And a few, such as Danone, Novo Nordisk, and Unilever—the “best of the good”—sped through the stages by repurposing themselves to “make a better world” through their businesses.

A few years ago, we started another deep dive into business around the world. A sea change was underway. Big companies were conducting regular assessments of social, political, and ecological issues to identify those that were “material” to their business—in terms of costs, growth, and risks. Leading firms were “internalizing” their impacts on society and had plans and programs to address them. Some had embraced the idea that business should be measured against a “Triple Bottom Line” (TBL) and began accounting for their economic, social, and environmental performance.² Many issued annual sustainability reports that touted, alongside data on profits and earnings-per-share, how they were greening their factories and offices, protecting the people and land in their overseas supply chains, and addressing social issues through CSR. (In increasing numbers, these reports are audited by independent parties.)

To manage this makeover, companies tasked their human resource group, consumer affairs office, investor relations people, supply chains functions, and departments concerned with CSR, sustainability, and public affairs with monitoring the firm’s impacts and mitigating potential harms. Each of these functions keeps a checklist of dos-and-don’ts, makes sure the business is in compliance with laws and policies, and, most important, protects the firm from adverse publicity or, in business-speak, “reputational threats.”

What has all this progress given us? More Responsible Conduct. Seemingly More Accountable Companies. And Less Harm to People, Societies, and the Planet. All good, but is this Good Enough?

The Company Footprint: Manage Risks, Do Less Harm

When the idea of sustainability first caught on in business, so did the need to attend to your company’s footprint. Initially, the footprint referred to the environmental impact that a business has on society from its carbon emissions, energy use, waste production, pollutants, and such. Later, it was applied to a company’s negative impact on society—such as unhealthy food, unsafe products, unfair employment practices, and other unsavory business doings. In response, food producers and franchisers reduced their use of “bad” ingredients and turned to more environmentally friendly packaging. We see the impact today as soaps, perfumes, and hair sprays are stripped of unhealthy chemical additives—to do less harm.

Former CEO of fast-food chain Wendy’s, Emil J. Brolick, tweeted: “We want to get to the point where nothing on our labels looks like it came from a chemistry book.”³ His comments came after another fast-food competitor, Subway, said it would remove the chemical azodicarbonamide from its bread. Why remove it? Well, food blogger Vani Hari, who runs the website FoodBabe.com, gained 75,000 signatures to a petition asking to ban the chemical which is also found in shoe rubber and yoga mats.

Recent years have seen many companies stop doing bad things. CVS pharmacies stopped selling cigarettes. Walmart and Dick’s Sporting Goods stopped selling assault-style weapons. Restaurants stopped using plastic straws. Hotels, with a guest’s approval, stopped washing bedsheets and towels every day. Major retailers certify that their overseas suppliers are not exploiting labor, polluting the environment, or taking bribes. Google announced that it will stop selling ads using your personally identifiable information from web browsers. In his annual letters to investors, Larry Fink, influential CEO of BlackRock, has urged businesses to stop focusing on financial performance alone and take social and environmental concerns more seriously. This is a big leap from decades ago when, as one CEO joked with us, “we used to laugh and say we were good environmental stewards. We paid our fines on time.”

The point here is that a company’s oversized footprint on the environment is bad. Everybody wants less of it! Cone Communications’ annual survey of consumers finds that nearly one in three “regularly or always” considers the environmental impact of their purchasing decisions and that nearly 90 percent expect companies to address the full environmental impact of a product over its lifecycle, from its manufacture, to use, to disposal.⁴ Top companies have, as a result, made CO2 reduction and eco-efficient production key priorities. This is not due to corporate beneficence. Green is gold! Companies save money by reducing waste, using less energy, and conserving water. And even when they have to put in new technology or processes to “green” things up, the payback is still significant.⁵

How about a company’s footprint in society? No employee should suffer at the hands of an abusive boss or work for an exploitative company. The spillover in higher blood pressure, drinking, drug abuse, and family problems can be staggering. No customer should be scammed or discover they purchased unsafe or defective goods. No investor should be lied to or cheated. And no community wants a bad company in its neighborhood. It is widely known that consumers, investors, and the public at large will punish “bad” company behavior—by bad-mouthing the business, giving it a thumbs down, and sometimes going so far as to join social media campaigns and boycotts. Even Milton Friedman, we believe, would argue that company actions taken to forestall such problems are in the best interests of investors.

So we’re all for reducing the harms of the company footprint as concerns the ecology of the planet and the health of its inhabitants. But this approach has been mostly motivated by risk management. Attention to their footprint has seen companies focus on minimizing impacts, mitigating risks, protecting reputation, and “doing less bad.” Operating in this mode makes managers reactive rather than proactive, dutiful rather than creative, and cautious rather than courageous.

Look at the consequences: John Elkington, the “Godfather of Sustainability” and originator of the Triple Bottom Line concept 25 years ago, has issued a “recall” on the TBL. He has “given up” on this “report card” because it has been “captured and diluted by accountants” and reduced to “box ticking” in corporate annual reports.⁶ Like so many endeavors, it seems the sustainability movement has been damned by its first principle. With all of this focus on risk management and harm reduction, as one wag put it, the company footprint is now “stuck in the mud.”

Doing Better: Sharing Value and Serving Stakeholders

Scan business periodicals, search the web, look at company websites and annual reports and you’ll see heartfelt stories, evocative pictures and videos, and even some credible evidence that companies are doing good deeds. A few years ago, Fortune began to publish an annual list of big corporations that “Change the World” through their good works. Look closer, however, and you will find that most do-good initiatives are funded and managed by a corporate foundation or CSR function. In other words, charity. Now the idea that business should “give back” some of its profits to society is laudable. It is a hallmark in US business history and good for communities. Many US companies are generous with their philanthropy, work hand in hand with nonprofits to serve society, and even provide “paid time” for employees to give voluntary service under the corporate banner. These practices are spreading around the business world today, to companies on every continent.

A familiar and, to our eyes, tiresome critique is that CSR is just greenwashing, designed to deflect attention from what’s really going on in companies. But a stronger challenge is that these CSR-type activities are typically “bolted on” rather than “built in” to the business. They are “nice” to do but are simply not planned, managed, measured, and held to account like business activities connected to the P&L statement and managers’ performance reviews.

Bridging this gap, Michael Porter and Mark Kramer proposed in 2006 that companies key their philanthropy to the interests of stakeholders and the firm’s brand (“Strategic Philanthropy”) and in 2011 made a business case for “shared value” whereby companies could find business opportunities in social and environmental problems and devise business models that benefit both business and society.⁷ The Harvard Business Review heralded this as “the next evolution of capitalism.”

Our recent scan of businesses around the world confirms that many companies have evolved. Jeffrey Hollender, the green founder of Seventh Generation, prefaced this point in What Matters Most: How a small group of pioneers is teaching social responsibility to big business, and why big business is listening.⁸ Big companies first responded by acquiring socially responsible brands. The Body Shop was bought by L’Oréal, Tom’s of Maine by Colgate-Palmolive, Stonyfield Farm by Groupe Danone, Burt’s Bees by Clorox, and confectioner Green & Black’s by Cadbury Schweppes. Unilever acquired Ben & Jerry’s and later Seventh Generation. Then leading companies took steps to clean up their existing product portfolios and develop new healthy, eco-friendly, and socially conscious offerings and brands.

PepsiCo took up this challenge when Indra K. Nooyi was named CEO of the company and connected purpose to profit. She described her aspiration in this way: “Performance with purpose is what I’d like PepsiCo to stand for… We have a profound role to play in society, and we have to make sure that we are constructive members of society.” On a corporate level, PepsiCo brought its purpose into focus with its decision to sell off fast-food franchises KFC, Taco Bell, and Pizza Hut (the “bad stuff”), and then acquire Tropicana, Gatorade, and Quaker Oats (the “good stuff”). These moves positioned the company to offer healthier food choices for consumers. In turn, Frito La...

Table of contents

• List of Figures
• Sources
• Introduction
• PART ONE Where We Are Now, Where We Are Going, and How to Get There
• 01 Sustainability: The End of the Beginning
• 02 Social Change: The Start of Something New
• 03 Business as an Agent of Change: Four Icons
• 04 How to Change Your Company to Change the World
• PART TWO Creating Social Value: Your Company’s Handprint
• 05 Put Social Purpose First
• 06 Create Equity and Inclusive Prosperity
• 07 Engage the “Whole” Person
• 08 Design and Market Products and Services with Social Value
• 09 Help the Planet to Flourish
• 10 Collaborate For Systemic Social Change
• Notes
• Index