How doing well is about doing good

25 November 2018 Hans Lindeman Anna Essehag

Businesses that do good also do well according to more than 300 peer-reviewed academic sources. Why? Employee engagement seems to be one, vital part of the equation.

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8 min

From folklore to fairy-tales; In centuries of storytelling, the heroes tend to be those who do the right thing. In corporate narratives doing well is heroizing but consulting a 2017 meta-analysis of 354 academic sources, comparing fiscal performance and corporate responsibility initiatives, tells us that ethics and result-orientation are now two pages in the same chapter: ‘Doing good’ in a societal context and ‘doing well’ as a business had a causal and significant interlink in S&P500-corporations over a time span of 20 years. 

According to the meta-analysis by Babson Social Innovation Lab and IO Sustainability, the companies best at synergizing social responsibility with business-plans and corporate values experienced significant share price increases, protected and nurtured firm value, and increased their revenues by up to 20 percent.  Moreover, employee turnover rates halved, and productivity rose with 13 percent in responsible organisations, hinting to enhanced employee engagement.  This tendency happens in parallel with an increase in demand for sustainable products.

Although not part of the academic vocabulary, one would argue that doing good to do well is a no-brainer.

Progressing, but a long way to go

Hans Lindeman, a sustainability expert and senior executive at Ramboll Management Consulting agrees; yet sustainable business is not so straight-forward as it sounds:

“Looking at the world’s biggest corporations, we not only see an increase in reporting on corporate responsibility but also on progress made in relation to UN’s Global Goals. This is a rock-solid indicator for what’s to come. But it's still a limited number of corporations that set specific and measurable business performance targets related to the Sustainable Development Goals. So, on the one hand there’s swift progress and a big willingness to advance, but if even the mightiest of companies are struggling to put up targets, then the vast majority of companies - big and small – will likely have a long way to go to really drive sustainable change. And then we haven’t even looked at the public sector.”

However, the more you investigate, the better the case for an increased focus on corporate responsibility gets. One prominent upside is employee engagement.

In a study of 15 thousand employees, Ph.D. in Organizational Behaviour at the Grossman School of Business, Ante Glavas and his colleagues found that corporate responsibility positively and significantly mediated employee engagement, likely because the employees attain a sense of purpose.

But that is not all. Spinning the globe to consult Singapore Management University, Madeline Ong, also a Ph.D. in Organisational Behaviour, argues that running a responsible business makes employees significantly more prosocial which means more positive, helpful, socially acceptable, and friendly – especially if they deem their own tasks significant contributions to the overall purpose. In a paper, she and colleagues conclude that employee engagement is likely to create a positive feedback loop or virtuous cycle of prosocial activity, which further increases employees’ prosocial motivation and organizational citizenship behavior. As such, responsible approaches to business appear to be a win-win-win for employer, employee, and the society.

The brand as a talent magnet

As millennials make up more of the workforce, employers seek new ways of effectively attracting, hiring, engaging, and retaining talent - and the above-mentioned triple-win situation has proven to be talent magnet.  For a lot of millennials entering the workforce, sustainability is not a nice-to-have; it is a must-have. Millennials do not only want to hear about their employer doing good - they want to do good themselves. Whereas baby boomers prioritise factors like stability and wage, social responsibility tops the list for millennials. According to a Cone Communications survey:

  • 64 percent of millennials will not take a job if a potential employer does not have strong corporate responsibility practices
  • 75 percent of millennials would take a pay cut to work for a socially responsible company
  • 76 percent of millennials consider a company’s social and environmental commitments before deciding where to work

Today, only 30 percent of workers are millennials, however by 2025 as baby boomers retire, 3 in every 4 employees will be millennials.

To Samy Porteron, these are more than just numbers. Porteron is a management consultant at Ramboll’s Brussels office and, having been part of the SDG-focused UNLEASH talent-programme in June 2018, he recognised the trend among peers; young talents see themselves as global citizens. Or citizens for a better world one may say:

“As a group, the 1000 UNLEASH talents proved to be very knowledgeable and felt deeply connected with the issues addressed by the Sustainable Development Goals. In my experience, there is a very explicit sense of awareness of the threats of our economic model to society and nature - and the brutal fact that you can’t fix it on your own is ultimately what makes you decide to work for an organisation that is socially committed.”

With globalization, many millennials have been used to travelling from an early age and now stay highly connected to each other and to global issues via social media. In that sense, companies who honestly want to ‘do good’ can benefit from the global connectivity, awareness and motivation that millennials bring to their business.

Two men in a cafe

Pioneering own, concrete takes on sustainability may be a strong means of luring in customers.

Pioneering sustainability actions

In the wake of the 2016 Paris Agreement, the 2015 SDG-deal, and many years of public attention, corporations are still flocking onto the sustainability band-wagon. But as the wagon becomes heavier, the word sustainable loses punching power, from a marketing standpoint at least.

As countermeasure, companies have found success in pioneering own, concrete takes on sustainability. Differentiation of both brand and cause has become an important way of swaying customers’ brand preference.

To business consultant from Ramboll Management Consulting’s Stockholm office, Anna Essehag, an all-in strategy on a few SDG’s can often be considered best practice:
“If you speak to a brand strategist, she will argue that true differentiation requires a focus. You can’t be everything to everyone in the market place. Likewise, when we work with business strategies; companies need to prioritise to give direction, use resources efficiently and better the odds of implementing initiatives successfully. Looking at the SDG’s and their link to business, we see a strong tendency of global companies putting their eggs in just a few baskets.”

As the Global Goals are interlinked and addressed by a myriad of corporations, all goals will be supported one way or another, explains Essehag.

In other words; they advocate very specific angles or solutions to very specific problems. An example of this is how ice-cream giant Ben & Jerry’s ironically is fighting global warming to prevent the ice from melting, or how Coca Cola and Pepsi are racing each other to becoming the first zero net water major distillery. And it is working. A study by Society for Human Resources Management found that companies with strong sustainability programs in general had a 43 percent stronger public image than those with poor sustainability programs. This will surely bring joy to marketing, but finishing where we started, the same study saw a 55 percent better morale and 38 percent better employee loyalty in the sustainable end of the comparison.

By this, from HR and marketing to business development and finance, the storyline supporting corporate responsibility seems to be written in capital letters - and black numbers...

 

Written by Martin Christiansen and Søren Møller Sloth


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