“One word comes to mind when I think of 2017,” begins Susan McPherson piece on Forbes, titled “8 Corporate Social Responsibility (CSR) Trends To Look For In 2018.”
“One word comes to mind when I think of 2017: unprecedented.”
McPherson then goes on to cite multiple reasons: Susan J. Fowler’s exposé of Uber’s (and the tech industry in general’s) misogynistic norms; multiple instances of CEOs and leaders taking stands against public policy measures from the Paris agreement to the immigration ban; and Boston College Center for Corporate Citizenship research showing “the number of companies directing corporate citizenship from the C-Suite has increased nearly 75 percent compared to five years ago.”
These are all great examples of wins for CSR in 2017 — and 2018 was off to a good start as well. Andrew Ross Sorkin, writing for the New York Times, reports that Laurence D. Fink, founder and chief executive of investment firm BlackRock, sent a letter to chief executives of the world’s largest public companies. His goal? To inform them that their companies will need to do more than just make profits, but will also need to contribute to society to if they want the financial support of BlackRock.
According to Sorkin, Fink’s firm manages more than $6 trillion in investments via 401(k) plans and exchange-traded and mutual funds, This makes BlackRock among the largest investors in the world and gives Fink enormous sway over which directors are voted on and off boards.
Writes Sorkin of Fink’s letter: “It may be a watershed moment on Wall Street, one that raises all sorts of questions about the very nature of capitalism.”
Sorkin also quotes Jeffrey Sonnenfeld, a senior associate dean at the Yale School of Management and an expert on corporate leadership:
“It will be a lightning rod for sure for major institutions investing other people’s money … It is huge for an institutional investor to take this position across its portfolio.‘‘
Sorkin reports that Sonnenfeld has seen “nothing like it.’’
While Sorkin’s enthusiasm is infectious, and Sonnenfeld’s opinion brings further legitimacy to the claim that this could be a turning point for CSR’s importance on Wall Street, others aren’t so sure.
“It’s good news,” writes Andrew Winston with the Harvard Business Review, “but before I get too excited, I pause to remind myself that we’ve been here before. This is the fourth straight year that Fink’s letter has made the pitch for long-term thinking and sustainability.”
Winston questions whether or not these letters of Fink’s are making a difference, bringing up that while it holds assets “on par with Japan’s GDP,” most of these assets are “passive” investments with limited impact on equity prices, frozen and unable to be moved around.
“In essence,” writes Winston, “the company is a bizarre, oxymoronic blend of unprecedented clout and powerlessness.”
Is corporate social responsibility its own driving force?
Neil Senturia, writing for the San Diego Union-Tribune, recently published an interesting historically themed piece titled “This 15th century merchant was ahead of the times with corporate social responsibility.” The merchant Senturia is writing of? Benedetto Cotrugli, of course, a humble 15th-century Italian rug merchant and author of “The Book of the Art of Trade.” Senturia writes:
“Cotrugli advised his peers that in order to succeed in business, ‘leaders need to be charitable, ethical and treat people fairly, be modest, look for the right qualities in a wife and retire at 50, when his blood calms down and his intelligence dims and his memory becomes less quick, so that he risks committing many errors in his business.’”
This is a message imbued with virtue, and proof that the idea of CSR was already being explored 600 years ago. Cortugli may have been onto something, it seems. According to Mashable, 90 percent of Americans are more likely to trust brands that back social causes. It’s not just consumers — employees have been shown to value culture and work environments that align with their own goals, so employers are beginning to adopt these ideals just to keep their workers happy.
Sarah Morrow is the perfect example of this rising tide of sustainably-minded future members of the workforce. “Upon graduation, Sarah hopes to continue working with companies that emulate her values,” write the experts at ASU.
As the composition of workplace culture and ethics changes. It’s inherently already harder for board directors to ignore ethics and sustainability measures. Experts at the University of Villanova write that buy-in from these top level board members is important to obtain, because “when they’re enthusiastic about giving back in the same way that you, your employees and your customers are, they’re more likely to set aside a CSR budget, and maybe even get hands-on with the initiative as well.”
Unfortunately, the board is where all the money-moves are made and CSR can either flourish or wither and die. Fortunately, Winston, in his piece with HBR, does mention that perhaps BlackRock and their ability to vote directors off of boards is a more powerful tool than we all realize.
“The idea of shifting board composition used to be a fairly weak threat, but the rise of activist investors has made companies much more nervous,” he writes. “That said, could low-risk, index investor BlackRock really get more aggressive? Well, … last year BlackRock did vote against two ExxonMobil directors while supporting a shareholder resolution to force the oil giant to ‘report on the impact of global measures designed to keep climate change to 2 degrees centigrade.’ BlackRock, Vanguard, and State Street Global Advisors helped swing the resolution with their combined 18% of the company’s shares.”
A turning tide …
Whether or not CSR is on Wall Street’s radar yet is hard to say, but evidence that the tide is turning points to a future where the concept will be hard to ignore by even the biggest hitters. Corporate leaders such as Subaru, Honda, Marks and Spencer, and Nestle have all taken autonomous steps to shore up their ethical and sustainability measures, from decreased landfill waste, to cutting carbon emissions and reducing water use.
In fact, Paul Astick brings good news from the 24/7 Wall St. blog, reporting that corporations have added a record amount of green energy via power purchase agreements (PPAs) in 2017.
“A total of 43 corporations in 10 countries last year agreed to purchase 5,400 megawatts (MW) of clean energy, according to a new report from Bloomberg New Energy Finance (BNEF),” writes Astick. “The previous record was 4,400 MW worth of PPAs in 2015. In 2016 corporations signed PPAs for 4,300 MW. Since 2008, corporations have signed contracts to purchase 19,000 MW of clean energy, an amount comparable to the generation capacity of Portugal. More than three-quarters of the contracts have been signed since 2015.”
- The carbon emissions of the world’s largest businesses continue to decrease in absolute terms, reaching the lowest level in the past 5 years as a result of a switch to cleaner fuels.
- There have been some global improvements in water use and waste management.
- The number of companies setting carbon and water reduction targets has increased by about 10 percent over the past 5 years.
The bad news is that, in the face of these achievements, carbon reduction targets set by the largest companies, both abroad and in the US, are not enough to hit the 2°C target to limit global warming in the Paris Agreement. This isn’t a death knell for CSR, especially in the face of all that’s been accomplished, but it’s proof that further action is needed by advocates of sustainability — and these numbers show nothing in terms of ethical progress that has been measured more nebulously. The good news is that, as long as small businesses and large alike continue to support CSR measures and donate responsibly, the fight will stay alive.
Only time will tell whether or not Wall Street wises up and begins supporting more CSR initiatives. Such a move would be unprecedented … but, like Susan McPherson notes: these are unprecedented times.