Expectations about the role of business in society are changing dramatically. The impact of business on the environment is of vital importance to many corporate constituencies. Today, however, many more purely social concerns are coming strongly to the fore and CEOs are paying close attention.
A Bain & Company survey of nearly 300 global CEOs reveals that 85% of business leaders view social issues as “urgent” concerns for their companies. When asked about the primary role of their business, 60% said either creating “positive outcomes for society” or “balancing the needs of all stakeholders.”
“Companies that are at the forefront of addressing social issues linked to diversity, equity, and inclusion (DEI) and that have socially responsible supply chain practices have discovered ways to connect their social initiatives directly to their business strategies,” said Sara Minelli, an associate partner at Bain & Company Middle East. “It goes beyond implementing a risk mitigation approach but rather one that creates new possibilities and adds value to all stakeholders involved. In fact, these companies see the direct correlation between making a positive impact and achieving success.”
One of the most influential stakeholder groups in the charge for change: customers. Customers have made it clear that they care about the social ramifications of their brand and product choices. A Bain survey found that half of consumers globally say they 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. Regionally, 82% of consumers in Europe, the Middle East, and Africa are more likely to recommend a brand after learning it supports a social cause, and 86% of consumers in Latin America say it is very important that companies contribute to improving society. In the US, a third of Gen Z consumers say they would boycott a brand with bad labor practices.
The executives Bain surveyed said social performance drives business outcomes in several ways. A self-assessment of executives at companies who lead on social issues perceive their companies to have higher revenue growth and EBIT growth than their peers who lag on social issues. They also perceived their companies to have better results in attracting customers and talent as well as raising capital.
“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,” said Jenny Davis-Peccoud, a partner at Bain and global head of the firm’s Sustainability & Responsibility practice. “The ‘S’ in ESG comprises a wide range of issues, which vary by organization. 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.”
Bain’s study explores four areas of opportunity to translate action on social issues into economically sustainable business performance:
- 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.
- 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.
- 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.
- 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.