Monday, January 14, 2019

8 Factors Driving Corporate Activism

Value systems drive activism and these efforts are increasingly intersecting with corporate self interest.  Companies have a vested interest in combating consumer skepticism. They know they cannot ignore consumers' distrust nor can they avoid the growing demand that businesses act in an ethical manner. Apart from the inherent value of doing the right thing, there are powerful incentives and disincentives that are driving corporate activism. Here are eight reasons why companies are feeling compelled to act.

1. BOTTOM LINE BENEFITS

It pays for business to be ethical. Companies like Patagonia have demonstrated how ethical conduct enhances their reputation, reinforces customer loyalty and improves the bottom line. This is in line with research shows that consumers are more likely to buy products and services from a company they deem to be responsible. According to a Nielsen survey released at the end of last year almost half of US shoppers indicate they would change their consumption habits to reduce their environmental footprint. This poll indicates that US consumer are increasing their purchases of sustainable products at four times the rate of non-sustainable products. The survey indicated that there has been a 20 percent increase in the purchase of sustainable products since 2014. In 2018 US consumers spent $129 billion on sustainable products and by 2021 that spend is expected to increase to $150 billion. Businesses benefit from science-based climate action and a recent CSE study is among a large pool of research that confirms the bottom line benefits of sustainability.

2. COMBATING DISTRUST

Companies see value in combating the rising tide of anti-corporate and anti-capitalist sentiment. Distrust is bad for business this is especially true for consumer facing brands. Corporate distrust is rampant according to a 2018 Deloitte poll of more than 10,000 people from 36 countries. This research reveals that distrust for companies is at a four year high. Less than 50 percent of those polled said they believed companies were ethical. 

3. PRESSURE FROM INVESTORS/SHAREHOLDERS

According to research by Lazard shareholder activism is at an all time high. Lazard’s Shareholder Advisory Group report of shareholder activism revealed that activists targeted 174 companies in the first half of 2018, surpassing the 169 companies targeted in all of 2017.

4. TRANSPARENCY DEMANDS

The demand for corporate transparency is a megatrend that makes it increasingly difficult for companies to hide. The demand for transparency is coming from supply chains, shareholders, employees, consumers and stock markets. There really is no choice, to participate in today's marketplace, corporations must get over their fear of reporting failure.

5. UBIQUITOUS DIGITAL TECH

New digital technologies and platforms make corporations vulnerable to scrutiny and criticism. Twitter, Facebook, Instagram and others social media sites have massive audiences. The reach of a user can be in the millions. Consumer commentaries, either good or bad, can go viral and this can either boost or bust a brand. Whistleblowers can also comment anonymously exposing practices that can harm a firm's reputation and even subject them to legal challenges. Examples of companies that have been tried and convicted in the court of social media abound. Two examples from 2018 are Starbucks and United Airlines

6. YOUNG PEOPLE WANT CHANGE

The Nielsen report reveals that Tech savy youth are driving the growth of sustainable products. According to WEF data, companies cannot afford to overlook young people. A 2017 World Economic Forum survey of 30,000+ youths indicates that more than half of the world’s population is now under 30, and they are very concerned about climate change, conflict and inequality.

7. HUMAN RESOURCE BENEFITS

Ethical companies are better able to recruit and retain human resources. As revealed in a Cone report, this is particularly true for millenials and Gen Zers who together make up the bulk of the workforce. According to the 2016 Cone Communications Millennial Employee Engagement Study they care about the ethics of the companies they work for. This research shows that 75 percent of millennials would accept less money to work for a responsible company. There is tremendous value associated with a loyal and principled workforce. A 2017 Povaddo Survey indicates that half of employees in firms valued at one billion or more say failure to act on social issues would affect their decision to maintain or pursue employment with a company. There is an emerging movement of social intrapreneurs, these are people who advocate for change from within an organization.

8. MITIGATING AGAINST RISK

Consumers will judge a company based on the products its sells, its business practices and its community engagement. There are risks associated with companies that are perceived to be disconnected from their customer's values just as there are risks associated with inaction. Silence is no longer an option, companies that fail to align their values with their customers are vulnerable to criticism, boycotts and protests.

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