Why do companies get involved in social issues?

“Just shut up and do the Oreos.”

Daryl Brewster reports on a discussion on child nutrition and the safe use of ingredients at a board meeting of US food giant Nabisco. It was 2004 and as President he was trying to make cookies and other products healthier.

However, one of the directors wanted him to keep the company focused solely on making cookies and making money for shareholders. Ultimately, changes were made, including the removal of trans fats and the introduction of more transparent labeling.

In the nearly two decades since, the way business is run has changed and companies are increasingly speaking out on social and political issues, from nutrition to climate change to diversity.

Just making money “is no longer an opportunity,” says Mr. Brewster, who now leads chief executives for corporate purpose, which helps many of the world’s largest companies shape their messages on these issues.

“Companies need to think through the issues that matter to them… how to respond to them and maybe even take action before they become bigger issues.

“Companies recognize that they must be good citizens of the world to grow profits over time.”

The US Supreme Court’s decision last month to restrict women’s abortion rights prompted some of the country’s largest companies to object to the decision and offer to pay their employees’ travel expenses for an out-of-state abortion.

One of the leading voices in this response was online business review platform Yelp.

“Not only did we want to protect and protect our own employees by implementing travel reimbursement,” explains Miriam Warren, Yelp’s Chief Diversity Officer, “we also recognize that our employees, our consumers, and our customers have come to expect from us that we will comment on this issue.”

According to a Pew Research Center poll, 61% of US adults say abortion should be legal in all or most cases, while 37% think abortion should be illegal in all or most cases.

“Following the Roe v Wade reversal a few weeks ago, we recognized the need to be even louder on the matter. And that’s something we hear very often, thanks not only from our employees, but also from people across the country and now even the world, on the attitude,” says Ms. Warren.

Yelp, which has more than 244 million reviews of businesses from more than 30 countries, has also spoken out on issues such as transgender and LGBTQ+ rights, gun reforms and freedom of expression in the United States.

“Basically, we have taken a position on human rights issues,” says Ms. Warren. “[Those affected] are our colleagues, they are our customers, they are our consumers. And if we don’t take a stand with the vast platform at our disposal, morally it really is an incredibly missed opportunity [and] on a social level.”

There is public support for the idea that companies can positively influence these conversations. Edelman’s Trust Barometer surveyed more than 36,000 people in 28 countries and ranked the economy significantly better than governments or the media in this regard. Businesses are just one point behind NGOs.

However, 52% of respondents said that capitalism as it exists today does more harm than good to the world.

Ms Warren says anecdotal evidence suggests this activism is good for business, but boosting profits at a company that made nearly $40million (£34million) last year is not a motive .

“Many corporate stakeholders are silent and may try to remain neutral. To be honest, I don’t think neutrality is viewed positively, especially from a historical-looking lens.”

However, even if a company wishes to speak out on a particular topic, it may not always be advisable to do so.

“Sometimes it’s best just to say nothing, you can’t win,” says Paul Argenti, professor of corporate communications at Dartmouth University in the US.

As a consultant to major corporations, including Wall Street bank Goldman Sachs and Japanese conglomerate Mitsui, he has developed a framework for figuring out when and why companies should speak up.

The first thing he asks is, “Is that connected in any way to the overall strategy, the business, or the core context of what they’re doing?”

He continues: “The second thing I’m looking for is: Can you actually do anything about this incident or problem?

“And then the last part of that is how your constituencies are going to react? Will most be positive about your decision, or will a significant and important ingredient turn against you that could do you more harm than good?”

It helps a company make a positive impact when these tests are passed or when its leaders are passionate about an issue. One example, according to Prof Argenti, is Apple CEO Tim Cook’s commitment to fighting climate change, when in 2014 he told investors who hadn’t agreed to sell their shares. “This is a very, very bold move by a company.”

In contrast, Prof. Argenti says that one of the worst moves a company can take is to change its stance on an issue when it’s under pressure. Disney recently lost its special tax status in Florida, which is believed to have saved the company tens of millions of dollars over the years after opposing the state’s “Don’t Say Gay” legislation. It initially said nothing, but was persuaded by staff to intervene.

Last month, Unilever struck an agreement to resell Ben & Jerry’s ice cream in the occupied West Bank, although the ice cream brand itself said that doing so was “inconsistent with its values” due to Israeli control over the territory.

There have been disagreements between shareholders, with Norway’s largest pension fund, KLP Asset Management, among opponents of the deal, saying Unilever puts “profits ahead of human rights”.

Unilever said it was a “complex and sensitive matter” and had never backed a boycott of the territory.

While shareholders may disagree with a company’s decision or stance on a particular matter, they can still exert influence even if they cannot persuade them to change it.

This year, a group of investors led by Netherlands-based Achmea Investment Management failed in efforts to force some of the world’s largest Covid vaccine makers to increase access by revealing their know-how.

However, they see increasing support for their plan as positive progress and a “strong message for management”. Their pressure led to one of the three, Moderna, linking executive bonuses to vaccine distribution.

CECP’s Daryl Brewster expects companies to become more vocal on social and political issues in an increasingly politically divided world.

“Business has an opportunity, if not to find common ground, but to find a higher level for society to move towards.

“Things like climate change and social justice are really critical issues that I think companies can lead in partnership with other companies and also in partnership with governments.

“But I think there’s a gap that we’ve seen in so many places, and companies that really serve the vast majority of our population really have an opportunity and a need to really speak up on these key issues.”

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