The risk of corporate reputation in 2021

Save the Children Australia CEO Paul Ronalds on why corporations can no longer, and should no longer, do the bare minimum when it comes to corporate social responsibility. 

The job of a corporate affairs executive has never been more challenging. 

Once upon a time, business could generally avoid difficult political issues.

When confronted by a hot-button political issue in the past, many corporate affairs directors would have tried to avoid any comment, or recommended the blandest of press releases to hopefully stay under the radar. 

Today, it’s increasingly hard for our most prominent companies not to have a public position on major social and environmental issues.

Telstra tried to sit on the fence after initially supporting marriage equality in 2016. The Catholic Church had placed pressure on the company to dial down its public support for equality in the lead up to the plebiscite. It was quickly forced to reiterate its earlier support following a significant customer backlash.

Woodside was slammed when its chief executive recently sought to avoid criticising the Tatmadaw, Myanmar’s army, following this year’s coup. Within days, it had released a statement condemning human rights violations in Myanmar.

Many profitable Australian companies have felt obligated to pay back JobKeeper, knowing that the reputational damage far outweighed the value of the payment.

Even in the deeply divided United States, business is increasingly taking public positions on contentious political issues. 

When the Capitol in Washington DC was stormed earlier this year, one of the country’s most conservative corporate peak bodies, the National Association of Manufacturers, fired off one of the first press releases. Its CEO called on Vice President Mike Pence to “seriously consider” invoking the 25th Amendment of the Constitution to remove President Donald Trump from office.

The National Association of Manufacturers’ condemnation was quickly followed by other business leaders including Citigroup’s CEO Michael Corbat and Salesforce’s CEO Marc Benioff.

More recently, hundreds of US companies published a letter opposing discriminatory legislation in Georgia making it harder to vote. One signatory argued that by putting democracy at risk, the state’s Republican leader was placing capitalism at risk.

Companies in Australia and the United States are responding to a clear trend of rising expectations from staff and customers.

People increasingly appreciate that governments have far less influence over our economy and global issues than in the past.

Political leaders in many countries, including Australia, also seem less willing or able to exercise policy leadership.

In the absence of political leadership, customers and staff are looking to the private sector to drive change.  

Seventy four per cent of those surveyed in the 2020 Edelman Trust survey suggested, “CEOs should take the lead on change rather than waiting for government to impose it”. This was up 9 per cent since 2018.

The other driver of this trend is that more than ever, employees want their work to contribute to a sense of broader life purpose. If employees do not feel that their employer’s values are aligned with their own, they are unlikely to stay long.

When Google’s work for the US Defence Department became public, it was seen as incompatible with its corporate slogan “Do No Evil”. Combined with a poorly handled, high profile sexual misconduct case and a lack of employee diversity, Google employees staged the largest walkout by employees at big tech. Google let the contract lapse.

COVID has likely accelerated these trends, making most people more conscious of the vulnerable and marginalised in their community.

After years of declining public support for overseas aid, there were even indications that Australians appreciated that they had a responsibility to help those in our region whose health systems had been overwhelmed.

This growing sense of international solidarity may have been one of the reasons Save the Children’s tax year end appeal in 2020 was its best ever.

Sales through our retail network of second-hand stores also enjoyed significant growth once COVID lockdowns ended. Conscious consumption is growing alongside greater environmental and social awareness.

How should corporates respond?

To retain the loyalty of the most valuable customers and employees, companies must be able to demonstrate a genuine commitment to improving their social and environmental impact.

Any sense of white, green or other coloured washing will quickly be found out and the backlash is likely to be painful.

Instead, we need a new generation of corporate leaders who understand their central role in helping to solve some of the most challenging social and environmental problems.

Only if all three parts of society – government, civil society and the private sector – are actively engaged and work together, will we achieve progress.

Companies and their boards must do much more to ensure they “do no harm”. Any major company that does not have a credible plan towards zero carbon emissions or cannot be confident that its supply chain is slavery free is playing with fire.

Too few companies are taking sufficient steps to ensure corporate assets are not misused. At a time when online child sex abuse has skyrocketed, a company that is not taking steps to prevent staff working from home on corporate IT assets from consuming child sexual abuse material are taking a risk.

Ask Westpac’s former CEO and chair what happens if a company’s systems fail to detect activity associated with child exploitation.  

Companies also need to ensure their corporate philanthropy is socially and environmentally impactful, not just a marketing exercise.

Scattergun grants to community organisations, often accompanied by significant corporate advertising, is clearly marketing expenditure disguised as corporate philanthropy. Instead, companies must identify long-term relationships with community groups where corporate philanthropy, volunteering and core business work together to have a meaningful impact on an important social or environmental issue.

Save the Children’s work with GlaxoSmithKline on a solution to umbilical cord infections or with QBE on increased disaster preparedness are good examples of long-term, business aligned and impactful corporate philanthropy.

While these trends may have made the job of corporate affairs harder than ever before, they also present a massive opportunity: never before has this work been such a driver of competitive advantage for the firm that gets it right.

This article is an extract of a speech Paul Ronalds is giving at the Corporate Affairs Summit in Sydney on Wednesday.