Episode notes

• Discover CECP

• Learn how experts have shifted away from the Friedman model

• Explore stakeholder theory

• Check out CECP’s Investor Forum

• Dig into the Net Zero Futures initiative

• Get a primer on employee resource groups 

• Read more about the Yellowstone Wolves 

• Subscribe to Sam's Newsletter

• Check out Give from Submittable

• CECP’s annual reports:

  • Giving in Numbers

  • Global Impact at Scale

  • Investing in Society

Transcript

SAM CAPLAN: In 1995, biologists reintroduced gray wolves to Yellowstone National Park. It had been nearly 70 years since the last wolves in the area were killed off. And it wasn't clear what effect, if any, the 31 reintroduced wolves would have. 

The results were astounding. The changes started with the elk. The presence of a new predator forced them into smaller herds away from the valleys. As the elk population moved, swaths of underbrush grew back. Trees thrived. Songbirds returned. 

[BIRDS CHIRPING] 

Tree roots stabilized the shores of the rivers. Beavers flourished. The beaver dams improved the ecology of the water for fish, bringing back birds of prey. In the end, 31 wolves transformed the ecosystem of more than 2 million acres. 

For CSR professionals, the Yellowstone wolves offer an important lesson. To see the full impact of your work, you need to look at the whole ecosystem. Kari Niedfeldt-Thomas helps drive the research that empowers corporate leaders to do just that, to take a holistic view and understand how their work ripples out across space and time. 

[MUSIC PLAYING] 

Welcome to Impact Audio. I’m your host, Sam Caplan, VP of Social Impact at Submittable.

This episode originally aired as part of our Impact Studio Conference in 2022. Our 2023 conference is coming this September. Stay tuned for more details.

Last October, we sat down with Kari Niedfeldt-Thomas, managing director of Chief Executives for Corporate Purpose, and mayor of New Brighton, Minnesota. She spoke to how new expectations are shifting the whole paradigm in the corporate sector. One of the big changes we’re seeing is a reorientation of who corporate leaders think about when they make decisions.

KARI NIEDFELDT-THOMAS: Companies really need to think about their work around which stakeholders are the most critical for them to focus on. Of course, they have to think about all of them. But the old model, the Milton Friedman model was to really be thinking about shareholders and shareholder theory. 

And we instead want companies focused on stakeholder theory, that this is around all of your business. It's your customers. It's your suppliers. But it's also your employees and it's the communities where you're operating. And so how can companies think about that work differently? 

Companies have continually been evolving that model over the years. And that definitely is a trend that we have been helping companies to focus their strategies on. So they're not just thinking about-- a grant that you're making, for example, out of your company is not just about that grant. 

It is really around, what are you wanting to accomplish? Why are you making the decisions to do that? Are you looking at how you can build your employee pipeline in a new way and be able to access students of color, to be able to increase diversity in your company? Or is it that you're thinking about human rights and your supply chain in a way to be able to make sure that you're supporting the development of your products, but in a way that is ethical? 

So all of those viewpoints companies are continually looking at. They're going through materiality assessments, deciding what's relevant to their business, and then honing really what their strategies are based on what's most critical. 

SAM CAPLAN: As companies take a more holistic approach to their CSR and ESG strategies, they need to rethink some of the traditional business practices of measuring and tracking success. Social change doesn't happen on a quarterly schedule. Leaders need to think on a longer-term horizon. 

KARI NIEDFELDT-THOMAS: We know that it's very easy for companies to get caught up in the quarterly analyst conversations that are happening. And those quarterly returns calls can often have companies find that they're not centered truly on their long-term strategy. What is their long-term purpose? Really, where are they headed? 

So an area that we have really advanced over the past several years is our CEO Investor Forums. We have CEOs delivering their long-term plans. Think about all the work that a company does around ESG and boil it down into a 20-minute presentation. And they deliver that to institutional investors to really describe, this is where we are, but this is where we're headed. And this is why this is important to us across all facets of their business. 

And that transformation from where they are to where they want to be, that long-termism, we refer to it as, is really a game changer for companies. It really is a way to be able to tell the market, this is how we're going to lead with purpose, and to be able to make sure that all the stakeholders understand where they're headed and how they can plug in. 

SAM CAPLAN: When companies think more holistically about their work, they better understand and account for their impact on community members, the environment, and employees. This perspective is really important. But an often overlooked benefit of this broader perspective is that it enables leaders to more deeply understand the ecosystem they're operating within. And that's just good business. In fact it's becoming clear that not thinking about this bigger picture can be a liability over the long term. 

KARI NIEDFELDT-THOMAS: I think there's a risk for companies to not think about the world in terms of materiality and of the broad sense of what is happening in their world of their stakeholders. Companies for generations were focused exactly as noted, around what shareholders wanted. And shareholders sometimes were only concerned about the short term. They wanted to be able in the short term see a company increase their profits to a point, see the stock go up so they could sell. 

They weren't there for a long-term model. They weren't looking at it around how is a company performing? Yes, maybe the company is meeting all minimum regulatory standards, but they're not necessarily looking at a net-zero future of where the market is potentially headed and where they have to be prepared to operate as a business when the rules might change. 

And so the role that we play in helping companies please think this through is to say, this is the world today that you're operating in. And you know the risks today. And yes, you can make money at this point in time. 

But if you're thinking about the future that you're going to need to operate in, where are regulatory pressures going to come in? What are the impacts of challenges in your workforce? We've seen challenges in supply chains. How are you going to be able to manage through those risks? 

That really is what materiality should be driving toward, is helping companies identify the big issues that are going to potentially cause risks to their business. And then how do they develop the strategies and then implement those to be able to mitigate losses to their business, but at the same time making sure that they're looking out for some of those societal impacts? So yes, the old model could have been only around how much money was being given away into a community. But that model alone doesn't help a company to ensure that they're going to be strong for the future. That model should be integrated into the larger view. 

SAM CAPLAN: It's easy to say, let's redefine how businesses think about their impact. Actually doing it is another story. Corporate leaders can't and shouldn't redefine their businesses impact alone. They need community. They need access to data. They need resources. That's where CECP comes in. 

KARI NIEDFELDT-THOMAS: CECP stands for Chief Executives for Corporate Purpose. We are a trusted advisor to companies on their corporate purpose journeys to build long-term sustainable value and tell their impact stories. We have a large network of over 200 of the world's largest companies that are part of our coalition. And so we're really working with those companies and helping to lay out for them through trainings and convenings that we hold, benchmarking and research that we do, and overall strategy and communications on how they can think about their corporate purpose work differently, how they can lead. 

And we do that around five centers of excellence, which CECP is helping companies in transforming their strategies around. And those are societal community investment, diversity, equity, and inclusion, employee engagement, ESG, sustainable business, and telling the story. 

SAM CAPLAN: A big part of CECP's effort is to gather data about the current corporate purpose landscape. They then help companies understand the trends and forces shaping the CSR and ESG ecosystem. Their reports are some of the most comprehensive and insightful explorations of what it means to fold purpose into a corporate mission. 

KARI NIEDFELDT-THOMAS: We have three annual reports that we put out every year-- Giving in Numbers, Global Impact at Scale, and Investing in Society. Giving in Numbers is the unrivaled leader in benchmarking on corporate social investments. And we do this in partnership with companies. And we have an over 20-year historical data set. It's the oldest and largest in the world. 

And it was on CECP's original report that we put out. It was focused on corporate community investments. And this would be from the company, from their foundation. It could be noncash, in-kind, pro-bono. And so that work has evolved to also include total social investment, how companies are doing work in supporting society that's beyond just their giving programs. 

Our Global Impact at Scale Report is a publication that we put out in partnership with the CECP Global Exchange-- that is, mission-driven corporate societal engagement organizations that are focused on advancing the corporate sector's work as a force for good around the world. And we have partners in 18 countries and regions. That global exchange body of knowledge that is in that report really helps to bring insights into what's happening locally around the world and how companies are really leading in different ways. 

Investing in Society is our third publication. And that is designed as a report to look at the state of corporate purpose across a range of ESG metrics and how companies are performing and also disclosing their targets. 

SAM CAPLAN: A major challenge for corporate leaders is to step out of the frameworks they traditionally use to gauge success. In the world of business, competition can be a positive force, but social impact is different. It's not a hierarchy. There's no alpha. Every company can be a force for good in its own way. The companies leading the way are the ones who are continually asking how they can show up, both authentically and effectively, for their communities. 

KARI NIEDFELDT-THOMAS: I think there are all types of companies that are leading in different ways. And it really isn't a continuum. It is not where this is the good side and this is the bad side and companies have to find their way on there. Every company is leading in different ways around how they can be a force for good in society. 

And I'm excited every day to be able to work with leaders who are really thinking differently. So we at CECP are working with CEOs. But we're also working with their full teams who are leading on corporate responsibility strategies or whatever it's called inside of a company. Every company calls it something different. 

And so we have to be adept at working with them on whichever team it that is leading on these strategies. But these leaders really are able to translate the various different languages going on. They have to be able to understand supply chain. They have to also be able to understand the finance function. They have to be able to understand investor relations, to be able to talk about ESG. 

These leaders have to be able to think about their communities. And so they are translators of what's happening outside in the world and then helping to interpret that internally and then vice versa, being able to bring that information out. So these leaders who are leading corporate purpose strategies are certainly very different in how they lead. They have very specific functions inside of a company. 

And a lot of it really depends upon the ecosystem that they're working in. So there could be that there are other champions inside of their company. They could have a CEO who's been a large voice at wanting to say what they want to see happen. And then the work is really around bringing that senior leadership team along. 

But there at times can be leaders who are pretty isolated inside of their company. And they are a social justice advocate in many ways inside their company. And partnership with an organization like CECP helps them to be able to navigate and learn best practices, how to be able to lead, how to be able to benchmark, how to really think about where you want to head and how to navigate those strategies. 

So oftentimes it's the CEO who is really clear about what they want. And then they bring in a corporate responsibility leader who knows how to make it happen. And it is that place in the middle, between the CEO and that corporate responsibility leader, that that individual spends a lot of their time working through. 

In a pandemic world they're not necessarily walking the halls like they maybe were years ago. But they certainly are spending time on building relationships, advancing new strategies, and looking at ways to be able to have every function own a piece of this work, because everyone knows, these are not large departments inside of companies. They are lean. 

And their role is really about how you infuse that corporate purpose across the entire enterprise, not just have those strategies reside only in one little place. Otherwise they won't survive and they won't really make it out to broader impact. It's really when you can infuse that across the business, across multiple functions that it becomes stickier, as one would say in the business world. 

MARK PENDOLINO: Hi, I’m Mark from Submittable. It’s been really interesting to watch so many companies double down on their commitment to social impact over the last few years. It has put CSR professionals in a unique spot. For the first time in a long time, they’re getting a real seat at the table. And right now they have a chance to channel the momentum to shape the future, not only for themselves, but for the whole corporate sector. Our Impact Studio Conference this September brings together experts to dig into what it really means to work with a purpose. More details are coming soon—stay tuned.

SAM CAPLAN: One of the most exciting things about this movement toward a broader definition of stakeholder is the revelations that come along the way. As corporate leaders shift how they think about impact, they're making space for new perspectives. And it turns out some of the most valuable and nuanced insights come directly from employees. 

KARI NIEDFELDT-THOMAS: I do believe that companies have identified that their stakeholder number one is their employees, though. And that has been a shift over the past decade, as you've noted, that companies are quite clear not only in this time when a number of employees have shifted roles, but that additionally there is a tremendous amount of value if they're listening to their employees. They're able to stay on top of not only trends, but what is it that they as a company should be focused on? 

Their employees, for example, are very close to what their customers want. And if a company's leadership listens to their employees, they'll be able to develop the best campaigns to sell their new products and services. But they also will make sure that they're authentic and that they are not going to, in a world of social media, be seen as disingenuous. 

We a few years ago had commented in one of our year-end trends that we saw increasingly employee power, that employees expect their employer to have a voice on issues that years ago companies did not necessarily feel comfortable speaking out on. And they specifically want that voice to be their CEO. And we've been tracking over the years through our CEO closed-door gathering, a Board of Boards, that CEOs themselves are saying that they know speaking out on an issue is one of the most important ways that they can demonstrate the values for their business. 

Companies are not a person. Companies are made up of a bunch of people. And all of that is a collection of values that need to come together to drive products, services, marketplace relevance forward. And I can say that companies, when they are looking at their employees as an important stakeholder in a way to provide that input, yes, employee resource groups have been on the rise. 

If a company did not have solid employee resource groups in 2021, the beginning of that year, by the end of that year they certainly did. If a company did not have a chief diversity officer in 2020, by 2021 they certainly have put one in place. And they recognize that this is an interconnected group of ways that you can engage your employees, but at the same time be able to plan for your employees of the future, be able to think about how are you retaining? How are you looking at pathways for promotion inside of your company? So companies certainly are looking at all of these issues. And employees are helping to advise their companies. 

As for other areas of ESG and corporate responsibility, I would say that it depends on the function. But every single department inside of a company is being asked questions. Do we have policies that are going to be able to demonstrate that we are anticorruption? Do we have policies that are going to demonstrate how we are going to operate in developing countries around the world? 

So companies are thinking about all of these issues. And ESG, I always like to say, is two parts. ESG is both the environmental, social, and governance programs in management inside of companies. And it is how a company intersects with its investors who prioritize a company's commitments to those environmental social and governance priorities. 

SAM CAPLAN: As companies make an effort to get feedback from their employees, they're realizing corporate purpose is not just about reaching external objectives. It's also about redefining internal practices. Diversity, equity, and inclusion are essential to a strong CSR or ESG mission. 

KARI NIEDFELDT-THOMAS: Companies for a long time have recognized that they've had challenges in aligning, for example, their community investments with their actual recruitment pipelines. We led an Accelerate community a few years ago on systemic investments and equity talent in tech. These companies were saying, we're investing in all the STEM education programming in K-12, in postsecondary, and we're not seeing those individuals applying for jobs to our company. What's happening? How can we not have a more diverse pipeline if we've been pouring all of this money out of our company into the communities? 

And the reality is that they had not aligned their human resources function with their corporate responsibility work. When companies have done that, that is where they're integrating, for example, their employee resource groups with the organizations that they're providing grants to in communities on STEM education. I'm just using STEM as an example, but there are many fields where aligning that work is important. 

So there is all of the internal DEI work that companies are taking on, assessing how are we retaining our employees? Are we participating in appropriate pay equity? What are the pathways to promotion, not only looking at what their workforce diversity is, but middle management, senior executives, the C-suite, sometimes the CEO also? Even looking at their boards of directors, that's the internal. 

But then externally, how companies are showing up in their communities and having that be a cross-enterprise effort to build those relationships, that is where companies are recognizing that there are huge opportunities for them to be able to be out more in communities, build those relationships. And their corporate responsibility functions are often the ones that are the best brokers of being able to build those kinds of partnerships. 

SAM CAPLAN: So there's a big opportunity for companies to really show up when it comes to equity. But this work doesn't happen on its own. It takes intention. It takes leaders who are willing to engage deeply to ask the difficult questions, leaders who are willing to say, here's where we want to be. Now, how do we get there? 

KARI NIEDFELDT-THOMAS: Business leaders are excellent at coming up with new strategies and all of the implementation tactics that they need to get to where they want to go. Think about it, entering a new market, launching a new product, all of those skills that those leaders have are the same way that they need to approach DEI. If you want to have a diverse workforce, you all are smart people and you can make it happen. And that's the advice that we're giving to these leaders. 

Say where you are. Disclose your data. Acknowledge where you have challenges. And then use data to help you drive decisions forward. 

Look at before and afters. OK, we set a goal this year that by next year we're going to work to have a 2% increase in people of color in management. And if that 2% increase, you need to then build out all of the tactics to get there, just as you would in any other business strategy. It is not hard work, but it is certainly hard for companies to think about diversifying their workforce and their management in a way that is not how they were originally trained to do. Originally they're trained of, well, we'll just let whatever employees that come into our recruitment pipeline come in and we'll wait and see. 

The leaders who are doing this are hustling. They're working hard to build new partnerships for recruitment. They are building apprenticeships. They are looking at hidden workers to be able to find individuals who maybe are outside the workforce right now. And they're finding what those unique pathways are to bridge them into their workforce, whether it's a manufacturing or an office setting. And they're finding out how they can best be supportive to retain them and then eventually promote them. 

But this is the hard work. The easy work happened a year ago. And it should have happened a long time before then. I think everybody who does this work felt that in 2020, the door that had been cracked open and everyone was wanting to pry open, we were able to push it faster. So that's the good news, all of those immediate actions that companies took-- ERGs, hiring a chief DEI officer-- all of those were the right things to do, townhalls, CEOs making statements. 

Now when everyone says, well, our company is really living up to their commitments, yes they are, but this is hard work. It's going to take a lot more innovation than they ever have had to apply to this particular topic area. And companies are having really hard internal conversations. It's not about how many more implicit bias trainings can we have. How can we set targets for where we want to be? And then how do we track to get there? 

SAM CAPLAN: As companies get serious about addressing systemic injustices, they need to think deeply about how issues intersect and overlap. These efforts cannot be piecemeal. With that, let's return to Yellowstone National Park. 

Before the wolves returned, the erosion of rivers, the disappearance of the birds, the beavers, the trees, they all seemed like separate issues. But in reality, it was all connected. It's easy to understand that now in retrospect. The real trick for all of us is seeing the totality of our ecosystem as it exists today, understanding all of the systemic forces at play. 

KARI NIEDFELDT-THOMAS: I do believe that companies are understanding that for them to truly achieve the equity in society that they are promising they want to deliver-- again, they're looking at it internally and they're looking at it externally in the communities-- that they have to understand that systemic poverty or systemic racism exist because systems haven't been changed and invested in. You can't just find one little piece and fund it. You have to really look at the totality of interconnected issues to be able to then address how to support that. And supporting organizations holistically, those organizations that you believe are going to achieve societal outcomes in the way that you value, are the best practices that companies can follow, instead of making nonprofits report on societal impact or participant impact when you're only funding a small portion of that work. 

SAM CAPLAN: Thanks for listening. We hope this episode helps you find more ways to connect your efforts to wider systemic change. To hear more conversations like this, be sure to subscribe to Impact Audio. And stay tuned for more details about our Impact Studio Conference—coming this fall. Until next time.