Closing the Corporate Accountability Gap
The expectations for business are changing, and leaders committed to long-term growth must be prepared to live up to new standards.
Take data from three recent studies for example:
- The 2021 Edelman Trust Barometer found that 86% of U.S. adults expect business leaders to speak out publicly on social issues. This includes pandemic impact, job automation, societal issues, and local community issues.
- A study from Porter Novelli found that 59% of Americans believe it is unacceptable for companies to remain silent on social justice issues. Additionally, 58% of employees hold their employers to a higher standard than other companies on this front.
- Recent research from JUST Capital and The Harris Poll revealed that 95% of Black Americans believe it is important for companies to promote racial equity. Eighty percent also believe businesses can do more.
What the data reveals is a shift in the public’s perception of the responsibility of corporations and business leaders to become forces for change. But as leaders strive to balance the expectations of stakeholders, including customers, employees, and investors, they must also work to bridge the accountability gap that exists between intent and action.
Accountability for Progress
According to a May analysis from Creative Investment Research, of the $50 billion corporations pledged to support racial equity, only $250 million had been spent or committed to a specific initiative.
JUST Capital’s Corporate Racial Equity Tracker also shows that employers are more likely to disclose DE&I commitments (such as anti-discrimination policies) than to share actions that demonstrate accountability for progress (only 32% of employers shared data around pay equity). The Tracker monitors the state of disclosure of the 100 largest U.S. employers across 23 data points related to racial equity.
When it comes to social issues, including climate change, racial justice, and diversity and inclusion, business leaders must recognize the downsides of remaining silent on issues that matter to stakeholders. But responses to corporate commitments also emphasize that stakeholders want more than promises — leaders must be willing to take action to close the accountability gap and address prevailing issues in how they conduct business.
According to Porter Novelli, a majority (60%) of US adults will hold a company accountable when it makes a statement of support around specific issues. Before making a statement, company leaders should ensure their internal practices are aligned with external communications. Business leaders who want to bridge the accountability gap and reconcile the demand to speak out with the actions expected of them should consider the following steps:
- Recognize unique challenges. While there may be commonalities in the issues that companies face, each organization’s challenge will be unique depending on its culture. Leaders should understand that there is no universal solution and work to identify the areas of improvement unique to their organization, be they internal (e.g., pay parity, inclusion) or external (e.g., supply chain).
- Be honest about where you are. Transparency is key to building trust, and as companies work to improve practices, establishing and maintaining trust with stakeholders is essential. Regardless of where the company is in the process, leaders should be open about challenges and plans to improve.
- Outline clear action steps. Making a commitment is a good first step, but beyond that, companies should outline tangible actions to live up to those commitments. Doing so draws a bridge between intent and action and helps stakeholders hold leaders (and leaders hold themselves) accountable to promises they have made.
- Communicate progress. Tangible change takes time. The good news for companies is that while consumers want and expect change, a majority (66%, per Porter Novelli) know that true change won’t happen immediately. Still, it is important for them to see progress from companies. Communicating progress with stakeholders helps increase transparency, build up the company’s reputation, and demonstrates how the company lives up to its commitments and purpose. Additionally, as global standardizations are developed, companies that seek to lead on accountability and ESG performance have an opportunity to lead on disclosures for investors, employees, and customers.
- Define accountability measures. To ensure long-term progress, company leaders should be clear about what success looks like and how they plan to track it. This could look like tying improvement on DE&I practices to compensation, disclosing pay and diversity information, or publicly sharing action plans.
Corporations and business leaders will be held accountable for their commitments and practices, or lack thereof. For businesses that want to be sustainable in the long-term, becoming a force for good is no longer a nice-to-have. Leaders looking to bridge the accountability gap must be strategic in how they approach these issues and follow through.
Join us for an upcoming Kindred Assembly Closing Out 2021 ESG Investing, Climate Efforts, and What You Should Think About for 2022 (Kindred guests can register here). Kindred members also have full access to the exclusive content linked out below. Not a member? No worries. Submit your application form here and someone from the team will reach out to you.