At the 2018 Sustainable Brands New Metrics conference, RF|Binder Founder & CEO Amy Binder spoke about corporate purpose in an age of political tribalism, including the long-running link between profits and cause, the power of policy, both public and private, and how ESG and ratings agencies are catching up on what investors already know – that doing good is critical to doing good business. The complete speech can be found below.
Good afternoon. It is a pleasure to be here and I look forward to our discussion following my talk.
As we explore the risks and opportunities we face today in this age of political tribalism, it would be interesting to see how these issues are facing your companies. I look at these issues through the lens of my field — strategic communications, reputation management and brand-building. We do a lot of work in the area of social impact and sustainability. These days, our work never lacks for surprises.
Who could have predicted that one of the biggest decisions facing the CEOs of leading media, tech and financial service companies would be whether to drop out of a so-called Davos in the Desert because of reports that the host country had murdered and dismembered a Washington Post columnist?
Or that Nike would put its longtime relationship with the NFL on the line, producing an ad celebrating the Black Lives Matter activism of a quarterback who had sued team owners for conspiring to keep him from obtaining a new contract and who had been the target of presidential Twitter attacks? Or that three weeks after the ad first aired, Nike’s stock would hit an all-time high, even as social media exploded with videos of irate consumers burning Nike shoes and threatening boycott?
These are only the latest examples of the unpredictable, complex environment in which management and boards find themselves in this period of inflamed social, political, and cultural division. They underscore the paradoxes of this period in our public life, where the clash of causes produces risks as well as opportunities for brand leaders and marketers.
It’s significant, of course, that we’re meeting here today just days before a mid-year election that will be something of a referendum on an administration that came to power almost two years ago with plans to erase large sections of the sustainability agenda. In the last two years, we’ve witnessed a retreat by government across a broad front of issues such as climate change, protection of air and water quality, as well as diversity and inclusion.
Today, I want to give you my sense about where we are two years after the elections of 2016. How have corporations adapted to the intensification of political tribalism? How has consumer behavior changed? What – if anything – has changed about how we build and manage brands?
Let’s take a few minutes to put what we are seeing today into a historical context. In many ways we are seeing “history repeat itself.” This period is hardly the first time when political tribalism has flared and the notion of “corporate responsibility” has come under attack.
About 50 years ago, in September 1970, Nobel prize-winning economist Milton Friedman took the editorial pages of The New York Times to denounce the very notion of “social responsibility” as an appropriate consideration in corporate governance and management. He famously declared that the only social responsibility of a corporation is “to increase its profits.”
Friedman saw nothing wrong with corporate leaders supporting various social causes as individuals. But the concept of “corporate social responsibility” was more than just wrong-headed, Friedman argued, it was “hypocritical window-dressing” that “harms the foundation of a free society.” He didn’t see how the concept could be squared with the obligation of management to do what’s best for shareholders.
Friedman offered this view in a political period that, arguably, far surpassed our own in terms of social division and political upheaval. Still fresh in the public mind when he wrote was the rioting that engulfed score of US inner cities after the King assassination in 1968 — a bloody year that also saw the Robert Kennedy gunned down in June and police battling anti-Vietnam War protesters at the Democratic convention in Chicago in August.
In the late 1960s, anti-Vietnam war protesters regularly picketed the headquarters of companies deemed complicit in the war effort. In 1969, radical elements of the anti-war bombed the Marine Midland building and a leading activist was later convicted of carrying out or planning bombings of Chase Manhattan Bank, GM’s headquarters at 59th Street and Fifth Avenue, and Standard Oil’s offices in Rockefeller Center.
Meanwhile, corporations were beginning to feel pressure from anti-apartheid activists to divest their South African interests. The divestiture campaign started in the 1960s, gathering momentum through the 70s and 80s. The campaign ultimately resulted in 200 US companies cutting all ties with South Africa over a little more than a decade starting in 1985.
It was the divestiture movement that highlighted the potential influence of large institutional investors – primarily in the form of big public employee pension funds and university endowments – on the policies of public companies. In a sense, this movement was the beginning of the ESG advocacy we are seeing on the part of big institutional investors such as BlackRock and various activist investors.
Also notable in the late 1960s and 1970s was the growing activism around environmental causes. Responding to public outrage over events long since forgotten – such as the Santa Barbara oil spill of 1969 and New York City Thanksgiving Smog in 1966 — President Nixon proposed the creation of the EPA in 1970.
Climate change and global warming, of course, had yet to grab the attention of the media. John Sawyer published a seminal study on the issue — Man-made Carbon Dioxide and the “Greenhouse” Effect in1972. Only when a series of droughts threatened Midwest states in the mid-1970s did the media start to focus on climate change.
By 1980, Friedman’s rejection of the concept of corporate responsibility found its policy expression in the arrival of the Reagan administration. Reagan’s views of the social and environmental legislation and regulation were very much in line with those of the current administration. He came to power with the votes of Americans who were exhausted by the divisions the war had caused, and tired of what many felt was social experimentation and regulation run amok. Then, like now, conservative commentators revived talk of conservation, sustainability and social justice as “private virtues” – not the stuff of corporate governance.
So how does our period of political tribalism compare with the tribalism of the 1970s? There are many differences, but it seems to me there a few major features that stand out.
The most obvious difference is today’s social media environment. Once you have billions of people on the same few global networks — people who have largely identified themselves, their locations, their likes and dislikes, their jobs, and who can communicate with one another virtually free – that clearly changed the dynamic of public conversations.
As we know too well, negative consumer responses can now spread quickly and – if inclined – form virtual “mobs” that can tear down brands and organize online protests. We’re of course also finding that – just like mobs in physical space – virtual mobs can often be manipulated.
You’ll recall that when the new administration came to power, many executives professed fear of being hit with a presidential tweet storm that would undermine their standing with customers and hurt their reviews. That fear is in large part the reason why brands tried to steer clear of contentious causes or taking a stand on big issues like gun control.
What is perhaps the most surprising outcome of the last two years is that brands appear to have become pretty good at managing through — or even skirting — these risks. Tomorrow could bring an exception, of course, but presidential Twitter attacks have not proved to have a sustained impact on a major brand. We have been tracking this phenomenon and our research has shown that companies that have taken stands in periods of major news events — such as the Parkland School shootings on February 14 – mostly did not experience prolonged impact on their businesses or their brands.
What are the sources of brand resilience in this period of division and heated rhetoric? I’d cite a few factors.
First, social media has – built into it – a bad case of attention deficit disorder. Today’s outrage quickly fades when some fresh controversy – especially one involving a celebrity – comes into play. Some die-hards may linger on an issue, but it’s rarely in numbers that affect the brand’s fundamental health. Poor service, flawed products, or regulatory or legal misdeeds are far more likely to do sustained damage to a brand than a reasonably thought out position on a major event in the news.
Does this mean there’s no risk in taking stands? Absolutely not. Every major news event or shock is different, and companies’ involvement or proximity to the issue in terms of public perception can vary widely. But a reasonable, thoughtful position – one that’s based on the brand’s promise and is in line with the values of the company – is unlikely to have a long-term impact. It could, in fact, encourage greater engagement with the brand by customers and employees.
The second factor is the sheer size and diversity of brand followings. In an age in which digital technology has empowered companies with highly recognized brands to achieve substantial scale, the sheer size of customer bases makes it hard for one set of extreme views or another to pull down a brand in a significant way unless the brand has egregiously departed from its values and its promise.
Third, I believe brand managers and reputation managers are getting much better at understanding the relationship their brands have with customers. This is a function of the often extensive data and analytics they have access to. This allows them to model outcomes and predict behavior in ways unthinkable in decades of the 1960s and 1970s. That may be one of the lessons of Nike’s commitment to Kaepernick. There are those that argue that the use of Kaepernick in the new ad to celebrate the 30th anniversary of the “Just Do It” campaign was bold and risky. There are others who say that this move was based on Nike’s deep understanding of its core customer and the risks were in fact quite minimal.
Finally, despite current political trends, corporations continue to adopt ESG principles and the concept of a “purpose-driven” business – a development that surely would have dismayed Friedman, who passed away in 2006. A new generation of management has largely endorsed the view that it’s right and proper for a company to consider its impact on society and to give its employees a meaningful context for their work.
Through purpose-driven approaches, CEOs and their management teams see the opportunities to engage, motivate and retain their workforce through the articulation of compelling values. They see the opportunity to differentiate their brands with customers and clients. They see an opportunity to align their values with those who influence their customers’ behavior and with key business partners and distributions channels.
The value that companies see in adopting ESG principles and policies can be seen in the growing number that have produced sustainability reports. About 85% of companies in S&P 500 Index now produce sustainability reports. That’s up from 82% in 2016 and compares with just 53% in 2012.
Those statistics underscore the trend that the media has largely overlooked — the degree to which companies are standing up for ESG principles and policies. In 2015, more than 365 companies took a public position in support of the Clean Air Act. More than 200 companies have publicly supported the introduction of carbon pricing.
In many cases, companies are in effect lobbying for good regulation. They understand how uniform standards can build public confidence in their industries’ governance and behavior. And they see the limits and credibility challenges of voluntary guidelines or company-specific policies. As one observer put it, “Ultimately, long-term legitimacy, reputation, and license to operate are at stake.”
Again, we have historical lessons about what happens when government leaves the field when it comes to issues such as the environment and climate change. In the 1980 presidential election, the Clean Air Act and the EPA had come under attack. When the Reagan administration took office, it installed leadership who was instructed to “rein in” the EPA. Turmoil ensued. The EPA administrator was cited for contempt of Congress, resignations from the agency surged, complaints surfaced alleging destruction of documents. Does this sound familiar?
Twenty-eight months into his second term, President Reagan summoned William Ruckelshaus, the EPA’s first administrator and asked to return to the agency to restore order and effectiveness. Ruckelshaus, in a New York Times op-ed last year, recalled those events.
“While I awaited Senate confirmation hearings that April,” he recalled, “several chemical industry chief executives asked to meet with me. I expected to hear complaints that over-regulation was stifling economic growth, just as I had heard 10 years earlier.
“Instead, I was stunned by their message. The public, they told me, was spooked about the turmoil at E.P.A. Americans didn’t believe anything was being done to protect their health and the environment. They didn’t believe the E.P.A., and they didn’t believe the chemical industry. These executives had concluded that they needed a confident, fair and independent E.P.A.”
Certainly, one of the drivers of the ESG movement in the corporate suites of public companies has been institutional investors’ growing focus on companies’ “sustainability” or ESG profile as a risk indicator. As we all know, assets in investment products based on ESG and sustainability principles have grown steadily in recent years. More and more investment managers are running ESG screens on their holdings, not just those managers with an ESG mandate or those overseeing investment strategies built on one of the many ESG benchmarks.
Publicly traded companies are, of course, keen to make sure they’re not left out of the consideration set when big investors are putting together portfolios worth billions of dollars. But tensions are building up on the corporate front that may complicate the strategies of brand managers and marketers down the road.
The issue is a growing frustration among corporate leadership about how various ratings services arrive at their results. Increasingly, corporate officers complain that the ratings approaches are inconsistent, lack standardization and result in scoring that can undercut a company’s appeal to investors. One MIT professor estimates that a company in the top 5% of one scoring system has a very high probability of being the bottom 20% of another. The professor says this “extraordinary discrepancy is making the evaluation of social and environmental impact impossible.”
These complaints are beginning to surface in major media. Last month, a Wall Street Journal article carried the provocative headline, “Is Tesla or Exxon More Sustainable? It Depends Whom You Ask.” Noted the article, “Electric-car maker Tesla is ranked at the top of its industry by one firm, but another grader puts Tesla at the bottom.” We work with companies and investors in the ESG space, and we’re hearing these complaints from the corporate side in particular.
This could turn out to be a complication for brand managers and reputation managers. The reason is that these ESG scores are becoming more accessible to both individual investors and consumers. Last year, Morningstar’s Sustainalytics ratings became available on Yahoo Finance. Bloomberg offers CSRHub data now on its terminals. And earlier this year, Barron’s started running a ranking of the “100 most sustainable companies.” This, of course, is not the first ranking of its kind. But it is significant that an organization such as Barron’s has now created this type of list. We’re likely to see more of this data made available in the months ahead.
As this data enters the public domain, the “streams” of investor interest and consumer interest could start to cross. Ranking and scoring data is already starting to be used in attacks or criticism of brands. I suspect we are going to see a growing number of activists and NGOs using the rankings to call out companies they have targeted. It’s early days, but this is a trend worth keeping an eye on.
So what should you, as marketers, be focused on in this period of political tribalism?
My advice is to encourage management to stay the course on “purpose” and ESG positioning if they’ve already embarked on that journey and if you haven’t started on that journey, now is the time. Corporations’ boards and leadership teams should not be deterred in using purpose-driven messaging for their companies or brands by the divisiveness they see in the media and online. Increasingly, when major events like Parkland erupt, they will come under pressure to take a stand. At these moments, it’s important that marketers bring to bear their deep knowledge of the brand and data they have developed on the characteristics of their customers.
Most management teams will want to do what’s right. But their messages must be cast in ways that persuade their customers of the wisdom, proportionality and fairness of their stands. If you get the customer messages right in such volatile situations, the messages for other important stakeholders – employers, investors, government officials – will ring true as well.
Amy Binder is the Founder and CEO of RF|Binder Partners, a fully integrated communications and consulting firm headquartered in NYC. Some questions Amy Binder asked her audience to consider during the talk:
- What policies or social issues has your company taken a stand on?
- Does your senior management team see social impact as an individual responsibility, a corporate responsibility or have they not addressed this at all?
- Have your CEO or CFO been asked by investors about ESG issues and your company?