I’m back with another installment in our series unpacking how the shift from Corporate Social Responsibility (CSR) to Environment Social & Governance (ESG) is transforming… well, everything. I’d encourage you to read our earlier primers on the differences between CSR and ESG and the role risk is playing in the ESG pivot as a preface to this article.
As Janet covered last week, we have spent the last year continuing our study of how social impact is evolving inside corporate America. We think it’s a pretty big deal, both for the nonprofit organizations we originally built our business to serve and to society as a whole. We’ve reframed our company’s entire theory of change as a result of this research and have constructed a business plan into the future to scale our new approach.
What we’ve learned is that the work we have done with nearly 200 nonprofits since 2014 is ultimately not that much different than the paradigm shift we are navigating with private sector companies. Both are being powered by people, and helping lead movements of people is what Next Stage is all about.
The Shift from Sustainability to ESG
While it may seem like ESG came out of nowhere as a disruption to private sector businesses, it has been a movement two decades in the making. ‘Corporate charity’ existed for the better part of the 20th century, but the new millennium brought with it a greater degree of focus on environmental sustainability. Companies began to pay attention to their carbon footprint, particularly those businesses with complicated supply chains that required significant logistics. The debate over climate change may have raged politically, but many companies were quietly beginning process modification and change management.
These efforts grew into what we now call ‘sustainability,’ and for many companies it became a significant part of their corporate cultures. The first Chief Sustainability Officers were seen in the early 2010s as companies sought to be proactive. As we covered in our last deep dive on this topic, the risk of regulation was a motivating factor for companies that began to see a societal shift on the horizon.
Running concurrent with sustainability inside the corporate construct have been other expressions of social consciousness. As previously noted, corporate social responsibility predated sustainability but rarely was directly connected to the strategic arm of the business. For most companies, this expression has lived disconnected from the rest of the business, not reporting into any of the departments it logically impacts like human resources or marketing.
Related efforts arose in other areas of the business model. Initiatives to create increased diversity in the workforce began as expressions of human resources, eventually evolving into more mature goal setting around inclusion and equity that led to the creation of DEI as a strategic imperative. Some companies have recently added Chief Diversity Officers as DEI has taken on new energy in the wake of increased calls for racial justice following the murder of George Floyd in 2020. Identity has been a big part of the emergence of employee resource groups (ERGs) that have become expressions of workplace culture.
The challenge for companies right now is that they are applying what previously worked for sustainability in a new era of change that ESG is signaling. A combination of corporate counsel and sustainability leaders are being tasked with a new form of risk with regulatory implications. Except this time, the field of play is focused on new human-centered metrics that are more difficult to manage. If sustainability was primarily centered on operational change management, this new focus on ESG is more expansively reaching into all aspects of the business model. And at stake, more than ever before, is public perception driven by customers, employees and shareholders.
Leading the People Powering a Movement
We know that sounds sort of ominous. We have been wrestling with how to frame the opportunity that is in front of institutions of all types and finding that a little bit of scary-sounding rhetoric is needed to get the attention of decision-makers. Like the nonprofits we’ve worked with for so long, sometimes you have to talk about the downside risk of inaction.
But Next Stage is far more optimistic about what this change means for all of us, for a society that is increasingly becoming more plugged in to how we all have a voice through collective action. What has been termed as ‘generational change,’ of a Millennial and Gen-Z-led effort to bring values front and center, can no longer be compartmentalized. These young people are not aging into acceptance of previous norms. Instead, they are reshaping the world through a renewed focus on ethics and guiding principles.
For a guy who has dedicated his career to advancing social good, it is hard to see this as anything but a win.
We believe this need not be seen as a disruptive force for the private sector. America is founded not only on democratic ideals but capitalistic ones as well. We believe in a free market, and that market is increasingly declaring itself. How will your company (or nonprofit) respond?
We liken this paradigm shift to others that have come before it, to the industrial revolution, the rise of digital technology, the advent of the Internet and the emergence of social media. Each of these advancements challenged leading institutions to make a choice – to either fiercely protect the status quo that had worked so many years, or to make changes to stay contemporary to a new reality. For every Sears that refused to make those changes fast enough there is an Amazon, a new company that seeks to harness the paradigm shift into a powerful expression.
This movement has the potential to help solve problems that have long plagued our communities, if we can harness the power of collective will and ownership.
The New Realities of Collective Ownership
We use the word ‘collective’ intentionally. Social media, the most recent paradigm shift, has changed society in ways both good and bad. One way it has been used effectively is in galvanizing people to action in service to shared values.
In this way, we believe all of the brands we engage with are collectively owned – we either feel they express us or they don’t – and increasingly that determination is being made not only through regulatory processes but in the court of public opinion.
It is a space Next Stage knows very well. We have long championed the 501c3 nonprofit as a collectively owned construct, powerful in the ways it leverages mission, vision, values and guiding principles to build buy-in toward tackling society’s toughest challenges. It takes care to knit together the many constituencies that make up the nonprofit business model including board members, staff, volunteer, donors, and perhaps most importantly, the people served by the nonprofit. Ensuring all feel ownership in the model creates the sense of belonging that fuels the nonprofit. Without a shared belief in the nonprofit – in its virtuousness, deep commitment and strategic savviness – it would be entirely ineffective no matter how many resources it has. The nonprofit model is collectively owned.
The new reality for the private sector is that we believe their business model is also collectively owned – not because the IRS designates it as such, but because customers, employees and shareholders have decided that it is.
A New Private Sector Paradigm
Next Stage has arrived at a moment of clarity about what we are here to do. Our new brand manifesto is in the final stages of development and I could not be more excited. It speaks to our work in helping our clients lead movements, of “building a less lonely path for the visionaries and changemakers” who aspire to reshape the world.
There is a critical need for business leaders in that matrix. Social impact will always be a small expression if we think of it as belonging solely to nonprofit organizations. We believe fiercely that nonprofits can be effective and powerful partners to the private sector in unlocking their pent-up potential, but the much bigger movement we want to be a part of is dependent upon the business sector.
We see so much potential in our private sector clients, to not only ride this wave of social change but leverage it, letting it fuel a transformation that translates into bottom-line results. Without profitability, this movement will not be successful. As with every paradigm shift that came before it, capitalism must find a way to create a new status quo that is infused with new standard operating procedures.
We want to do our part. We look forward to sharing more about the future we see in the weeks and months ahead, including how your company or nonprofit can harness this paradigm shift to advance your goals. Because a movement is meaningless without an effective call to action.
We will be sharing more about this at SHARE Charlotte‘s Fifth Annual Nonprofit Summit next Tuesday, focusing specifically on how nonprofits of all sizes can center their corporate partners’ customers, employees and shareholders in their private sector activation plans.
Intrigued and want to explore how to harness this paradigm shift for your company or nonprofit? Reach out and schedule time with our team. We believe every conversation is another step toward the future we want to see.