Next Stage - Social Impact Services

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Corporate Impact

Our 2024 Social Good Forecast

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One of Next Stage’s annual traditions is this blog post. We think about what’s ahead for social innovators everywhere. This year, we’re breaking from our usual ‘trend’ language – because we don’t believe that anything on this list is temporary – and instead we are forecasting. In our 2024 Social Good Forecast, we delve into how emerging trends like AI integration in content creation, the expanding role of Medicaid in the nonprofit sector, and the rising significance of trust-based philanthropy are redefining the landscape of social innovation and community collaboration.

Here’s what we are predicting for next year – and beyond:

AI for All

2024 is the year when artificial intelligence naysayers will start seeing the benefits of this tool and integrating it into their workflow. For content creators, the emergence of ChatGPT and similar AI-powered writing “assistants” has felt a little shaky. Are we being replaced? If we tap into this, are we contributing to our craft’s doomsday? The answer is no. There’s no replacement (yet) for lived experience, relational nuance or your emotional connection to your stakeholders/audience. In 2024, expect more late-tech-adopters to lean into AI as a collaborator for brainstorming, refining thoughts and combating writer’s block.

Medicaid Expansion Will Impact Nonprofits

Medicaid officially expanded in NC on December 1. The impact on individuals and families has been well documented – but what hasn’t been mentioned is the slew of impacts this could have on nonprofits. It is likely to mean more funding and new referral pipelines as more community-based organizations have the opportunity to participate in service delivery. Stay tuned for more specifics on the ways this will inevitably affect nonprofits across our state!

Trust-Based Philanthropy Will Pick Up Steam

The concept of trust-based philanthropy is already picking up steam among philanthropy and nonprofits. This year, we expect it to become a hotter topic among companies – and for good reason. Trust-based philanthropy is all about creating more equity in grant-making processes. This most often shows up as multi-year, unrestricted funding, streamlined application processes and more transparent, bi-directional feedback. Our team is dipping our toes in these waters through our UnFundable Grant – we can’t wait to share what we’ve learned.

Collaboration Will Be Even More Critical

The biggest challenges facing our communities are layered and multi-faceted, with positive outcomes in any one focus area dependent on supports in other, seemingly unrelated areas. How can a child achieve academically when affordable housing for that child’s family is out of reach? How do we build workforce pipelines that realize economic mobility when transportation options are limited? We have arrived at a clearing in the woods, where leaders in overlapping sectors are realizing there is no successful path forward without collaboration. We wrote earlier this year about the Federal Plan for Equitable Long-Term Recovery and Resilience – an initiative that lays out how federal funds will be invested to advance positive outcomes in these areas of intersection. We see great potential in it to help take on these social challenges head-on – but only if we do it together.

Businesses Will Look to Fund Community-Based Organizations

Companies are increasingly looking to fund community-based organizations (CBOs) as a way to fuel local impact. It’s a way to support hyper-local impact through organizations most proximate and trusted by communities – but the challenges for companies can be equally steep. For companies used to funding highly structured, large nonprofits with strong processes, working with CBOs can require more patience and support. Watch for more conversation on how to do this effectively.

Cultivating Community-Level Engagement Through Trust

The collaboration mentioned above will only happen if we use a methodology of trust. It is essential to displaying care and responsibility for one another as well as addressing pertinent issues around affordable housing, education, healthcare, navigating systems, workforce development and more. Charlotte and cities across the country are seeking ways to do this kind of engagement more effectively while assessing areas for growth, improvement and opportunities.

Polarizing Politicization

It’s an election year, and you know what that means. And I don’t just mean obnoxious candidate commercials that make us all want to throw our TVs out a window. No, these days an election year brings with it increased vitriol and baseless hatred at a time when we need to be coming together for the greater good. Politicized messaging can create rifts and disrupt forward progress in communities at a time when they are addressing the long-term impacts of a global pandemic. Keep that in mind as you engage the people you serve, your colleagues and others. What may just seem like empty rhetoric and hot air to some can feel like the reopening of old wounds that rarely ever fully heal.

DEI Will Remain Under Attack

Speaking of polarization – Diversity, Equity, and Inclusion (DEI) will remain under attack and will continue to have opposition in 2024. And that is unfortunate. After the death of George Floyd, DEI evolved and structural changes were prioritized. And yet, we believe there are individuals, companies, and institutions that will continue to hold the line and create space for DEI, belonging, and respect, evaluating processes and examining the root of systemic disempowerment – and calling that out. In 2023, we wrote a blog entitled “Walk A Mile In My Shoes” – in 2024, who’s willing to go the distance?

Intentionality Will Replace ‘Disruption’ in Change Management

An intentional focus on change management and ‘just-in-case’ planning will be top of mind. Many companies have recovered from the emergency state of the pandemic and have pocketed a lot of wisdom from their experiences. Putting key operational plans in place for future disruptions will give leaders and their teams peace of mind. There are more things to plan for than you’d think! Succession planning, financial planning and planning for major technological shifts in how we work will be a valuable resource in your back pocket when the time comes. 2024 feels like a good year to get that done!

Organizations Will Build Their ‘People Resiliency’

Gone are the days when employees’ tenure could be reliably mapped out. The job market continues to shift and employees (and employers) are not afraid of seizing new opportunities and facilitating personal and professional development. Companies will be building strong HR teams to help organizations and companies avoid major disruption to company success and workflow amidst employee turnover.

And finally, your annual reminder that Community Voice is not a trend. We expect community voices to rise in prominence throughout 2024 – and we can’t wait to see what arises!

We’d love to know – what would you add this list?

Impact Report Essentials

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With the end of the year quickly approaching, nonprofit and CSR teams are turning their attention to impact reporting. And while it’s not quite ‘report season’ yet, savvy teams will begin considering what to report – and more importantly, what story to tell. 

To Impact Report, or Not to Impact Report

For nonprofits and companies alike, annual impact reports offer a chance to clearly articulate the impact you made throughout the year, weaving a compelling story that resonates with stakeholders. Organizations publish impact reports for a variety of reasons, but some of the major ones include:

  • Transparency and Accountability – Reports offer stakeholders a transparent look at how funds and resources have been used. For nonprofits in particular, these reports can be a valuable overview for funders and donors. 
  • Legal Compliance – Larger companies, especially those that are publicly traded, need to complete impact reports that demonstrate sustainability and governance efforts. However, this doesn’t mean that they have to be dry, data-focused reports. Many include engaging representations of what the company has socially accomplished that year. 
  • Marketing & Storytelling – Strong impact reports include story-driven pieces that offer plenty of opportunity for stakeholder engagement. For nonprofits and companies alike, reports can elevate brand image and position organizations as human-centered, innovative thought leaders who are engaged in meaningful community work. 

The Essentials

At Next Stage, we look at a lot of impact reports. While they are all different, the best ones have a few things in common. Here are some things that we think make impact reports great – along with a handful of our favorite reports from the last year as prime examples:

Story Matters – and So Does Style

Whether your impact report targets annual donors or financial disclosures, the way your report shows up matters! When The University of Maryland did studies on how people read on social media, in school and in business, they found we spend an average of 26 seconds on things we choose to read – which means we have limited time to get our point across. Make that time more effective by focusing on the compelling, human-centered stories that bring your data to life. 

Tangible stories paired with compelling images bring specificity to a report and help your audience quickly ‘get’ the impact you’re making. The data is critical – but it’s the stories and themes that bring these reports to life. 

Check Out: Girls Who Code built their impact report from several years ago directly onto their website, offering an easily accessible, visually appealing look at their year. They intentionally built on the previous year’s theme of ‘sisterhood,’ clearly defining a narrative that resonates broadly. It takes a subject that could be perceived as less exciting (coding!) by pairing it with a highly relatable and human theme that centers the girls they serve. 

Impact > Metrics

Data that demonstrates impact continues to be a big question for nonprofits and CSR professionals alike. When measuring impact, it is often easiest to default to ‘output’ metrics instead of impact – and for good reason. Long-term, effective impact is notoriously difficult to track. When considering the long-term impact of funding or programs, ask yourself ‘Why does it matter?’ – then ask it again and again. This often helps move from an ‘output’ position to an ‘outcome.’ Diving even deeper can result in getting to longer-term outcomes. 

For example, a nonprofit that provides scholarships may say, ‘We raised $100,000 to send first-generation students to college.’ The money raised is an output of their activity. Their second draft may say, “Ten students were able to attend their first year of college’ – this is an outcome metric and much stronger than the first. A final draft based on long-term impact might read, “Five scholarship students graduated this year and obtained their first professional job.” All of these metrics are important but focusing on impact makes for a much more effective story. 

Check out: We love the 2023 impact report from Consumer Reports. In addition to the beautiful design (that header!) it offers clear data on their mission to test and investigate products to make them safer for consumers. The data comes alive when they link the number of surveys and engagement with stories about the annual wins that will have a long-term impact on consumers – such as new requirements that make dressers safer and less likely to tip over or exposing the dangers of heavy metals in chocolate. 

Know Your Audiences

When it comes to marketing, impact reports can be a valuable asset for companies and nonprofits. Similar to any other marketing asset, it is critical to define target audiences and to develop content that will resonate. One frequently overlooked audience is your own internal team. 

According to the Edelman Trust Barometer, 71 percent of employees say societal impact is a strong expectation or deal breaker when considering a job. In a competitive recruiting and retention market, current and prospective employees may be the audience most carefully reading your report! And while ‘impact’ is the most important thing to report, consider how your impact relates to your audiences and the elements they will most want to know. For example, a buyer may want to know the ethics of your supply chain, while a prospective employee might want to better understand what DEI looks like at your organization, or how the company engages with nonprofits. 

Check Out: Glen Raven built their 2023 impact report around a clear set of sustainability, safety and social metrics but the report comes alive when they tell the stories of how Glen Raven employees enabled this work. (Full disclosure: Next Stage helped produce this report last year). We love the story on page nine that describes how one employee is elevating women in leadership and advocating for mentorship across the company. Whether discussing manufacturing plant safety or their nonprofit partnerships, they center storytelling, offering a compelling accessible look at the company’s impact. 

The Takeaway

Anyone can publish an infographic with metrics from their year, but savvy teams focus on the why behind their data – and translate that into approachable, human-centered content. 

In Microcosm: Social Responsibility in a Rural Context

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“Thank you for your courage in attending this session.”

When presenting on the addendum to our Profit & Purpose report, I start by acknowledging the audience. At a time when corporate social responsibility is making headlines for the wrong reasons, people who work at nonprofit organizations are often confused about how to approach local businesses for support. Diving into why it’s so complex is not for the faint of heart. 

This is how I found myself in Asheville last week speaking at Philanthropy Institute 2023, an annual conference presented by the Association of Fundraising Professionals chapter in Western NC. It was an uncommon backdrop — corporate social responsibility has typically been thought of as a framework for urban communities with large professional services companies inside skyscraper office buildings. Philanthropy in Western North Carolina has more often been defined by large foundations like the Dogwood Health Trust and leadership gift-making by individual donors.   

But something important is changing about how companies based in rural and more sparsely suburban communities interface with social good. And it has the potential to be game-changing for residents who live in disinvested neighborhoods there. 

Recently, our company has had a bit of an epiphany: stakeholder capitalism driven by socially responsible investing is driving a new supply chain of social impact. It is a trendline that brings together quite literally everything Next Stage has championed in recent years – the importance of community voice, the power of trust-built sites, collaboration as a critical imperative, the social determinants of everything, and the vital role community health plays as connective tissue.        

It made for one heck of a conversation last week in a room full of people who I’m sure are still processing all that was shared. It’s a new way of thinking that I’ll gladly share with you here.

Can we just call them… Social Impact Offsets?

One way to understand how social responsibility is changing for companies with operations in rural areas is to explore global standards for sustainability impacts. A good place to start would be with the Global Reporting Initiative (GRI), which outlines a set of standards for how companies electively report on their impacts on the economy, environment and people. We go in-depth into this process as a part of our recent Profit & Purpose report. 

Suffice it to say, companies that desire to benefit from socially responsible investing avail themselves to assessment by third-party groups, like GRI, to aggregate environmental, social and governance metrics for consideration by investors. Ethical investing has become a worldwide trend, representing $1 out of every $5 invested. Companies simply can no longer ignore a trendline representing that much investment.

The key to this rating system is in their balancing framework. No one metric is considered alone, rather a score is determined by looking holistically at a company’s entire ethical footprint. That is important as corporate executives explore their materiality – the company’s unique drivers of societal impact – and design the best way forward.

There are so many unintended downsides in the day-to-day decision-making of companies. A bank rejecting a family for a home loan may be making a good business decision based on a low credit score, but that is also contributing to poor social and economic mobility for people experiencing poverty. It is a minefield for companies that must examine everything they do through a new lens.

This is especially true for companies wrestling with environmental sustainability challenges. Manufacturers with complex supply chains, companies extracting natural resources, agriculture producers optimizing their crops and other private sector businesses that predominantly work in rural and sparsely populated suburban settings can be those most disrupted by poor performance on impact reporting standards.

For the very largest of these companies, secondary markets for carbon offset credits are an essential tool. Some processes people count on every day to feed their families, power their homes and make transportation feasible have negative environmental impacts not easily solved. While R&D departments work on innovative solutions, socially responsible investing is squeezing capital from these companies. And as outlined recently in a Freakonomics podcast, this has the potential to have the exact opposite outcome as initially intended.

But what if there was a secondary market for social impact, allowing a company with complex sustainability efforts a chance to counter-balance with positive social metrics? And what if those companies not only activated this marketplace with investment but also with the entire engine of its business model? Would we call that secondary market ‘social impact offsets?’

There is evidence in the European and Asian markets of this exact way of thinking. While it might take time for the concept of social impact offsets to make its way to the politically charged United States, it is surely coming. 

It is a framework that smart companies should be seeking to harness now.

Collaboration in Rural Communities  

Heads up – that marketplace of social impact offsets already exists and it’s called the nonprofit sector. Organizations that generate impact through programming and companies with resources to fuel that engine of impact are discovering new forms of mutual benefit.

For companies with complicated sustainability challenges, the lure of social impact offsets may be just the solution they are seeking. That doesn’t mean it will be easily realized.

Creating positive social impact in small towns is incredibly difficult. Beyond limited financial resources, a lack of public transportation, credible service providers and resident trust in systems creates a landscape of challenging factors. And yet, the small size of the community also makes it much easier for a company to demonstrate how its self-interested efforts help move the needle for social and economic mobility. 

The emerging concept of demonstrating ‘impact in microcosm’ invites new ways to construct social impact offsets. The targeted work is best pioneered in a rural context, where corporate social responsibility is more often thought of as ‘big city talk.’

Next Stage believes ingredients to make this happen include:

  • New Methods of Service Deployment – The lack of health and human service providers in rural communities is a significant barrier to overcome. New models leverage trusted sites, coordinate service delivery institutions, and harness direct service providers to create social impact supply chains to activate nonprofits in urban and suburban areas nearby to bring additional services to underserved communities. This regional hub model is ripe with potential.
        
  • Public-Private Collaboration – Companies pioneering these models will be hard-pressed to deliver them without multi-sector investment. The sustainability of service delivery increases as public sources of funding align with foundations, faith institutions, and private philanthropy. Corporate investment is best used to build capacity and scale interventions – resources that traditional philanthropy and government agencies are typically less nimble to provide.
  • Models Built for Measurement – Regional hub service models work best when they are able to generate meaningful impact metrics to demonstrate forward progress. As nonprofits and the companies that invest in them join on the same side of the table, measurable impacts in community become more possible. To us, this sort of progress is what we need to see for a ‘social impact offset marketplace’ to be fully formed.

In theory, theory and practice are the same. In practice, they are different. At Next Stage, we are actively working with employers and nonprofit networks throughout the Southeast to realize new impact models. This construct is something we feel can truly change the world.

If you represent a company, municipality, aligned foundation or regional framework and would like to discuss these concepts in greater detail, contact us today for a free consultation. 

ESG 101: What does ESG mean for business?

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ESG is everywhere right now – but what does it all mean? In this week’s video blog conversation, Candice, Janet and Josh break down the ESG basics, why every company should pay attention to their impact strategy and one way any business can get started.

Whether you’re an ESG novice or someone thinking about impact all day long – we think there is something in this conversation for everyone!

Looking to learn more about ESG, check out our other ESG posts:

We need your help!

In 2021, Next Stage published The Social Good Report: Profit & Purpose, a study of the ways companies and nonprofits are intersecting around social impact. In the eighteen months since we completed our research, corporate social impact has changed significantly, including the rapid rise of ESG. This fall, we plan to publish an addendum to the original report that covers these changes – and we need your help! We want to hear from business, ESG, CSR and nonprofit leaders on this one question:

In the last year, what has changed about your company’s approach to ESG and community impact? You can respond here!

Why Every Company Needs a Theory of Impact

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How does your business determine how to make social impact investments? There is no single way that companies choose to express the public-facing ‘S’ in their ESG strategy. Some companies choose to align around a particular cause or passion. Others largely leave it up to CSR officers or the marketing & PR department who collaborate with nonprofit leaders to form longer-term partnerships. Still others have no strategy at all, making charitable donations to whatever feels right.

In Josh’s blog post last week, he noted that the ‘External S’ is the next frontier of corporate impact – a chance for companies to build custom expressions of their purpose and reimagine community relationships that will yield mutual benefit. And as Josh noted, “We believe that activating the people power of a company – the very customers, employees and shareholders that are driving the ESG shift to begin with – is a big part of how companies will be evaluated in the future. Transactional social impact activities are shifting to more meaningful and strategic expressions of commitment to causes.”

This sounds great – but we know the challenges of reimagining a social impact strategy can feel overwhelming on a good day. This is why we believe that every company needs a Theory of Impact.  

What is a theory of impact? 

For years, nonprofit organizations have built ‘theories of change’ to help illustrate the way their interventions and programs will achieve their vision, leading to long-term community impact. It is an important exercise, helping to clarify an organization’s value proposition, while ensuring that programs and activities are all designed to support an intended impact.

As our team has worked with more and more corporate clients over the last year, it is a construct that we are finding equally helpful in the private sector. We’ve worked with several companies to better define their impact, align internal employee engagement with external social activities and launch pilot projects designed to demonstrate measurable impact. In every single case, starting with a Theory of Impact was critical to a successful project.

It aligns impact with your company’s purpose. 

Rather than staking impact efforts on ‘corporate charity,’ developing a Theory of Impact ensures that your company’s social impact strategy becomes an expression of your overall purpose. Many companies can name their corporate purpose – but when it comes to their ‘External S’ – their social impact – it is often disconnected.

The light bulb moment for many companies happens when the two are aligned. Initially, some companies balk at this notion. Shouldn’t charitable efforts be motivated by altruism rather than benefit? We don’t think so.

When External S efforts are aligned with a company’s own goals and superpowers, that’s where the magic happens. This can look like identifying a challenge – a sluggish workforce pipeline, a need for local name recognition or the desire to see a thriving, economically mobile community that will help business thrive.

One recent financial company we worked with found traction when they connected economic mobility with their own desire to help people confidently invest. They built a Theory of Impact that focused on helping students achieve the financial resources needed to attend and persist through higher education using a range of programs that leveraged their own resources. This framed their educational efforts in a whole new light and enabled their team to create targeted, measurable programs connected to their own purpose.

It balances risk and opportunity.

A Theory of Impact can also help mitigate risk, turning exposure into opportunity. ESG measures have traditionally been centered in more of a framework of risk – what potential downside risks does a company have based on environmental, social and governance impacts of its business model? For example, many companies are seeking to diversify their supply chain while also also examining where vendors may have potential areas of exposed risk.

A thoughtfully designed Theory of Impact can turn these risks into opportunity, taking areas of exposure and mitigating them with genuine community impact. When companies tap into their own materiality – areas of exposure that are surfaced as a function of their own business processes – they can discover authentic ways to express an external social impact that makes sense for them to advance. In this way, it is natural for a real estate developer to care about affordable housing and gentrification, just as a mortgage lender would focus on first-time homebuyers or a law firm would consider pro bono casework.

Whatever your company’s inherent business risks, external social impact efforts can be custom-designed to help mitigate these risks while supporting related community needs.

How is Next Stage supporting companies developing their own Theory of Impact? 

The benefits of a defined Theory of Impact are wide-reaching and significant. When done well, aligning impact with your business purpose and practices becomes the opposite of a traditional ‘feel good investment.’ Instead it helps turn risks into opportunities, engages employees, creates strong community brand recognition and best of all – builds opportunity and success within a community.

Our team has a strong background in the ways practices and programs knit together impact in a community. We launched our Impact for Business service line with the goal of partnering with companies to ‘work at the intersection of social good.’ As outlined in Profit & Purpose, there are many bottom-line serving ways that embracing ESG – and a Theory of Impact – can translate into increased brand visibility, employee retention and yes, increased profitability.

Next Stage can work with your company to identify ways social impact can help address some of your biggest business challenges, building a Theory of Impact that both mitigates risk and addresses some of your community’s biggest needs.

ESG may be disrupting the status quo but we believe it can be harnessed to leverage the win-win-win potential hidden in every company. Want to learn more? Reach out for a free consultation.

ESG & The Rise of the External ‘S’

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 “Woke corporations.”

I suppose it was only a matter of time. Perhaps it was an inevitability. Paradigm shifts like this are bound to disrupt the status quo for many, and so it is only natural that this one would result in some unhappy people.

ESG has ‘arrived’ as a concept to op-ed pages of some of America’s most prominent publications. What was largely an initialism to be found in business journals and corporate impact reports is now something your uncle might bring up during a lull in the conversation at Sunday dinner.

I will admit some amount of disappointment that the ESG shift has become fodder for political talking points. As a company that has committed to ushering in a new era of positive societal impact through the framework of the private sector, Next Stage believes activating the big system of capitalism to align to social good outcomes is a complete no-brainer. But we know the road ahead may be a little rocky. Societal change that ushers in a new, more just and equitable era almost always is.


An ESG Refresher

I’ve written a lot about ESG this year. I’ve unpacked how ESG and corporate social responsibility relate to each other, how it is disrupting the status quo inside of companies, and most recently how people are at the heart of a new era of collective ownership. This has turned into a continuing essay series – an attempt to narrate what we are learning at Next Stage and why we think it is important. Those would be good primers for this essay, the fourth installment in the series.

As a catch-up, ESG stands for environment, social and governance. They represent domains of the private sector in which a company works on behalf of positive societal outcomes that go beyond maximizing shareholder wealth. It is related to stakeholder capitalism, which is the new corporate buzzword for business practices that center goals that reach beyond profitability.

If that sounds like Profit & Purpose, the big report we published a little over a year ago, that’s because it is. Sort of. Funny enough, we wrote a 92-page report about the trendlines driving this shift but referenced the term ESG just five times. Less an indictment of the report, it speaks to the incredible speed with which ESG has altered the landscape of corporate America in the year since.

In Profit & Purpose, we made an argument for how increased expectations from customers and employees are requiring companies to rethink how they do business. What we missed was the importance of shareholders, particularly Millennial and Gen-Z investors who are increasingly wanting to ‘live their values’ in all aspects of their lives, including through their retirement portfolios.

According to the US Sustainable Investment Foundation, socially responsible investments (SRI) have increased 25-fold since 1995, growing from $600 billion to nearly $17 trillion in 2020. The growth was particularly strong over the last decade as the Millennial generation moved into their 30s and began to save for the future. An ESG fund is the shorthand for this type of mutual fund investment vehicle.

With the rise of interest in socially responsible investing came a need to codify what qualifies a company for inclusion. Two primary standards have emerged – the Global Reporting Initiative (GRI) and the Sustainability Accounting Standards Board (SASB). Companies that want to qualify for inclusion in these portfolios must submit disclosures that demonstrate how they are setting goals across each area of ESG and what they have done to move the needle.

The Internal ‘S’

So much of what you just read is still relatively new not only to those of us who work for Next Stage but also to the management teams of countless companies. Areas of sustainability, social impact and governance have traditionally been managed individually and without a great degree of intersection. Breaking up those silos of management to knit together more cohesive strategies is a big challenge for companies who are trying to keep up with the pace of change.

The dominant theme of the ‘S’ in ESG has been an internal one, with social impact expressed as a combination of diversity, equity and inclusion (DEI) and economic mobility for front-line employees. This was a trendline that pre-dated the pandemic but was sped up considerably by both the disruption of COVID-19 and calls for increased racial and social justice in the wake of the murder of George Floyd. Companies that had been slow to prioritize equity and wellbeing for their workforce were suddenly making them mandates.

It was a big wake up call for corporate leaders. We highlighted it in our Profit & Purpose report, where increasing employee engagement and developing the workforce pipeline were significant sections. In the year that followed its publication, concerns for a workforce shortage have only amplified, gripping corporate America with renewed focus. Companies aiming to be an ‘employer of choice’ are being faced with a need to reshape how their workforce is treated as lifeblood. That includes creating a workplace culture that celebrates diverse backgrounds, creates equitable ladders of promotion and cares for the health and wellbeing of the entire workforce.

Talk about a rollercoaster. Maintaining one’s workforce during a time of crisis was reason enough to focus on the social implications of internal employment policies. The process of ESG reporting tethered those activities happening inside countless companies to a framework for goal-setting, transparency and accountability.

The results thus far have been nothing short of extraordinary as companies lock in on supporting their people. As the adage goes, “real change starts at home.”

The External ‘S’

So, what do those of us at Next Stage believe is the next horizon for the ESG shift? I’m so glad you asked.

As we’ve outlined previously, much of this movement began nearly two decades ago with increased focus on the ‘E’ in ESG – environmental sustainability. The early 2000s saw companies with complicated supply chains rethink how to address negative environmental impacts, with a primary focus on carbon emissions. Rather than wait for regulators to force a change, corporate leaders recognized getting ahead of it would lead to increased profitability in the long run.

This past decade saw the ‘Internal S’ of DEI and employee wellness as a must-do to remain competitive for talent. The last two years has seen this focus go into overdrive as strategies driven at the C-Suite level are resulting in transformed workplaces.

The common theme for both of these phases is a primary focus internally. Goal-setting has focused on aspects of the corporate business model that management can more easily control, areas like supply chain, hiring practices, compensation and access to healthcare. Optimizing the business model in an era of heightened focus on ESG has meant reimagining how work gets done. That change management is demonstrated by how many companies have hired ESG teams to focus on a new model of internal operations.

We believe the next horizon for companies will be the ‘External S’ – how a company looks beyond its own walls to make a positive impact on society. At some point in the future, optimizing the internal business model will no longer be sufficient to stand out from the pack for inclusion in portfolios for socially responsible investment. And when that time comes, like the sustainability work that began two decades ago, proactive companies will be best positioned to win the day.

This area of focus has primarily been the domain of corporate social responsibility officers who lead a company’s collaboration with community institutions. For many companies, that has meant financial investment in nonprofit organizations as a form of ‘corporate charity.’ What is changing is why those allocations are getting made and how the impact of those investments get measured. It is reimagining the relationship between companies and nonprofits as partnerships of mutual benefit.

Next week, my colleague and co-author of Profit & Purpose, Janet Ervin, will walk through this in greater depth, outlining how the development of a ‘theory of impact’ can help harness a company’s ‘External S,’ and how this new approach to corporate investment in social good is translating into exciting new collaborations.

Suffice it to say, if corporate social responsibility was once viewed as a ‘slush fund of feel-good investments,’ the future is the exact opposite. The next horizon for ESG is Corporate Citizenship in an external context, boldface and in capital letters.

What Do You Stand For?

Next Stage is proud to be working with private sector companies to assist them in solving for externally expressed corporate citizenship through comprehensive strategies with an eye toward future impact reporting. That includes aligning ‘External S’ activities with UN Sustainable Development Goals, identifying connectivity with GRI reporting standards and leveraging the big systems of a company that go well beyond their financial investments in nonprofits.

We believe that activating the people power of a company – the very customers, employees and shareholders that are driving the ESG shift to begin with – is a big part of how companies will be evaluated in the future. Transactional social impact activities are shifting to more meaningful and strategic expressions of commitment to causes.

We are already seeing this with cause marketing. Those who would criticize a company for ‘empty expressions’ of social cause alignment through communication channels are missing the much bigger point – brand advertising is normalizing the position of corporations in service to these social causes. In this way, we see it as the ‘canary in the coal mine’ for the much bigger change we will see in the decades to come – a change being driven by younger generations who are making ‘taking a stand’ a corporate mandate.

That this is disrupting the status quo in a way that leads to politicization is not a surprise. But, data suggests this is not being done to companies, but rather proof of how a free market works. This is capitalism driven by the preferences of customers, employees and shareholders, like it or not.

What does this mean for the private sector? We think it means there is still significant work to do, and Next Stage is committed to helping companies navigate the next horizon of the ESG pivot – the ‘External S.’

Interested in learning more? Get in touch – we’d welcome the chance to learn more about the needs of your company.