Corporate Impact

What’s Next? is back! Our team is so excited to roll out season two of our online roundtable where we talk to corporate and nonprofit changemakers who are partnering in innovative ways to fuel social good. This week, Josh and I are back with a season intro.

As we mention in the video, it has been nearly a year since the publication of the Profit & Purpose report and the amount of changes that have happened in the social good space this year are staggering! We believe that there is a major paradigm shift happening and that the pace of these changes are going to continue at a rapid pace (Josh will talk about this paradigm shift in next week’s blog, so stay tuned!).

In the meantime, we’re talking about four trends that we’re seeing in the social good sector. For Next Stage, the last eleven months have brought their own kind of paradigm shift. In addition to the incredible work that we continue to do with nonprofits, we’ve begun working with private sector businesses to build out their own social impact work. The trends we’re seeing have major implications for private sector businesses and nonprofits alike.

The Rise of ESG

When we published Profit & Purpose in May 2021, we used the word ESG exactly five times – and all five were in the Sustainability section. One year later we’re seeing ‘ESG’ everywhere, across a range of social good contexts. We’ve talked about the rise of ESG on the blog before – the acronym stands for Environmental, Social, Governance. ESG typically has a large scope that includes the environmental impact of the company’s operations, social impacts both charitable and through the lens of its day-to-day activities and governance, including internal controls, representative leadership and shareholder rights.

What to Watch: ESG isn’t a construct that’s going away anytime soon. In fact, we anticipate even more conversation about company efforts and how their social strategies are fitting in with the larger ESG picture.

A Focus on the ‘S’

Now that ESG is a construct that companies are embracing, the ‘S’ is taking its place in a larger narrative. Environmental and governance – the ‘E’ and ‘G’ parts of ESG have been on private sector minds for a while now and in many cases have defined measurements and strategies. But Social – the ‘S’ in ESG – is forcing companies to think about impact in ways they haven’t before.

Next Stage has recently begun working with several private sector clients to establish a Theory of Change, a way of thinking previously embraced primarily by nonprofits. This method helps organizations map out the challenges they want to help address, the resources they can provide and the expected impact they hope to achieve. It has been an ‘aha’ moment for our own team. Clarifying this theory of change has helped more clearly map a company’s overall strategy and align it with the business’ own values and goals. It also helps employees understand the impact that company hopes to make and how to engage with those efforts.

What to Watch: Over the next year we anticipate this trend to only increase. Expect to hear a lot more businesses defining their social strategy and aligning those efforts with their brand.

The Shift for CSR Leaders

After another year of rapid social change, many CSR leaders find themselves in a strange place. Companies are placing more importance on social good than ever before. In fact, companies like Chipotle and Salesforce are even tying portions of their executive compensation to ESG goals. A lot is expected of CSR leaders today and many find themselves at new tables within the company. These roles are being pulled into conversations not only about impact, but about overall ESG efforts, DEI and more.

But while many CSR leaders face increased responsibilities, the investment into these goals often lags. They are part of more conversations, but in most cases have not been given additional decision-making power and are limited in their ability to be an agent of change within the company.

What to Watch: We expect to see this change over the coming years, as the ‘S’ continues to increase in importance. Look for larger teams, repositioning of those teams within companies and even ‘Chief Impact Officers’ to start emerging as companies build more robust social strategies.

An Eye on Measurement

With the increased focus on the Social part of ESG comes an increased focus on how to measure impact. Environmental and governance have metrics that are already clearly defined. While they aren’t necessarily easy to measure, companies largely use the same set of metrics, such as carbon footprint or emissions. When it comes to ‘S,’ these metrics are almost entirely undefined – and different for every company.

Because every company focuses on a different set of impact issues, impact measurement can look drastically different from company to company. And since social efforts can also impact companies internally, there are both internal and external metrics to consider. For example – if a company is focused on education issues, they may choose to track how their efforts are helping kids gain access to college. Internally, they may want to track volunteer hours or the impact of those volunteer hours on employee engagement. In every case, these metrics are harder to define because they aren’t clear cut in every organization and they require significant collaboration with nonprofit organizations.

What to Watch: We expect to hear a lot more about this over the coming year, as companies further define their social impact strategies. Savvy companies will partner even more closely with their funded organizations and may include the support of academic institutions to create methodology that better defines the effectiveness of their social investments.

Check out the episode, where we discuss these trends in more detail – and let us know what you expect to see this year in ESG!

Last Friday, the Next Stage team got to spend the day in a film studio, capturing some incredible conversations for Season Two of What’s Next?, our video roundtable that explores innovative partnerships between nonprofit and corporate changemakers. And wow – we feel lucky. Nearly a year out from the publication of Profit & Purpose, we got to spend an entire day talking to partners that are forging new paths for social good partnerships.

Since the launch of Profit & Purpose, we’ve also had the privilege to work alongside several companies as they build out their own impact strategies. In just the last few weeks we’ve sat in several conference and Zoom rooms with nonprofit, public and private sector leaders as they map out their partnerships and collaborate on shared outcomes.

I’ve sat in a lot of sponsorship conversations throughout my career on both the nonprofit and private sector sides of the table. But y’all – these conversations felt different.

These partnerships have the hallmarks of so many of the trends we’re seeing in the corporate impact space right now. Collaborative planning, multi-year funding commitments and focus on hyper-local causes are becoming more and more common among companies we interview and work with. We think this is for several reasons.

A Changing Dynamic
First, the disruption of the last two years has pushed for greater innovation. There is a growing realization that no single entity – nonprofit, corporate, government or civic – can create systemic change on their own, so it becomes essential to work together. This creates an environment where each organization is more acutely aware of their own needs, as well as the strengths of their partners.

Second, quickly evolving ESG demands are encouraging companies to think about impact in ways they hadn’t previously needed to consider. This focus on the ‘S’ or Social component is prompting companies to think in ways that are traditionally occupied by nonprofits. We are currently seeing a greater sharing of expertise between partners, as nonprofits and companies learn that sharing expertise, data and outcomes offer benefits that have previously gone unexplored.

A Different Conversation
The partnership meetings we attended over the last few weeks were honest and engaging. People left the room feeling energized. After our team left our third meeting room buzzing with excitement, we realized that it wasn’t the projects itself that were so exciting (although the partnerships themselves are innovative and energizing!). It was the conversation itself that felt different.

We think this ‘new’ way of partnership is changing the dynamic between nonprofit and private sector partners. In Profit & Purpose, we noted that transactional sponsorships are dying to a more dynamic, collaborative kind of relationship and these conversations were evidence of that shift. Here are three ways we see this dynamic changing the tone and the power dynamic:

It encourages honest conversation. There is an openness to conversation that happens when nonprofits and companies come to the table as co-collaborators instead of funder/fund-ee. Rather than conversation about transactional sponsorship grids or expectations around outcomes, we saw a free exchange of ideas and information. In one case, the company asked a room of grant recipients for their opinion on their impact theory – and really listened to the feedback. In another case, a nonprofit was able to request a different type of support – access to data and a connection that the CSR professional didn’t even realize was needed.

It enables creativity. One nonprofit leader noted the freedom that came with this style of partnership. Rather than requesting a set of outcomes before the project even started, co-collaboration meant that the partners defined possible outcomes together – and noted that these may shift throughout the project. Traditionally, funders have held nonprofits to strict reporting and outcomes. And while accountability is important, so is innovation. A long-term, collaborative partnership means that both parties can adopt a ‘fail faster’ mentality that is more responsive to the needs of communities and better equipped for results.

It leverages resources. In this type of partnership, both sides have valuable resources – data, expertise, network, stakeholders and more. This type of collaboration allows each side to authentically access those resources and work together. In one meeting last week, a group of nonprofits and a company discussed what it would look like to share data, how the company could help them interpret that data and the shared narrative and outcomes that could be driven by collaboration. In another meeting, educational nonprofit leaders shared leadership goals and considered what cross-training opportunities may be available that would improve employee engagement for both parties.

These conversations were only the beginning of many of these partnerships, but the mutuality and kinship present were refreshing and promising for the success of these collaborations. In the meantime, I’m feeling extra grateful for the energy present in so many of these rooms and the work we get to do every day.

Nearly a year after the release of Profit & Purpose, we’ve had the opportunity to learn from (and work with!) so many innovative companies. And as the world turns rapidly towards a greater focus on ESG, businesses across all industries are looking at how to best integrate impact and sustainability into their own business models.

Advanced manufacturing companies and other blue-collar dominant businesses are no different. We’ve had a number of conversations with leaders in manufacturing industries this year, and the benefits and challenges ESG poses to these companies are significant and unique from many other business models.

The manufacturing sector has long been ahead of the curve on strategies such as apprenticeship programs and exposing students to the trades to build their workforce pipeline. But ESG is quickly evolving and many of these same businesses are now turning their attention to DEI efforts, workforce retention and environmental sustainability, in addition to workforce pipeline efforts.

Why are manufacturing companies investing in ESG? 

Like other industries, manufacturers are experiencing disruption due to changing expectations of shareholders. Millennial workers and consumers expect the companies they engage to be responsible across a range of issues. Environmental and sustainability factors play a particularly big role in this industry and many advanced manufacturing companies have established sustainability departments focused on reducing their carbon footprint, making their supply chain more environmentally-sound and examining production processes of the future.

While this movement is driven by large, publicly-traded companies, it is having a trickle-down impact. Many privately-owned manufacturing companies find themselves in the supply chains of these larger companies and must evolve their business models to remain competitive.

Layer in a rapidly-retiring workforce, the impacts of the pandemic, supply chain shortages and a need for greater inclusivity of both women and workers of color in these fields – many of these companies are being forced to evolve in real time to meet quickly changing needs and expectations.

Where does CSR or community impact fit in? 

As we noted back in January, CSR is not the same as ESG, but community impact is a critical part of a comprehensive ESG strategy. Savvy manufacturing companies are looking to leverage the long-term impact of their community efforts to solve business challenges and to support the broader goals of their ESG strategy.

This is typically an unexplored area of focus for a company accustomed to running in the background of civic engagement, with its business-to-business model less often resulting in prominent social impact efforts. But it is a trend we believe is only going to become more essential for manufacturing companies in the coming months and years.

How are advanced manufacturing companies leveraging ESG and social impact efforts to support their businesses? 

Social impact strategies can be leveraged to solve many of the challenges faced by companies that count on blue-collar, gray-collar and white-collar employees working together to produce a profit, including:

• Talent Recruitment – A large portion of the blue-collar workforce in the United States is rapidly approaching retirement age, without enough next-gen employees to fill their spots. Some companies are partnering directly with nonprofits to set up training, hiring or apprenticeship programs in a clear win-win strategy. The company gains qualified workers, while the nonprofit and community gain valuable job training and positions.
• Employee Engagement – More than one leader we spoke to specifically pointed out the challenges of employee retention over the last few years. Considered essential workers, many manufacturing employees are feeling the stress of the last two years. Staffing shortages and overtime hours compound this stress and many businesses are looking for team-building, mental health support and other engagement strategies to prevent burnout and retain their workforce.
• DEI Efforts – Similarly, nearly every manufacturing leader we spoke to cited DEI as another focus area they hope social impact efforts can support. For example, one local company has its eye on increasing the diversity of their workforce and increasing the number of women and people of color in their leadership structure. In addition to examining their current practices, they are working on cultivating a diverse future workforce by investing in technology programs at under-resourced high schools.
• Workforce Pipeline – Long-term pipeline is on the mind of nearly every business leader. Advanced manufacturing companies need to cultivate a strong pipeline across a range of areas – technology, finance, trade jobs and more and many companies are investing in nonprofits designed to support the long-term success of students. Some companies are investing in schools and academic support for students, while others are funding organizations that focus specifically on segments of the future workforce, such as girls and technology or students of color and engineering.

A new way to look at nonprofit partnerships. 

Nonprofit partnerships have long been seen as primarily a ‘give back’ or cause marketing effort for companies. But what if these partnerships had the ability to invest not only in the community, but inside the walls of your company? A shift in thinking opens up a new world for private-sector and community organizations that collaborate. If we instead viewed nonprofits as valuable partners and vendors who could help address company issues, your company could find efficient and effective partners in solving common workplace challenges.

Here are a couple of tips to keep in mind as you consider partnerships in line with your ESG strategy:

• Create a ‘theory of change’ – Your company needs a narrative that ties together your focus on each of the initials in ESG. We see companies with mostly disconnected strategies that don’t speak to each other, making it difficult to communicate how your company is addressing these complicated issues. A strong human-centered narrative that connects metrics to your newly-developed mission is the key to remaining competitive.
• Prioritize key challenges – As you consider a social impact strategy, explore how it could support your business challenges. If the mental health and stress of your workforce is a concern, consider partnering with an organization that offers group meditation or wellness services. Hiring challenges could be supported by partnering with an organization that offers training in the trades for their clients. When you consider partnerships based on your own challenges, it opens a world of collaboration that provides wins for everyone.
• Find collaborative partners –  In this vendor-based model, it is critical to find nonprofit partners who ‘get it.’ Consider the ways you form partnerships with organizations and see if you can change the dynamic. What would it look like to present a specific problem to a nonprofit, then collaborate on a solution? These collaborative partnerships frequently produce innovative, targeted solutions that work well for both parties.

The impacts of ESG on advanced manufacturing and other blue-collar businesses is significant, 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.

“The only constant in life is change.” – Heraclitus, Greek Philosopher

As a whole, people don’t typically like change. We might understand the need for change – heck, we might even be on the frontlines advocating strongly for change. But when it comes time to actually modify behavior, to change practice, that’s where the rubber really hits the road.

This is the space we are finding many private sector companies as they wrestle with increased expectations for ethical, values-aligned business models that reflect positive social and environmental impact.

When we published The Social Good Report: Profit & Purpose last year, we had spent the better part of a year exploring how the private sector was tackling these increased expectations. We sought to detail a new approach to social impact for businesses, and through more than 80 interviews, we feel strongly that we have developed an effective roadmap for the community. And in the months since we went live with the report, we have learned so much more.

In the fall of 2021, Next Stage launched its Social Impact for Business service line – an opportunity for companies to engage Next Stage to apply the concepts outlined in Profit & Purpose. We inked our first contracts soon after and have been broadening our understanding and refining our services.

We now understand better than ever what a “Wild West” this trendline has become, with companies and nonprofits alike publicly acknowledging the shifting ground upon which they stand but expressing uncertainty with how best to proceed. It is clear much has changed but what is it changing into? This is the question we aim to continue unpacking on behalf of the Charlotte community and beyond.

To understand this trendline is to explore how vocabulary is changing.

What is CSR and ESG?

CSR stands for “corporate social responsibility,” a concept that suggests private sector companies have an ethical responsibility to improve the communities in which they operate. Most public companies and some private companies have formal CSR strategies that most prominently include how a percentage of revenue is invested back into community. Companies may feature a CSR executive who is charged with managing these strategies, or that may be one task of a professional with a broader scope of responsibilities.

ESG stands for “Environmental, Social and Governance.” According to Investopedia, it describes criteria that serve as “a set of standards for a company’s operations that socially conscious investors use to screen potential investments.” ESG typically has a large scope including the environmental impact of the company’s operations (including its supply chain), social impacts both charitable and through the lens of its day-to-day activities, and governance including internal controls, representative leadership and shareholder rights.

So ESG isn’t just another term for CSR? What is driving the shift from CSR to ESG?

While some have suggested ESG is the new expression of CSR, Next Stage believes it is actually a major evolution of the concept to something far more powerful. And much of it is tied to generational change.

As noted by the Association of Corporate Citizenship Professionals, CSR got its start in the late 19th and early 20th centuries with successful tycoons like Andrew Carnegie and John D. Rockefeller expressing a responsibility to give back to society. In the latter half of the 20th century, CSR began to gather steam as consumer buying decisions became influenced by cause marketing. By the early 2000’s, increased expectations by a younger workforce brought CSR strategies into the workplace as volunteerism and employee engagement became a more common human resource strategy.

The big disruptive shift has come more recently as the private sector manages the increased expectations of shareholders. Socially responsible investing has existed for decades but has been significantly reactivated through Millennial and Gen-Z generations choosing socially responsible mutual funds for retirement investments. As noted by MSCI in their 2020 whitepaper, a recent survey noted that “87% of high net worth millennials considered a company’s ESG track record an important consideration in their decision about whether to invest in it or not.”

While previous CSR efforts translated into cause marketing impacting consumer preference and employee engagement practices to increase employee retention, ESG is focused on shifts to investment that have the potential to dramatically impact the bottom line for companies. To put it another way, the Millennial who grew up believing cause marketing messages became an employee who expected those values in their workplace. And now, they are “changing the game” once again through their investments.

I guess ESG is mostly something for publicly traded companies to worry about?

No. In our recent work, we have partnered with large corporations and private, family-owned businesses alike. Our learnings are that socially responsible investing is having an expansive impact on many different types of businesses.

ESG is currently 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. One area where companies are focusing is on the supply chain where a company’s vendors (and the vendors to those vendors) are potential areas of exposed risk. Many companies are seeking to diversify their supply chains while also examining how those vendors create ESG risk. Companies that do business with publicly-traded companies (or are vendors to the companies that do) may find themselves just as exposed.

The definition of stakeholder is also changing for many companies. Since investor impact is really a function of the will of the people, elected officials are also monitoring how the underpinnings of ESG impact the voting habits of their constituencies. The leadership of local municipalities like the Charlotte City Council have demonstrated a desire to see increased social responsibility from companies of all sizes.

In this way, we believe ESG is like a snowball rolling down a hill. It is a trend that will eventually impact every private sector company.

How is Next Stage supporting this shift?

We entered this space having focused on the role nonprofits play in communities through the often-messy framework of community ownership – nonprofits are a public framework “owned by the people” and must knit together many different constituencies to achieve success. Our skillset of building coalition is ideally aligned to the needs of companies that find themselves suddenly needing to build buy-in from more constituencies than ever before.

We launched our Social Impact for Business service line with the goal of partnering with companies to “work at the intersection of social good.” Whereas many companies are seeing these shifts through a lens of risk, Next Stage aims to reframe it as “corporate social opportunity.” As outlined in Profit & Purpose, there are many bottom-line serving ways that an embrace of ESG criteria can translate into increased brand visibility, employee retention and, yes, increased profitability.

With this in mind, Next Stage is tackling many ways this is being expressed:

• As the leaders of privately-held businesses prepare for an IPO or get ahead of industry accountability protocols, we are engaging in formal planning and implementation engagements to create values-aligned ESG processes. We call this service line Social Impact for Business.
• Companies with staff leaders of CSR, DEI and Sustainability are wrestling with how to link these efforts to create an integrated approach to ESG. We are pioneering new models and seeking to lead area corporations through change.
• Private sector leaders are seeking partnerships with nonprofits that can help them navigate increased expectations for engagement while also assisting in measuring impact. We have built the Nonprofit Partnership Platform to do exactly that.

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.

One look at the news and you’ll quickly see one of business’ biggest current challenges – hiring. So today we want to share three ways businesses can use social good to close the hiring gap.  Just before the start of the pandemic, unfilled jobs in the United States outnumbered the unemployed by 1.4 million openings – the widest gap ever. And while it’s true that there are also a lot of people seeking jobs, the challenge is a bit more complex.

In many industries, there is a gap of skilled workers, especially in accelerating fields such as construction, healthcare and technology. In a fast-growing economy like North Carolina’s, demand is outpacing the availability of program graduates. Add in pandemic challenges such as parents (especially women) leaving the workforce, disruption to family and school schedules and the changing of workplace culture and we have a recipe for major disruption – and major opportunity.

In our recently published Social Good Report 2021: Profit & Purpose, we explored some of the ways that businesses and nonprofits are building beautiful and creative workforce development partnerships.

I believe there is explosive, community-changing potential in many of these partnerships. There are few intersections that create as many wins for everyone involved – the business builds a successful hiring pipeline, the nonprofit gains hugely impactful resources for their clients. Collectively, we build a local economy that is giving people one of the things they need most – stable careers that pay a living wage.

Throughout our research, we found several tangible ways that local businesses are engaging with nonprofits to solve their own hiring gap:

1. Internships – Nonprofits such as Year Up are partnering with organizations like Bank of America and AvidXchange to offer 6-month internships. Students gain valuable experience and corporate connections, while businesses are introduced to a diverse talent pool of students who are eager to learn and invest in their own professional development.
2. Apprenticeships – Many fast-growing industries are turning to apprenticeships as a way to create a long-term, sustainable talent pipeline. Charlotte-based companies such as Steelfab and Torrent Consulting are finding traction and proving that this is a model that works in blue-collar and white-collar industries alike. It can take a little longer to get apprentices up and running, but both companies note that the long-term payoff is well worth it.
3. Job Training – Almost every nonprofit will point to job training as an area of huge opportunity for their clients. Savvy businesses can work directly with nonprofits to ensure that the training is exactly what they need, then build a direct pipeline of talent in exactly the fields they need. Check out what Charlotte Area Fund is doing with their HVAC training program or how Goodwill of the Southern Piedmont is partnering with construction companies. City StartUp Labs recently began training teams of digital navigators for partnerships with county agencies.

Are you considering how your own business can leverage social good for your talent pipeline?
Next Stage knows you have questions and we’re here to help. Through our Social Impact for Business service line, we are working with companies to design compelling social good strategies that lead to impact in employee recruitment, retention and satisfaction. Got a specific challenge you’re wrestling with? Or a compelling workplace asset you want more people to know about? “Yes, we have a nonprofit for that.”

Reach out to us to learn more: info@nextstage-consulting.com