ESG

What Hybrid Means to Us

Earlier this year, Next Stage moved into its own dedicated office space. We had previously moved between co-working facilities, but the growth in our team suggested the need for a permanent home.

Having just passed the six-month mark, I can confidently say it was the best decision for the company. We now have a physical manifestation of our values, vision and commitment to working at the intersection of social good.

Our 1,600 sq. ft. space has a couple private offices but is otherwise made up of one large room with furniture configurable for a variety of uses, including several small tables, a standing desk and a couch. We do in-person team meetings on Monday and Friday mornings. The in-office time that follows is filled with 1:1 or team collaboration. Outside of those meetings, the office is available to the team to use as needed.

A hybrid work environment works well for our team. When we aren’t out in the community with our clients, teammates are empowered to decide for themselves where they are best positioned to do their work.

At the heart of it all is trust. We are a small team and I have personally hired each person who works at Next Stage. Believing in the work ethic of those who join our crew is among the most important factors when identifying talent. Encouraging them to find the right mix of in-office and remote engagement is an extension of our values of purpose, collaboration and belonging. It’s just who we are.

We were working this way long before the start of the COVID-19 pandemic forced many into remote or hybrid models. We’ve never had to make a remote or hybrid work announcement. And we’ll never need to make a return to office (RTO) announcement either because we’ve never been an in-office company.

But now companies in America have a decision to make. And the survival of our inner city centers of commerce is at stake.

The ‘Urban Doom Loop’

The headline of a recent Washington Post article caught my attention:

How the ‘urban doom loop’ could pose the next economic threat
A commercial real estate apocalypse particularly in midsize cities could spiral into the broader economy.

Yikes. The article does a really nice job of outlining how companies not renewing their leases for high-priced offices in center city areas creates a domino effect on the rest of the economy. When workers aren’t around, retail businesses close up shop, residents move out of the center city, and tax revenues decline leading to fewer services and eventually fewer residents.

That’s the ‘urban doom loop’ – a suitably horrifying name for an economic trend that has been slowly building since the onset of the pandemic.

In our own city of Charlotte, commercial and residential real estate projects continue to expand in all directions while the Uptown area in the center city is hurting. A Charlotte Observer headline from June noted that one out of every five Uptown office floors sit vacant.

When we talk about corporate social responsibility, we tend to forget the role the private sector plays in placemaking and economic impact. Much the same way we might argue that housing instability is an issue that corporations have an ethical obligation to address, so too is the sustainability of a city’s urban core an issue of intersection. This is particularly true since it is the policies of these companies that are contributing to the challenge.

Once opened, the Pandora’s box of remote employment and hybrid workplaces have not been so easy to put away. Companies and employees have been playing a chess match for several years now, with an uncomfortable détente achieved of some ‘mandatory’ in-office time (typically 2-3 days per week) balanced by a continuation of work-from-home. In some cases, individual managers have authority to determine the efficacy of holding to corporate policies.

The result is office buildings that look more like ghost towns than bustling centers of commerce.

Remaking the Urban Landscape

Something’s gotta give. This trendline has the potential to have lasting impacts and standing pat is not an option. Our conversations with some employers suggest that the long-predicted recession in 2023 was planned to serve as a bully pulpit for curbing work-from-home policies. The threat of layoffs would have made it easier to attract workers willing to go back into their offices. But the recession has yet to come, and waiting around is just prolonging the challenge.

Instead, we are hopeful to see more creative solutions.

In Charlotte, Center City Partners recently launched the Reimagining Vintage Office Design Competition to share ideas to adapt office spaces for more modern uses, to “add a range of additional destinations and economic activities to strengthen Uptown as a regional asset.” It may be strange to think of Charlotte office towers as “vintage,” especially since the vast majority of them are only a few decades old. But when one considers the shiny new buildings being erected in South End, the point is clear.

What RTO means for Social Responsibility

We have an idea – make more spaces for nonprofits in these office buildings and encourage them to directly engage with private sector employers.

As we’ve previously outlined in our Profit & Purpose series, generational change has included increased expectation of finding ‘meaning in the workplace.’ Employees who have traditionally worked in cubicles to drive profitability for shareholders and executives are questioning their life’s purpose. The ‘Great Resignation’ was really the ‘Great Reprioritization’ as early career professionals left roles that they found unfulfilling for careers that aligned with their values.

This is the real urban doom loop that all employers should be tracking, no matter the location of their office buildings. The increased demand of values-alignment has created powerful employee resource groups (ERGs) that encourage community-building. It has also led to more partnerful approaches to social impact efforts.

For many companies, this expression remains too transactional. Employees are less interested in one-off service projects than in ongoing engagement opportunities with causes that are meaningful to them. We have advocated for bringing nonprofits inside the workplace, with lunch-and-learns and hands-on activities that break up the work day.

Win-Win-Win

Guess what colocating nonprofits and companies together also encourages? The return of employees to their workplaces! It is difficult to have meaningful engagement with a cause from the comfort of one’s home office.

Bringing nonprofits and private sector employers together under one roof evolves the strategy of corporate responsibility into something far more partnerful. Desiring to build the STEM workforce of tomorrow? There’s a nonprofit for that. Seeking to demonstrate smart growth strategies in a rapidly changing city? There’s a nonprofit for that too.

Why any nonprofit should be forced to spend hard-won charitable dollars on occupancy in an out-of-the-way office building is beyond me. Not when office buildings sit vacant and employees long for more meaning in the workplace. It’s a win-win-win that makes sense for everyone involved.

Will it solve RTO alone? Of course not. But we need to be thinking about a combination of strategies working collectively instead of hoping for a magic bullet of economic recession to solve this challenge. And this is a strategy we think has significant potential as a part of a larger solution.

We just need to find a company willing to give it a try. Any takers? Reach out and let us know. We’d welcome the chance to work with you to make RTO a win-win-win opportunity for our communities.

The Challenge of Collective Action in the US

A Leg Up for the Middle Market

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“It’s the wild, wild west” – this is the phrase we most often hear when it comes to describing how companies measure the ‘S’ in their ESG strategy. It’s a common sentiment among the private sector companies we work with. They want to make a meaningful, measurable impact, but without a consistent set of standards or consistent data partners, it’s easy to feel lost in the process.

It’s a challenge that is unique to the ‘S’ – or ‘Social’ – part of ESG. That’s not to say that measuring any part of ESG is easy – it’s not. But the standards for Environmental and Governance are much more clearly defined. Carbon footprint, energy usage, waste output, executive compensation, ethics policies and supply chain sustainability are some of the most well-known. While these measurements come with their own challenges, the metrics themselves are clearly defined with specific outcomes.

What makes the ‘S’ so hard to measure? 

Social metrics are more challenging to measure, especially as it relates to a company’s external expression of social responsibility, mainly due to the diversity of social expressions. If you’ve seen one company’s social impact strategy…you’ve seen one company’s social impact strategy. Unlike carbon footprint or ethics policies, the outcomes that measure effectiveness will vary from strategy to strategy.

The only sets of commonly recognized standards that currently exist are the UN’s Sustainable Development Goals (SDGs) and the set of global report standards by the Global Reporting Initiative. Both of these standards are important and offer a common language and clear goals that help create a more sustainable world. SDGs in particular were created to assess systemic, population-level change and while they make great guides, they are hard to implement as social measurements for the average nonprofit or company funding a specific social program – especially on a local level.

In addition to this high-level challenge, there are other obstacles specific to impact stakeholders.

For nonprofits, corporate reporting is often time-consuming – and different for every grant or partnership, making the task hard to maintain. And while nonprofits are often rich in both data and stories, they typically lack the resources to assess long-term or systemic impact.

For companies, it is hard to know what data is most meaningful and what activities are most effective. In a landscape that is rapidly shifting from a sponsorship mentality to one more aligned with ‘social investing’ the ‘returns’ are more important than ever.

For consumers, younger buyers, in particular, are looking for authentic expressions of impact and are more skeptical of ‘causewashing’ than ever.

Great. So what do we do about this? 

The challenges are numerous and the mixed efforts to find solutions are contributing to the ‘Wild West’ feeling noted above. For the busy CSR professional or nonprofit executive, this makes for an interesting conversation – but how can we begin to practically address this?

The most important thing to know is that while no one knows exactly how to do this yet, efforts to measure the ‘External S’ are gaining traction. Projects like the Impact Genome Project are working to verify social programs and the cost impact of those programs while multiple universities are supporting long-term efforts to measure change.

If you are an impact professional looking for practical next steps, consider the following as you look at your own efforts:

• Collaborate with your partners – For too long, nonprofits have been seen simply as the beneficiary of impact dollars, rather than community experts with deep knowledge and rich data. When companies offer resources (both financial and expertise) to help analyze and work through the data challenge, magic can happen.
• Orient around a specific, respected outcome – The majority of companies and nonprofits desire to create long-term, systemic change. Rather than focusing on outputs (such as dollars spent, number of programs, clients served, etc), select a metric that speaks to the longer-term effect. For example, if you’re funding literacy efforts, what are the long-term success rates of those students? If you desire to impact entrepreneurship, how many of the business owners you fund are in business five years later?These outcomes aren’t the quickest to measure – but investing in that tracking can become invaluable.
• Find a data partner. Local universities or other data partners are one of the most overlooked resources in this conversation. They can offer expertise on measurement, survey and tracking support and expert data analysis – and usually for a very reasonable budget!

In one successful measurement collaboration, a CSR professional we work with convened both the nonprofits they were funding, alongside support from a local university. Together, the group identified metrics that resonated with each nonprofit, that were simple to report on and that the researchers determined would help measure the long-term impact of the project. Rather than short-term funding, the company provided 3-year grants that would enable the group to gauge the effectiveness of their programming as students aged into college and achieved goals.

The Wild West can be, well….wild. For many people, not knowing the rules can feel overwhelming. We want to know that our programs are successfully supporting impact and that we’re a good steward of both resources and community trust. But this same wildness is ripe with opportunity – to develop standards and methods that will measure impact for years to come.

Last month, our company released a new report on a continuing theme – the role of social impact in the private sector. Profit & Purpose: The ESG Addendum summarizes our findings following 18+ months of discussions and engagement with leaders in the private sector. It follows a lengthy report we published in 2021 on what we are calling “the intersection of social good.”

Next Stage has been on a journey to understand how the private sector engages in efforts to advance social causes for the past four years. In both reports, we profile our thinking on what is moving companies to be more focused on their citizenship efforts. We think it is more than just a trendline – it is a demarcation point.

Last year, we shifted our language. We previously settled on the term “social good” as phrasing for what we saw as a growing focus by companies to address social challenges. And then, seemingly overnight, the initialism ESG came to life and we adopted the terminology. Our new report focuses on ‘External S’ – the ways we think companies will be held accountable in the future for contributing to positive social outcomes that are outside of their direct control.

So, it made sense to call our new report The ESG Addendum. The initialism only showed up a handful of times in our original report, and now we believe it is the essential, disruptive framework that is at the heart of a paradigm shift. We not only joined the ESG bandwagon, but we also aimed to become one of its chief conductors through the lens of External S.

But first, we have to contend with what David Hassekiel called “a distraction” in his recent piece for Forbes, “ESG Should Bring Us Together Not Tear Us Apart.” In it, he references our report and the loaded phrase the initialism has become.

Are you really still calling it ESG?

The signs of hesitation regarding ESG were starting to show in the months leading up to our report’s release. The concept of ‘woke corporations’ was nothing new – it showed up as a trend of politicization that we’ve chronicled all the way along. But something changed in early Q1 2023. Much the way Critical Race Theory (CRT) had been hijacked to mean something different than was intended, so too has ESG been redefined – like it or not.

A conversation over coffee earlier this year was telling. I met with a social impact leader who described a tumultuous number of days leading up to what a company had branded as ‘ESG Day.’ Executives worried that the term had become too divisive and efforts were made to soften exposure. Banners emblazoned with the initials were quietly replaced and talking points were reframed.

Now, imagine having the initials in your department name or your title! Such is the case for many professionals across the country who have been a part of a series of change management efforts to reposition how environmental, social and governance strategies are formed and metrics are tracked.

Our conversations suggest corporate leaders are unsure what to do, which is where we also found ourselves a few weeks back, debating whether to move forward with naming our report “The ESG Addendum.”

In the end, we decided to stick with it. Why?

“Because it doesn’t matter what we call it. It’s the underlying change in behavior that matters.”

Coming to grips with the new reality

As we explored how social impact fits into the future of ESG, we started with an audience we know well – corporate social responsibility executives. But perhaps not surprisingly, our journey arrived in a different place altogether: the corporate general counsel’s office.

To date, the ESG movement has been predominantly viewed as a risk topic for companies, treated as another form of regulation to navigate. ESG evaluation is elective, but because of the stakes involved, it is typically reported to someone with a law degree.

That arrangement makes for some strange bedfellows. In companies across the country, social impact strategy is being filtered through a lens of risk mitigation and compliance. We see this as an essential challenge for the private sector – until ESG starts being treated as an opportunity as opposed to risk, flat-footed companies will fall further behind.

Because no matter what you call it, the underlying trendlines are not changing:

• Generational change continues to disrupt. You thought Millennials were disruptive? Allow us to introduce you to Generation Z, which the OliverWyman Forum recently described as “humankind’s best, and greatest, hope in the existential battles against global warming, inequality, and political and social unrest.” If your company is wrestling with whether it can possibly bow out of the whole social impact thing and take a wait-and-see – you run a significant risk of being left behind.
• The workforce shortage is real. We’ve been privy to some pretty scary discussions inside boardrooms about the looming threat of a significant labor shortage, which we outlined late last year. Recent preemptive layoffs ahead of a predicted recession are only temporary – the long-term trendline is pretty bleak, creating what we called “an existential threat to capitalism.” Key to workforce retention and acquisition strategies? Values alignment in the workplace. We’ve seen companies reframe the intended audience for their impact reports to include their current and future workforce.
• Socially responsible investing is not a temporary trend. As covered late last year by Forbes, ESG investing is expected to roughly double globally in the next three years, growing to 21.5% of total assets under management. In a few years, $1 out of every $5 invested will be in ESG vehicles. Is it a perfect system? Of course not, but that isn’t stopping people – particularly young people at the beginning of their investment journey – from choosing ESG funds as a part of their company’s 401k offerings.

For every Sears, there is an Amazon

In our report, we look to the past for inspiration:

“We liken the ESG paradigm shift to others that have come before it: 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 for 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.”

The real question isn’t what we should call social impact initiatives, but rather what we should do to embrace them, channel them and make it work for your organization.

In the months to come, that is exactly what we will be covering in this newsletter – Moving the Needle: Impact for Business. Each month, we will highlight innovative case studies, exemplary impact reporting and the latest on social impact metrics, employee engagement strategies and cause marketing. Subscribe today and stay in the know.

And that’s not all – we are so much more than researchers and prognosticators. Your company can hire us! The Next Stage team can support the development of new social strategies, provide project management support and even lead the design of your next impact report.

We stand ready to help your company bring its social responsibility strategies into a contemporary frame. Want to learn more? Reach out and let’s talk.