Corporates will be put to the test in 2023, when we will find out if their commitments to Sustainability, CSR and ESG principles are deeply ingrained values or just hobbies placed by the management to be enjoyed in good economic times. It is now more important than ever that companies do not waver from their commitment to the community and the planet to ensure short-term profits.
We work directly with leaders engaged in corporate social impact across every sector and region, so we understand the struggle corporate Sustainability and CSR leaders face in balancing profit and social commitment. We urge corporate executives to maintain the big strides they have already made in community and social investment and employee engagement as we approach the recession.
Corporate leaders are being tasked with navigating these turbulent times, and cutting costs is a common tactic to employ as the likelihood of a recession in 2023 grows by the day. Sadly, history shows that CSR, ESG, and Sustainability efforts are commonly first on to freeze or be underfunded during times like these. According to a recent KPMG survey, 70% of CEOs today acknowledge that CSR & ESG improves financial performance, up from 37% just last year. This test comes at a time when CEOs have made significant progress in tying ESG to profitability. However, 59% of CEOs indicated that they intended to pause or reevaluate their ESG efforts in case of an economic downturn.
This is a gap in responsible thinking that may set the development sector back upto a few years as facilities to recover the social systems, i.e. funded schools, hospitals and income-generating services, just begin to open pos-pandemic. The long-term success of profitable businesses depends on prioritizing an investment in corporate citizenship for the following three reasons:
1. Your workforce is employing individuals who look at your company’s actions and commitments linked to the company’s purpose.
Despite the weakening economy, it is still difficult to find and keep talent in every industry. During a recession, job security and fair pay will be top priorities, but employee engagement and the company’s commitment to social impact, largely driven by CSR teams, remain crucial. According to Edelman’s special report “Trust in the Workplace,” seven out of ten employees considered this a strong expectation or a deal breaker when considering a job. If your company is not a purpose-driven employer, your employees will leave to find one.
2. Customers make purchases based on actions and commitments to the company’s mission and strong social commitments.
During times of greater uncertainty, consumers are even more picky, making transparency and positive reputation essential. While consumers are more aware of rising prices, brands that stick to their social commitments in both good times and bad will stand out. In point of fact, “73% of consumers say that companies must show how they are supporting communities and the environment to win their support,” as stated in the 2021 Porter Novelli Purpose Premium Index (PPI).
3. The goals and actions of your company have a direct impact on its reputation.
According to the Edelman Trust Barometer, people are losing faith in corporates; even a single poor decision can shed negativity on a company’s image. During economic downturns, community needs, such as shelter, food, and education, will only get worse. Maintaining strong relationships with your key stakeholders necessitates the ongoing support that businesses provide to nonprofits through financial investment, employee volunteerism, product donations — the “Social (S)” in ESG. Your offense and defense for maintaining a strong reputation among your communities are based on your Corporate Responsibility team and actions.
So, where should we begin?
By reaffirming and carrying out your commitments to corporate social impact, corporate leaders can begin from taking decisions within the company before moving out. Know what you need to do as a leader to keep your social promises, keep your company’s reputation intact, and communicate openly on your actions and results to the public. The next step is to provide long-term social investment support for your Sustainability and CSR functions and leaders. The top quartile of leading companies invests 2.3% of their net profits in the community. Which number do you have?
A long-term perspective on the future of a company and society is necessary for systemic change. We can continue to build momentum in addressing our most challenging societal issues and drive meaningful and lasting change if corporate leaders make commitments to serving marginal communities, investing in their own CSR teams, and providing meaningful ways to engage their employees in their commitment to purpose.
Social innovation has been incorporated into the business strategies of the most successful businesses, which have established themselves as significant community members. Companies and society as a whole will face greater challenges as we emerge from a recession if they immediately reduce their societal investment, employee volunteer programs, and other citizenship strategies.
The decision is simple. Don’t fall into the trap of cutting costs without thinking long-term. Make a stronger commitment to your company’s mission and emerge from the approaching recession in partnership with your stakeholders in a position to achieve long-term success.