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During the late 20th century, most executives in global corporations felt compelled to serve one master above others: investors. They thought the game was to maximize returns for shareholders and they left it to governments and non-governmental organizations (NGOs) to solve global warming, poverty, water scarcity and other lingering societal problems. The economist Milton Friedman justified this view by saying, "There is one and only one social responsibility of business – to use its resources and to participate in activities aimed at increasing its profits." Consistent with this philosophy have many companies used part of their profits to fund corporate social responsibility (CSR) initiatives – this charitable event felt good for executives and was good for the brand. Still, CSR has always been viewed as "the poor cousin" of the business world, "as one CEO noted, even as the need to meet environmental, social and corporate governance (ESG) goals has increased.

Companies and executives now know that they can no longer stand aside when it comes to social and ecological issues. Issues such as climate change, inequality and pandemics are exacerbating, requiring action beyond what government alone can handle and fueling public calls for companies to take responsibility and show leadership. Roberto Marques told us: "When the world dies, we have no business".

Stakeholders also have more power than ever to hold individual companies accountable for action. With the democratization of the media, the public has unprecedented access to instant and reliable information about companies, their business operations and their impact. Standards, metrics and data on ESG topics are becoming more comprehensive and reliable. In 2018, 86 percent of the S&P 500 included data on their sustainability performance in their annual reports. Reporting on ESG performance became an industry in itself, valued at over $ 400 million by 2020. More information about companies will be available in the years to come. In 2018, investors with $ 5 trillion in assets urged the US government to require public companies to disclose standard ESG measures that are relevant to their business. In the same year, Chinese regulators announced that publicly traded companies in the country would also have to disclose data on ESG performance by 2020.

In our time of transparency and increasing global crises, consumers are no longer just looking for a satisfactory product, service, or experience from the companies they do business with. They expect companies to minimize their negative impact on society and the environment and even provide solutions to pressing problems. Research shows that a large majority of consumers around the world make purchasing decisions for social or environmental reasons. Politics plays a role as consumers become increasingly polarized and like to express themselves through their purchasing decisions. A survey found that nearly a third of Generation Z consumers worldwide have refused to do business with a brand they deemed unsustainable, while in the US, over 90 percent of Millennials left brands behind for no reason for those who did so. Over three-quarters of Americans said they would express their displeasure with a brand whose attitude collided with their beliefs when the brand was boycotted.

Case Study: PepsiCo's Impact Strategy

These shifts lead to actual business results. When Indra Nooyi took over the management of PepsiCo in 2006, the company and colleagues faced consumer concerns about the health effects of carbonated beverages, the rising demand for a "soda tax" by activists, and questions about the sustainability of their production processes (including its water use) ). Determined to reinvent the company and bring positive benefits to all stakeholders, Nooyi introduced a new vision for the company in 2006 called Performance with Purpose (PwP) that integrates sustainability and purpose into the company's core activities. As Nooyi noted, the strategy reflected the recognition that "our success – and the success of the communities we serve and the world at large – are inextricably linked".

To bring PwP to life, the company pursued a strategy aimed at delivering world-class performance to all of its stakeholders by focusing on three pillars: "improving the products we sell, acting responsibly to protect our planet, and empowering People all over the world. ”PepsiCo has made its existing products healthier (eliminating excess sugar, saturated fats, and sodium, while removing trans fats entirely) and built a portfolio of healthy products. It hired its first scientific director to focus on improving its current products and driving its investments in new products. To work more responsibly, the company launched a Sustainable Agriculture Program (SFP) to make agriculture more productive and profitable for producers, reduce the impact of agriculture on the planet, and support the rights of farm workers. To empower its workforce, the company launched PepsiCo University with online courses that helped employees improve their skills and put a greater focus on ensuring diversity in its workforce.

These efforts have brought tremendous benefits to all parties, including shareholders. By 2016, “good for you” and “better for you” products made up around 50 percent of the company's sales, up from 38 percent a decade ago. By 2018, PepsiCo was getting more than half of its crops directly from farmers in the SFP, and by 2016, water use on its old farms had become 25 percent more efficient. The company has also significantly improved the diversity of its workforce: women held 40 percent of their global leadership positions in 2018. All of these social benefits have accompanied a similarly impressive financial performance. Between 2006 and 2017 (Nooyi's last full year as CEO), PepsiCo's TSR was nearly double that of the S&P 500. Since taking over Nooyi in 2018, PepsiCo's new CEO Ramon Laguarta has been on that strategy established and a sustainability agenda further expanded by formulating a vision of Winning with Purpose.

Every corner of society wants more from companies

Governments and local communities also expect more from corporations in return for the right to operate. Realizing that government agencies at all levels alone cannot bring about a more sustainable future, elected leaders, officials and activists are trying to fill the void. "Governments must take the lead with decisive steps," said former UN Secretary General Ban Ki-moon. "At the same time, companies can provide critical solutions and resources that will move our world on a more sustainable path." Governments in emerging economies like India and China have long had tightly regulated economies, based in part on the belief that businesses must act on behalf of society. (India, for example, was the first to encourage companies to invest in CSR.) Companies that want to grow in these and other markets need to respond to local government concerns and demands and demonstrate their commitment to making a positive impact on society put. This makes companies more resilient, especially when they are in industries like mining, oil & gas, and pharmaceuticals that are highly regulated or otherwise exposed to strong government or community pressure.

Employees and investors are also looking for more from companies. Top talents tend to go to companies that share their willingness to change something. In a survey, 92 percent of beginners and students said they wanted to work for an environmentally conscious company. Investors are also demanding more sustainable strategies from companies. A survey found that 80 percent of investors make value-based decisions when choosing a capital channel.

There is growing evidence that companies that pursue sustainable business strategies are achieving superior returns. Funds from sustainable companies are less volatile than funds from traditional companies, although the market value deviation is 20 percent smaller. A 2009-2018 study found that a company's commitment to social impact seemed to correlate with higher valuation, lower volatility, and improved ROI. Another review found that 80 percent of the time, a multi-stakeholder approach boosted companies' share prices. In response to investor demand, pursuit of a broader social purpose is increasingly helping companies gain access to capital. Over the past several years, CEOs of many leading investment firms have expressed their intentions to pursue sustainable investment strategies. The pressure from investors is likely to increase. "Over time," wrote Larry Fink, CEO of Blackrock, in his well-read 2020 letter to CEOs, "non-stakeholder and non-stakeholder-facing companies and countries addressing sustainability risks will experience growing skepticism from markets and countries thus encountering higher costs of. " Capital. Companies and countries that advocate transparency and, in contrast, demonstrate responsiveness to stakeholders will be more effective in attracting investments, including higher quality, more patient capital. "

Contribution to the Branding Strategy Insider By: Dr. Arindam Bhattacharya, Dr. Nikolaus Lang and Jim Hemerling, excerpt from their book: BEYOND GREAT: Nine Strategies for Thriving in an Age of Social Tension, Economic Nationalism, and Technological Revolution

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