Making Responsible Business Leadership Effective

Making Responsible Business Leadership Effective

(This article originally appeared in Global Focus, EFMD’s Business Magazine, and has been republished on this website with the permission of EFMD.)

The current state of the world is unsustainable, and on top of the crises of war, inequality, infrastructure and the instability of democratic governance, we face an existential climate crisis that threatens to make them all irrelevant in the not-so-long term. As business occupies a unique position, occupying much of most people’s time, energy and resources, and serves as a provider of their needs as both employer and supplier, business leaders are in a position to advocate for responsible action towards a sustainable global future and to play a key role in bringing it about. Often, however, leaders respond to the immediate need to make a show of commitment but fail to follow through.

Seven principles for making responsible business leadership effective

1. Start close to home

Your efforts are more likely to be effective if they start with your own business situation. Customers and investors – rightly or wrongly – are apt to assume bad faith if your first big foray into societal leadership is based on finger-pointing, rather than looking within. Former Unilever CEO Paul Polman has become one of the most effective global advocates for socially responsible business by building on the credibility earned during his tenure through Unilever’s ambitious Sustainable Living Plan. By contrast, the fossil fuel industry has waged long and largely successful messaging campaigns attempting to divert responsibility for climate change away from itself and towards consumers. True leadership requires the courage to acknowledge how your organisation has contributed to problems and the commitment to follow through with meaningful improvements.

2. There is no shortcut to purpose

Genuine purpose doesn’t happen overnight. If they want to become purpose-driven, today’s companies cannot simply layer purpose atop what they’re already doing – they must ensure every aspect of their business harmonises with their core values. Societal concerns cannot be fighting for bandwidth with bottom-line issues; they must be fully aligned, or at least strategically balanced. The familiar, siloed approach to CSR, with all its insufficiencies, tends to be what less visionary organisations fall back on. But safe answers and low-value solutions are not the stuff of societal leadership.

3. Choose issues carefully

In an article entitled The Double-Edged Sword of CEO Activism, Stanford researchers found that while CEOs speaking out on social issues (with the exception of the Russian invasion of Ukraine that recently galvanised the western world) remain a relative rarity (with only four percent of S&P 1500 CEOs making such statements on a personal basis), their activism may too often be falling on deaf ears. The most common issues addressed by CEOs – those pertaining to diversity and equality – were the very ones most likely to divide public opinion. Topics such as environmental sustainability, climate change, access to healthcare and income inequality were more warmly and broadly received.

4. Timing and rhetoric matter

That doesn’t mean business leaders should always play it safe. On the contrary, raising important but uncomfortable topics is part and parcel of leadership. The first step is to anticipate and prepare for pushback when the time comes to raise divisive issues. And the most effective leaders skillfully frame and time their statements. For example, Lloyd Blankfein, then the chairman and CEO of Goldman Sachs, caused a palpable stir when he spoke out in support of same-sex marriage in 2012. His statement was well-timed to coincide with shifting public opinion on the issue, culminating in the widely hailed 2015 U.S. Supreme Court decision to legalise gay marriage across all 50 states. And Blankfein used the term “marriage equality”, rather than “gay marriage”. Whenever they can, effective leaders use the vocabulary of connection and universality rather than division.

5. Be aware of context

Connection starts with a solid understanding of the situation. Leadership is about using your voice and platform as a force for good where it will make the biggest difference. No leader possesses credibility on every conceivable topic, or with every audience. This is particularly true of embattled leaders. For example, US Major League Baseball commissioner Rob Manfred no doubt had noble intentions when he decided to move the 2021 All-Star Game from Atlanta to Denver in response to restrictive voting laws passed by the Georgia state legislature. However, Manfred’s pre-existing unpopularity among baseball fans – he was (and is) seen as prioritising profits over their enjoyment of the sport – helps explain why the All-Star Game switch was viewed by many as a grandstanding “woke” gesture, performed at the expense of small local businesses that were counting on revenue from the event. When, in the same context, another controversy erupted in Atlanta around the “tomahawk chop” chant that reflects stereotypes about Native Americans, the once-bitten Manfred passed the buck to Native American communities themselves. Leaders don’t make statements in a vacuum. Make sure your leadership mandate is strong before attempting social activism.

6. Treat observances as impact opportunities

The wheels of “woke capitalism” grind on, giving rise to ever-fewer surprising declarations of support from companies of all shapes and sizes for Black History Month, International Women’s Day, Pride Month, etc. In many cases, these are prime examples of what economists call “cheap talk”: low-cost communications that are non-committal and unverifiable. With the rise of social media, however, it’s much easier for the public to call you out for not walking the walk. For instance, an automated Twitter account called @PayGapApp taunted organisations who tweeted for International Women’s Day earlier this year by publicising their often-large gender wage gaps. Why not forgo the cheap talk and give your public statements some teeth? For instance, company involvement in Pride should focus on those in the community most in need of support and change. Right now, that particularly means trans people and people of colour. There’s nothing wrong with officially observing events like Pride Month – far from it. But these observances are symbolic of the care and consciousness that need to exist year-round, and should be backed up by relevant and impactful action, such as donations of time and resources to worthy outreach organisations and, most importantly, continued and measurable progress within the company itself.

7. Try not to fly solo

Many of the above principles are aimed at avoiding negative judgements from external stakeholders. This is because the more a leader’s activism can be interpreted as just one person’s opinion, the less likely it is to exert real influence. Thus, think in terms of “we” instead of “I”. A collective statement or commitment can be infinitely more powerful than one individual, or even one organisation, acting alone. Look at the way the Business Roundtable’s 2019 Statement on the Purpose of a Corporation transformed the societal conversation about stakeholder capitalism (though some argue that concrete results have yet to be seen). Or how Jeffrey Sonnenfeld, Associate Dean at Yale School of Management, regularly brings together CEOs – often at their behest – to develop concerted responses to pressing social and political events such as Brexit, restrictive voting laws, the January 6th insurrection, and most recently, Russia’s invasion of Ukraine. Looking forward – and indeed, looking at history – the best societal business leaders will be masters of coalition-building and the contradictions of “coopetition” (i.e. cooperation with rivals).

Positive impact

Ultimately, of course, it is impact that matters. If we understand what effective socially responsible leadership looks like, and are able to practice it and help others do so, then we may continue to increase the positive difference we are making in the world. More and more, whether from students, local businesses, investors, research partners or from generations yet to come, that is the standard to which we will be held.

This is an adapted version of an article that was published on EFMD’s website, written by Maury Peiperl; Dean of George Mason University School of Business.

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