CS/R — ESG 13 How the alphabet soup of corporate citizenship improves innovation

And why your company’s bottom line needs purposeful and inclusive culture to stay resilient

In this series of articles on the alphabet soup of corporate citizenship, I’ve pondered the changes in how we make impact; laid out some history & definitions of some concepts; shared a few examples of small and large companies leading the way; and delved into how individuals, companies and governments are influencing others and taking action.

In this article, I want to address more specifically, how embracing the “alphabet soup” is not about checking boxed and creating costs, but embracing a mindset that strategically manages people and change, and how it actually benefits a company’s bottom line, by increasing employee engagement, psychological safety, and creativity. This in turn keeps companies innovative, and keeps customers coming back.

It’s easy for the cynical to think of diversity, equity and inclusion (DEI) initiatives, or sustainability (CS) and social responsibility (CSR) initiatives as marketing costs. Yet, we are humans not automatons, and the majority of us come alive when there’s purpose to our efforts, and when team or corporate goals align with our personal values. In addition, interacting well with community and colleagues is enjoyable and stress-reducing — part of the fun of healthy work environments. These practices also foster trust, patience & curiosity, diverse ways of thinking, innovative solutions. This is an eco-system that is accepting of mistakes and supportive of learning. It leads to comfort in exploring ideas and other’s perspectives, resulting in smoother collaborations (with some authentically curious, solution-building discussions, which will channel constructive conflict); and in turn, the ability to build resilient product launches and go-to-market strategies.

Before continuing the discussion, I think it’s useful to share a basic, level-setting definition of DEI. You’ll see definitions of related terms in the other CS/R-ESG articles of this series. Perhaps, at the end, I’ll assemble them all into a separate, additional glossary-article.

DEI = Diversity, Equity, Inclusion. This is a set of practices and policies a company will have to ensure that they have an inclusive hiring practice and office culture. This aims to correct historic inequities, recognize unconscious bias, ensure informed decision making (gathering more diverse perspectives) and greater innovation. The policies typically focus on gender, racial and sexual-orientation-or-identity diversity. There is increasing recognition of other marginalized populations and making efforts to compensate for historic bias, and take advantage of their perspectives and insights – native tribes, those with disabilities, formerly incarcerated individuals (restorative justice vs forever punitive?), etc.

OUR BROADER CONTEXT: I think we would all agree that the world is changing rapidly, that there is much information to absorb and/or filter, and that our human brains and spirits are often overwhelmed (and more easily treading into anxiety and depression challenges, for a variety of reasons). Below, I share several statistics that should convince you of the importance of DEI, CSR, and ESG. They are not “merely” ethical initiatives, but when you think systemically in a complex and fast-changing world, you might start an initiative more slowly, but you go much further, and pivot more easily in response to changes. Bottom line, no one person can know everything. And we rely on each other, on the earth and its inhabitants (people, animals, nature) in so many ways that we often don’t realize. So, as I often say, businesses are now called on to have reliable products and services, and character.

So, given our fast changing world, and the fact your business likely wants to be responsive to numerous possibilities, the best way to effectively navigate the market, is to have a diverse-insights, mutually-trusting, and constructive conflict team. Google’s Aristotle project studied team performance and noted there were five key characteristics necessary for creating and sustaining high-performing teams — psychological safety, dependability, structure & clarity, meaning, and impact

DEI is not only the “right thing to do” addressing historical inequities, but numerous studies have shown that when it is central to *employee hiring and management, *Board development, as well as *internal & external communications, it leads to long-term innovation and financial performance. It is not simply an idealistic statement — employees will be collaborative and innovative where it is safe to speak, safe to fail, and exciting to learn from experience & listening.

Now, a key point to be noted — this is not about tokenism, but about authentically listening to diverse perspectives. When there is authentic DEI culture, communications move from marketing-speak and window-dressing to authentically creating and building trust, of both employees and customers, which means they are more likely to stick around. And the company is more likely to understand how to continue to serve and retain them. Given that customer and employee segments are not static nor monolithic, when diverse voices are not just tokens, but listened to, the decisions made will be more informed, resilient, and achieve better outcomes.

Bottom line, improving employee engagement is key to business success. When you create a positive work environment where people can grow, feel safe, and be recognized for their efforts, you build resilience into your company culture, your “secret sauce”. So, I’ve shared some of the reasoning behind why the “alphabet soup” of corporate citizenship supports and creates innovation, below I list the findings of a few, topical studies.

DEI and employee engagement effects on innovation and revenue

· Diverse companies enjoy 2.3 times higher cash flow per employee

· Diverse management has been shown to increase revenue by 19 percent

· Gender-diverse companies are 15 percent more likely to beat industry median financial returns

· More than 3 out of 4 workers prefer diverse companies

· 78% of employees who responded to a Harvard Business Review (HBR, 2013) study said they work at organizations that lack diversity in leadership positions. According to the study, “without diverse leadership, women are 20% less likely than straight white men to win endorsement for their ideas; people of color are 24% less likely; and [those who identify as] LGBT are 21% less likely.” A lack of diversity in the leadership of an organization hampers innovation, inhibits members of minority groups from being recognized for their contributions, and fails to meet client expectations.

· Companies with above-average diversity had 19% higher innovation revenues. (Harvard Business Review, 2018)

· A Highly-Engaged Workforce Increases Profitability by 21% (Gallup poll 2020) Engaged employees are more productive, happier, report lower absenteeism, and tend to be more loyal.

· Companies with a Thriving Corporate Culture Achieve Over 4x Higher Revenue Growth (2017 Hays Survey)

· Recognition Is the Most Important Motivator for 37% of Employees (Fortune.com survey, described here)

And CS — CSR (sustainability & social responsibility) related effects on company performance:

· According to a Pew Research 2012 study, Ninety-three percent of millennial consumers say they would buy a product because of a cause association, or a reputation as an ethical company.

· Sales for Dove jumped from $2.5 to $4 billion in Dove’s body positive campaign’s first ten years. Dove bars became the number one preferred soap brand in the U.S. and Unilever’s best-selling product company-wide.

· Less than 20% of S&P 500 companies published a CSR report in 2011, 81% were doing so by 2015, and 92% in 2020 (70% of the Russell 1000 companies, 68% of which discussed the impact of the COVID-19 pandemic)

· According to Journalist Jamie Bartlett’s TED talk, you can use the tor search engine on the dark web to purchase fair trade cocaine, sourced not from drug lords in Columbia, but from Guatemalan farmers, via an intermediary which promises to invest 20% of the proceeds into education in the villages. So, even a segment of those purchasing illegal products are interested in doing it with a moral code.

#sustainability #CSR #ESG #longtermstrategy #innovation #triplebottomline

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I hope you found the article (and others in the series) helpful. If you’d like to discuss diversity, innovation and resilience concepts, and related “alphabet soup” corporate citizenship issues please leave a comment or reach out.

Rachel E Patterson helps innovative SMB and their leaders navigate change and grow ethically, so that they keep their best employees and customers.