Two recent research papers suggest that companies need to address social welfare as a matter of business practice, not just good works or marketing strategy.
BCG’s Total Societal Impact details the ways companies are being pushed to take responsibility for issues that affect their stakeholders, but aren’t a direct outcome of their product or service offerings. Environment, health, gender and political freedom are some of the key areas in which buyers want to see action from sellers, in ways that go beyond philanthropy or marketing tie-ins.
In other words, consumers increasingly “buy” things beyond the things they buy or, conversely, there are “costs” that they factor into the prices that companies charge.
The study notes correlations between better ESG ratings — a somewhat standardized metric of environmental, social, and governance performance — and higher equity valuations. But it goes further to suggest a strategy of Total Societal Impact, or “TSI,” could have broader impacts on company performance and durability, and thereby open new options for business decision making and action.
TSI is business strategy, not a strategy for corporate social responsibility.
Researchers at Harvard and the University of Chicago argue for something similar in Companies Should Maximize Shareholder Welfare Not Market Value, though it goes a step further and argues that shareholders should have a greater say in determining company policies.
This directly challenges the notion that public companies are responsible only for increasing the value of shareholders’ equity holdings, irrespective of how they do it (always short of breaking any laws, ideally). Instead, the “externalities” of ethics aren’t wholly separable from production decisions, both because of technology and the scale at which large organizations operate, and the evolving social norms which inform, and judge, those actions.
Giving shareholders greater authority over management decisions is frightening stuff, and not just to elitists; In fact, we want elites with the proper training and experience to select, say, how to rivet wings to airplane fuselages, or what chemical combination yields the safest and most effective drug.
An article about the study in The Economist notes that not only could shareholder directives be “stupid, fickle, or sinister,” but they might simply overwhelm corporate boards with millions of competing opinions. Then the story closes with this foresighted conclusion:
“Plebiscitary capitalism may seem far-fetched. But the company has evolved continually to deal with pressures that boil up from society over time. More participation by ordinary, individual shareholders might be exactly what capitalism now needs to restore its reputation.”
This thinking should have profound impact on how marketers envision brands and brand engagement.
How could various stakeholder groups be more meaningfully involved in company operations, not simply touching the output of branding? What would brands look like if they included elements of TSI as core components? Where and when would companies chose to define where those responsibilities begin and end? Could a deeper and more constant relationship yield better insights about stakeholder wants and needs, and thereby create more communications (and selling) opportunities?
Such brand populism is a trend to watch in 2018, and a topic that warrants experimentation.
This essay was originally published at Medium