Angry customers knocking down store displays of LGBTQ+ merchandise and threatening sales associates. Conservative musicians posting videos of beer cans sprayed with machine gun bullets, and boycotts resulting in slumping sales and share prices. A major corporation locked in a feud with a Republican governor. Companies are now facing more perils than ever when getting involved in issues deemed controversial.
Business leaders are facing a thorny dilemma. On the one hand, a growing number of customers, employees and sometimes shareholders expect companies to help address some of the environmental, societal, and geopolitical issues the world is facing. On the other hand, in the context of widening domestic and international polarization, the risks of doing so have sharply increased.
How can companies best navigate this challenging context? Can they find a way to tackle environmental and societal issues they deem relevant to their business without being clobbered?
This is a question I have had to tackle when I was CEO of Carlson Companies and then Best Buy–and now as I work with MBA students and business executives. As ignoring social issues or the risk of backlash are not great options, companies must adopt a set of practices to navigate these treacherous waters, in a way that contains risks while always staying true to their values.
Completely ignoring these issues is not a great option
According to the 2023 Edelman Trust Barometer, 63% of consumers buy or advocate for brands that share their beliefs and values, and 69% of employees consider societal impact to be a strong expectation or even a deal breaker when considering a job. In the survey, people who think that business is not doing enough on issues such as climate change and inequality outnumber those who believe business is overstepping by a factor of six. Not only are companies expected to help address these challenges, but a majority of people surveyed in the barometer also expect CEOs to take a public stance on issues such as discrimination, climate change, and immigration.
Business leaders understand that they cannot successfully lead an organization today by focusing exclusively on what happens within the four walls of their business. This was completely clear to us in Minneapolis when George Floyd was murdered in May 2020. It’s hard to run a business if the city is burning. Companies cannot flourish for long when, as Harvard professor Rebecca Henderson puts it, the world is on fire.
Today, key stakeholders expect companies to do their share to address challenges in areas that were once often considered beyond their responsibility. Notably, 89% of investors take environmental, social, and governance (ESG) factors into account in their investment approach. Additionally, whether they like it or not, companies must comply with an increasing array of ESG-related regulations, including those coming from Europe that impact U.S.-based companies operating there.
Ignoring the heightened risk of backlash is a dangerous path
At the same time, the risks of getting involved in what are becoming increasingly politicized social issues have recently skyrocketed, with attacks by a new breed of activists decrying “woke” corporations on the rise. Companies caught in the crossfire of culture wars are paying a heavy price. For instance, several states are considering proposals that would stop government from doing business with financial firms that consider ESG in their investment decisions–a move that has reportedly cost investment firm BlackRock over $4 billion in customer funds. Disney is engaged in a bruising litigation with the state of Florida. A can of Bud Light personalized to celebrate a transgender influencer has resulted in a boycott that has cost the brand its spot as the top-selling beer in the U.S., with sales slumping by almost a quarter within four weeks. The backlash also sent the share price of Anheuser-Busch InBev, the beermaker’s parent company, sliding, wiping out some $21 billion in market capitalization.
As a result, companies are increasingly quiet–or even changing course–on key issues to avoid possible backlash. AB InBev put two executives on leave and issued new Bud Light ads featuring the American flag and country music. Retailer Target decided to pull some of its Pride collection off the shelves and to move other items from the front to the back of its stores. Companies are noticeably toning down mentions of social and environmental initiatives during earning calls, reversing the upward trend observed after George Floyd’s killing.
So how can companies and their leaders thread the needle between contributing to solving social and environmental challenges, while protecting their employees, their brands, and their businesses against possible backlash?
7 best practices to navigate today’s treacherous waters
Over the last several years, many companies have developed criteria to help them decide when to engage in societal matters. As outlined in several helpful articles, companies should generally focus their engagement on issues connected to their purpose, their values, and their key stakeholders. For example, while it is relevant for a company like Microsoft to engage on immigration issues, as so much of its business relies on H1-B visas, it may be more of a stretch for the company to take a stance on gun violence, an issue that is more relevant for a company that sells guns and whose employees have been victims of gun violence, like Walmart.
However, in the current context of heightened polarization, such a logical framework, while helpful and necessary, is no longer sufficient. Companies must embrace additional considerations and practices.
- Monitor risks and vulnerabilities
Public companies have developed capabilities to monitor and anticipate the risks associated with shareholder activism. The same should now apply to stakeholder activism. Companies need to develop a heat map of societal issues and identify areas in which the company may be vulnerable and risks becoming a target. Without that, companies may find themselves unaware of what’s brewing in echo chambers that they’re not part of and blindsided by the furor that they may unleash.
Similar to what they do when they assess their vulnerability to shareholder activists, firms can take actions to minimize their vulnerabilities. With such an approach, Nike could perhaps have minimized the backlash that followed their Colin Kaepernick commercial when they were criticized for their lack of internal diversity. They can also guide their teams on areas to avoid inadvertently agitating critics.
- Proactively plan for upcoming issues
Businesses cannot afford to be caught on the back foot and simply react to events. Like for the rest of their enterprise risk management practice, they need to inventory issues that are likely to come up in the upcoming months and years and develop an appropriate plan around them.
This approach has allowed companies to be prepared when the Supreme Court decided to overturn Roe v. Wade. By that time, many companies had had internal dialogues with their employees on the matter and made sure that their health plans covered out-of-state procedures.
- Develop and/or be able to access a broad set of capabilities
Companies are exposed to an increasing array of issues that go well beyond what most organizations have historically been prepared to handle. These issues range from dealing with pandemics to social and racial justice, from voting rights, abortion, and hate crimes to LGBTQ+ rights, humanitarian crises, geo-political conflicts, and climate change.
Developing and maintaining a network of internal and external experts has become essential to be able to navigate what is now a vast ocean of topics. For example, apparel companies must learn to comply with the Uyghur Forced Labor Prevention Act enacted by the U.S. Congress while simultaneously understanding the ramifications for their Chinese business.
- Double down on what you can do and control, more than what you can say
The current context calls for companies to focus more on doing and less on speaking. In 2021, many companies based in Georgia spoke against the state’s new election rules, which critics interpreted as voter suppression targeting Black Georgians. Ed Bastian, the CEO of Delta Airlines, angered conservatives after he issued a statement about the law. UPS, on the other hand, didn’t speak about the legislation, but instead opted to support initiatives facilitating voter registration and voting drives, particularly for their employees.
- Put those in your care first.
As companies face greater risk, leadership involves putting employees first. This not only includes protecting their safety but also consulting with them to understand what matters to your workforce to help guide the company’s choices.
For instance, food manufacturer General Mills runs an internal forum known as Courageous Conversations to discuss pressing social issues such as race, gender, or mental health. The day after George Floyd’s death at the hand of a police officer, the CEO’s council of advisors called a Town Hall to talk about what had happened, connect with how employees were feeling, and work with them to shape the company’s course of action, including how to best address the issues they were facing and seeing.
- Understand your leverage
When the state of Indiana introduced a law that would allow companies to discriminate against the LGBTQ+ community on religious grounds, Marc Benioff, the CEO of Salesforce, canceled all programs requiring customers and employees to travel to Indiana and offered relocation packages to employees who wanted to leave Indiana. Salesforce was not alone in doing so, with multiple businesses and organizations such as Eli Lilly, Apple, Paypal, and the NBA, also speaking against the law. This collective clamor eventually convinced the local authorities to change course.
- Stay true to the company’s fundamental values
Business leaders are not elected officials or policymakers, and as Ed Bastian, the CEO of Delta Airlines, recently pointed out, the goal is to stay out of the headlines and avoid being seen as politicians. However, as he added, “There are times where the values you stand for, particularly for your employees, matter.”
Standing by one’s values sometimes requires drawing a line in the sand, despite the risks. In 2017, Kenneth Frazier, the African-American CEO of pharmaceutical company Merck and a member of one of the councils advising then-president Donald Trump, publicly stepped down from his advisory role in response to the president’s comments about the violence that erupted during a white supremacist protest in Charlottesville that there were “very fine people on both sides.” Frazier did so with the full support of the company’s board, but before other prominent business leaders followed suit, which left him and the company potentially exposed. Even though he’d disagreed with the Trump administration on other issues before, he felt compelled to take a public stance when he felt his and the country’s core values were at stake.
Similarly, although Target decided to pull some of its Pride merchandise to protect its employees following the attacks on its stores, the company has made it clear it stood firm in its support of, and commitment to, the LGBTQ+ community.
The risks that companies face when embracing stakeholders’ expectations that they must help address social and environmental challenges are increasingly real–and unlikely to subside as the U.S. enters an election year.
In such a volatile environment, this topic should remain top of mind for boards and leaders of major companies, particularly consumer goods companies and those selling to the general public. Leaders will have to be ready to rapidly adjust to evolving circumstances, while never losing sight of their core values and those in their care.
Hubert Joly is a former chairman and CEO of Best Buy, the author of The Heart of Business: Leadership Principles for the Next Era of Capitalism, and a senior lecturer at Harvard Business School.
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