Whether in private practice or as in-house counsel, legal professionals have an outsized role to play in the decision-making for companies regarding social injustice, diversity, and sustainability, and companies are now in the driver’s seat on influencing outcomes on society.
Whether it is social media companies being forced to meet with civil rights leaders because of an advertising boycott or a football team having to change its name because of sponsors withdrawing, it is clear that the game has changed and reputation is now front and center on social issues. Legal counsel is perfectly positioned to provide dynamic and contextually relevant, data-driven input to leadership teams through this difficult time.
We are at an inflection point where company leadership teams must listen to their customers and clients, their stakeholders, and their investors intently, and take advice from their trusted counsel on how to handle delicate issues like whether to take a stand on racism or accept revenue from sources that are unpalatable to their stakeholders.
Reputational and Legal Risks
Since the death of George Floyd in Minneapolis on May 25, it’s been encouraging to see companies around the world taking stock of their own policies, behaviors, and internal makeup when it comes to diversity and social injustice, and what more they can do to make their businesses more equal and inclusive. It’s not just because this is the right thing to do; it’s because not paying attention to such concerns is a potential reputation and legal risk situation.
The challenge of making the business world more inclusive and diverse is not a new concern. For example, we know that equality, diversity, and inclusiveness were already on the minds of communications leaders: It was among the top priorities in RepTrak’s report on the 10 global trends that were expected to shape the reputations of companies this year.
ESG and Reputation
Thanks to protests around the world and impressive citizenship efforts by certain large companies in May and June, the topics of equal justice and inclusiveness are front-page news stories today, which is leading to growing expectations for equality and fairness in the workplace. And yet, our global trends study also showed that most companies are falling short in this regard. Inequality can have a detrimental effect on a business—not being perceived as inclusive or diverse enough is a significant risk that can average around a 15-point decrease in overall Reputation Score (on a RepTrak Score rated from 1-100).
No surprise, then, that encouraging and enabling equality, diversity, and inclusion can be good for business. According to global RepTrak data, there is a .95 statistical correlation between how stakeholders assess a company on its commitment to environmental impact, social performance, and governance standards (ESG) and whether they trust that company to do the right thing. Just as important, there is a .93 statistical correlation between a company’s ESG perception score and whether they would recommend that company to others. These high correlations are not to be ignored.
Social Responsibility = Good for Business
Clearly, the time is now for companies to step up and do the right thing for all stakeholders when it comes to equality, diversity, and inclusion—and legal professionals should make their voices heard. They can provide guidance on process and policy matters that will lead to a more inclusive and equitable business. After all, it’s not enough to simply voice support for social movements like Black Lives Matter or Pride Month through social media channels. This support must be backed up by actions that demonstrate the company’s true commitment to these critical concerns. As our RepTrak data also shows, when a company is perceived as “genuine,” it can lead to a 2.9-point lift in Reputation Score (on a RepTrak Score rated from 1-100).
One lesson of the last few months is that companies can no longer remain silent on the issue of racial injustice. In fact, social responsibility is now central to every company’s business plan. Where companies once remained on the sidelines when it came to hot-button issues, they are now expected to take a stand and support the causes they and their customers, clients, and employees care about to help bring about meaningful change. Legal professionals have a critical role to play in making this happen. In short: Being socially responsible is good for business. We’re all in this together. Let’s begin!