Five trends that shaped the business landscape in 2019 and five predictions to watch for in 2020
2019 marked a watershed moment for sustainability and Corporate Social Responsibility, also known as “Corporate Citizenship.”
While Corporate Citizenship has been around for decades, until recently it has been a more peripheral business concept embraced by leading brands looking to differentiate themselves from competitors.
Over the past few years, escalating expectations from consumers, decreasing confidence in the public sector and a vacuum of leadership on environmental and social issues have transformed Corporate Citizenship from a value add to a business imperative that, if ignored, can pose significant risks to a brand. The integration of Corporate Citizenship into mainstream business reached a climax in 2019, as the Business Roundtable (an association of CEOs from America’s leading companies) made the seminal decision to redefine the purpose of business itself, ushering in a new era of “stakeholder capitalism.”
From the circular economy to gender equality, environmental, social and governance-related subjects drove significant media coverage in 2019 and will continue to shape the business landscape in 2020. As political uncertainties persist and globalization transforms societies, brands that embrace Corporate Citizenship will not only find themselves better positioned to capitalize on its benefits but prepared to handle the risks posed by inevitable change. The following outlines five key Corporate Citizenship trends in 2019 and five predictions to watch for in 2020.
1. Transition to Stakeholder Capitalism and Acceleration of Ethical Investing
In August 2019, the Business Roundtable, an association of CEOs from America’s leading companies, released a Statement on the Purpose of a Corporation that advocated for a new model of capitalism prioritizing all stakeholders — customers, employees, suppliers and communities — not just shareholders. The statement, signed by 181 U.S. CEOs, represented an epochal shift from the principles laid out in 1997 that outlined how companies then thought about their responsibilities and reason for existence.
Investors are also reconsidering their fundamental obligations, particularly as they relate to the environmental and societal impact of their investments. More than 2,600 investment managers, asset owners, service providers and business leaders signed the UN-backed Principles for Responsible Investment (PRI), committing to incorporate environmental, social and corporate governance (ESG) factors into their investment decisions. From 2018-2019, PRI signatories in the U.S. increased by 22% and in Canada by 14%.
- BlackRock: In his January 2019 annual letter to CEOs of the companies in which BlackRock invests, CEO Larry Fink reiterated that companies need to do more than focus on profits. He said it is crucial that businesses also make a “positive contribution to society” and plans to hold other CEOs accountable. Fink added that “stakeholders are pushing companies to wade into sensitive social and political issues — especially as they see governments failing to do so effectively.” In his much anticipated 2020 letter, Fink went one step further, declaring that “climate risk is investment risk” and announcing that BlackRock will fundamentally shift its investing policy to make sustainability a central consideration.
2. Heightened Focus on Climate Change and Environmental Sustainability
Shareholders’ expectations for companies’ environmental sustainability continue to grow and, according to the UN Global Compact-Accenture Strategy 2019 CEO study, “99 percent of CEOs of the world’s largest companies say sustainability is critical to the future success of their organization.” A warming climate and the failure to curb the increase of greenhouse gas emissions have made it increasingly urgent for companies to take action to reduce their impact on the earth.
In addition to high profile events including the Global Climate Strike and Greta Thunberg’s speech at UN Climate Week, several companies made sustainability pledges in 2019 including IKEA, Nike, Google, Microsoft, and Amazon. Companies announced stronger commitments to more quantitative and measurable goals than in years past with an emphasis on achieving net-zero carbon dioxide emissions and eliminating single-use plastics.
- TerraCycle’s LoopTM: At the 2019 World Economic Forum, TerraCycle launched LoopTM, a “milkman” e- commerce model aimed at creating zero waste by selling household packaged goods in durable, reusable containers. Participating brands include Procter & Gamble (P&G), Unilever, Clorox, Nestle, Mars, Coca- Cola and PepsiCo.
3. Increased Employee Activism and Support for Diversity and Inclusion
Employees are reshaping corporate culture by advocating for social and environmental change — including equal pay, human rights, climate action and reducing gun violence — and against corporate behavior that conflicts with their values. Many employee-led initiatives are taking place within the technology industry, with employees demanding action to address the issues that have plagued the sector, including sexual misconduct and a lack of diversity.
- Walmart: Following the August 2019 mass shooting at a store in El Paso, Texas, 45,000 Walmart employees petitioned to halt the company’s gun sales. In September, Walmart announced it would end sales of ammunition for assault-style rifles and handguns and begin asking shoppers to no longer openly carry firearms in stores in states where “open carry” is allowed.
- Employees at Wayfair, Ogilvy, Google, Amazon and GitHub protested their respective companies’ work for the U.S. Customs and Border Protection (CBP) and the U.S. Immigration and Customs Enforcement (ICE) in light of perceived human rights violations against immigrants. Employees opposed the use of their companies’ technology to help the government agencies enforce federal immigration policies.
As Gen Z enters the workforce and Millennials increase in the C-suite, they are bringing with them a new set of values and expectations that are shaping business decisions, including the prioritization of diversity and inclusion and gender equality in the workplace. According to McKinsey’s 2019 Women in the Workplace report, 44 percent of companies have three or more women in their C-suite, up from 29 percent in 2015. Companies are reinforcing their commitment to empowering women in the workforce by hosting conferences and events, such as KPMG’s annual Women’s Leadership Summit.
- Salesforce: In his book, Trailblazer, Salesforce CEO Marc Benioff explains that he learned there was a gender pay gap at his company and made it a company mission to achieve equal pay for all employees. He said, “Holding equality as a value is not just a matter of fairness or doing the right thing. Nor is it about PR or “optics” or even my own conscience. It’s a crucial part of building a good business, plain and simple.”
4. Rise of the Flexitarian Diet and Plant-Based Protein
There was a proliferation of plant-based protein options in 2019 due to increased consumer interest in plant- based and flexitarian diets, growing awareness of the environmental impact of meat production and concerns regarding animal welfare. Several quick service restaurants (QSRs), including Carl’s Jr., Burger King and Del Taco introduced plant-based protein menu items as a way to grow sales through the expansion and diversification of their customer base. In May 2019, plant-based protein start-up Beyond Meat had a record-setting IPO, underscoring investors’ optimism in the future of plant-based products.
- Carl’s Jr.: In January 2019, Carl’s Jr. announced its partnership with Beyond Meat to create the Carl’s Jr. Beyond Famous Star burger. The meat-free option can be found at over 1,000 participating locations.
- Burger King: In April 2019, Burger King debuted its vegan Impossible Whopper at 59 locations in St. Louis, Missouri, in partnership with Impossible Foods. The pilot launch went “exceedingly well” and Burger King plans to extend testing into additional markets later this year.
- Del Taco: In April 2019, after initial pilot testing, Del Taco announced it would launch Beyond Tacos at all of its locations nationwide, making it the first national Mexican fast-food chain to offer Beyond Meat.
5. Growth in Global Collaboration and Pre-Competitive Alliances
2019 saw an increase in the number of companies partnering with their peers — and even competitors — across industries to address shared societal and environmental challenges. These pre-competitive alliances include efforts to expand access to renewable energy, address plastic waste, innovate new packaging materials and promote sustainable agriculture. According to a report by the Harvard Kennedy School and the Business and Sustainable Development Commission, “Action by individual companies is necessary but not sufficient to drive transformational and systemic development. Collaboration will be essential.”
- RE100: RE100, a global corporate leadership initiative uniting influential companies committed to achieving 100% renewable energy, continued to gain momentum in 2019. The initiative has expanded across Europe, North America, India, China, Japan and Australia. Members include Accenture, P&G, Target, Unilever, Bloomberg, Dell Technologies, Apple, Estee Lauder, Facebook, Goldman Sachs, Google and Salesforce.
- Science Based Targets initiative (SBTi): At the 25th annual UN Climate Change Conference (COP 25) in December 2019, the SBTi released a report highlighting the adoption of science-based greenhouse gas (GHG) emission reduction targets across industries. SBTi champions science-based target setting as a powerful way to boost companies’ competitive advantage in the transition to the low-carbon economy. Its 700 corporate members include Accenture, P&G, Target, Nike and McDonald’s.
- Ellen MacArthur Foundation’s New Plastics Economy Initiative: In 2019, Google, Borealis, Nestle, Walmart and Condé Nast signed the Ellen MacArthur Foundation’s New Plastics Economy Global Commitment, which unites more than 400 organizations around one common vision — to rethink and redesign the future of plastics by creating a circular economy for plastic through its ambitious 2025 targets. Other signatories include Apple, Coca-Cola, PepsiCo, L’Oréal and Unilever.
1. Natural disasters and resource scarcity will demand collective action
From wildfires to hurricanes, extreme weather events and natural disasters are expected to increase. As first responders desperately work to scale up their capacity to address the escalating risks, companies must be prepared for the impact that natural disasters will have on their operations and employees, as well as the communities they serve. The ability to rapidly deploy assistance and thoughtfully support stakeholders in the event of a crisis will create immense opportunities for companies. At the same time, consumers will increasingly advocate for companies to take a stand on climate change and provide specific plans to mitigate their impact. In Larry Fink’s 2020 “watershed” letter to CEOs, he demands that companies develop robust plans for managing the risks of climate change and warns that BlackRock will be “increasingly disposed to vote against management and board directors when companies are not making sufficient progress on sustainability-related disclosures and the business practices and plans underlying them.”
2. Data responsibility and digital safety will take center stage
For the first time in history, new generations have a digital footprint from the day they are born and grow up in a world that collects data about them through increasingly sophisticated — and sometimes nefarious — ways. To date, the technology to collect personal data has outpaced the regulation protecting it, but as evidenced by the California Consumer Privacy Act (CCPA), which went into effect on January 1, 2020, this will change. Personally identifiable information will become more heavily regulated and abuses will be increasingly penalized. Companies will be held accountable for the data they collect and sell, creating risks for those that do not pursue proactive transparency or seek to create a “safe digital space” for consumers (especially minors). The trend of “techlash” — skepticism of Silicon Valley’s ethics — is likely to grow particularly among Millennials, whose personal values may increasingly come into conflict with companies’ handling of personal data.
3. U.S. election season will be a litmus test for climate change
As evidenced by a recent Democratic presidential debate, “climate change is deeply coloring the presidential race.” While initial polling indicates that climate change is a “top concern” among Democratic voters, Republican opinion appears more divided, particularly among younger Conservatives. The Trump Administration’s rollback of several environmental protections related to climate change (including water pollution, air pollution and emissions, drilling and extraction and toxic substances) has proven polarizing, with 73 percent of voters under the age of 30 disapproving of President Trump’s approach to climate change. While the outcome of the presidential election will have a significant impact on U.S. climate policy, it may also determine whether the U.S. completes the process of officially withdrawing from the 2015 UN Paris Agreement. According to Larry Fink, “Over the next few years, one of the most important questions we will face is the scale and scope of government action on climate change, which will generally define the speed with which we move to a low-carbon economy. This challenge cannot be solved without a coordinated, international response from governments, aligned with the goals of the Paris Agreement.”
4. Supply chain transparency will become table stakes
Increasingly, stakeholders are no longer satisfied with an “out of sight, out of mind” production model. They want to understand how a company manages its supply chain from end-to-end, what programs and policies are in place to ensure protection for the environment and human labor and how companies are leveraging their supply chains to create shared value for people and the planet. Companies will be held accountable for the downstream impact of their supply chains as well — not just what goes into a product but what happens to the packaging after its useful life. Doing no harm is no longer good enough. Real risks exist for companies that cannot account for, or provide assurance of, responsible sourcing. Companies will need to leverage new technologies (e.g. AI and blockchain) to meet the demand for radical transparency. Partnerships with third-party experts and nonprofits will provide much- needed expertise and credibility to companies that seek to responsibly manage their supply chains.
5. The Fourth Industrial Revolution will accelerate sustainability
From cell-based meat, to plant-based Styrofoam alternatives, to carbon capture technology, technological innovation will drive the sustainability agenda in 2020. Coined by the World Economic Forum (and a key agenda item for its Annual Meeting in January 2020), the Fourth Industrial Revolution refers to the digital revolution that has been occurring since the middle of the last century, characterized by technologies that are “blurring the lines between the physical, digital, and biological spheres.” Expect to see more leading companies partnering with Silicon Valley- style start-ups to pilot and scale new technologies that allow them to meet Corporate Citizenship goals.
Senior Vice President H+K U.S. CSR and Sustainability Practice Leader
Vice President H+K U.S. CSR and Sustainability Practice