There is a global phenomenon sweeping across the corporate landscape recently—businesses have quietly shifted towards more adaptable mindsets and new approaches to corporate social responsibility (CSR) and diversity as they deal with new stakeholder expectations post-pandemic.
According to the latest research by McKinsey, 350 global human resources leaders are looking to prioritise initiatives that strengthen their organisations’ ability to drive change in leadership, culture and employee experience over the next two years.
Recent studies at Hong Kong Baptist University School of Business align with this insight, showing that the need for next-level corporate social responsibility and increased diversity are essential to better managing businesses in 2023 and beyond.
The golden relationship between the board and CSR
How can businesses better manage employee engagement and retention as we enter the new year? In a recent survey, Deloitte states that 92% of respondents thought that CSR makes their company more attractive as an employer and increased employee loyalty; while 85% of board directors see CSR as an important tool for achieving a competitive advantage in the marketplace.
However, is there such a thing as too much CSR? Some CEOs only invest in CSR activities to increase their individual reputation at the expense of shareholders’ interests. Therefore, it is crucial to implement rigorous management of corporate CSR efforts. Below are key findings that all business leaders should consider:
1. Leverage the experience of TIDs
Talented Inside Directors (TIDs) are those employee directors with outside directorship, that have firm-specific knowledge but less reliance on CEOs for career advancement. This better positions them to monitor and advise CEOs to avoid excessive CSR, while also improving the efficiency of CSR investment.
One recent example is The Stock of Exchange of Hong Kong Limited implementing a board skills matrix framework, which displays each board member’s proficiency in specified skill sectors, areas of experience, knowledge and diversity of perspectives.
This information is then analysed to determine how each board member can assist in leading the strategic direction of the exchange, including the identification of TIDs to help drive a clear CSR mandate.
2. Monitor institutional investors’ and stakeholders’ mindset
Institutional investors are instrumental to a firm’s valuation of CSR. As business leaders, we need to understand and align with the mindset and values of investors to mitigate any existing or potential issues around CSR efforts.
According to a Harvard Business School Insight, in comparison to just 27% of Gen X investors and 16% of baby boomers, 41% of millennial investors make a substantial effort to understand a company's CSR activities when considering options.
Today, we see investors evaluating stocks using CSR as an authentic value-enhancing strategy. As a result, we need to give the next generations of investors a fair share of voice by respecting their advice and opinions on CSR-related matters.
Together, with an increased diversity of board members, these new perspectives can help companies achieve next-level results in CSR management and management in CSR at the next level.
Don’t treat diversity as a box-ticking exercise
Truthfully, we have been talking about diversity in the workplace for a while. Perhaps too long, with little progress to show for all of the discussion.
According to recent research by recruitment websites Glassdoor and Indeed, 2023 will see an increased emphasis on diversity, equity, and inclusion (DEI) in the workplace, with 72% of workers aged 18 to 34 saying they would consider turning down a job offer or leaving a company if they did not think that management supported DEI initiatives.
We find that societal events can be key turning points for workplace diversity. For example, COVID-19 has had a significant impact on women in the workplace, levelling the field, increasing employment, providing better work-family arrangements, and helping to build stronger networks.
As organisations are not isolated entities, they are often collectively drawn into these powerful diversity-related matters via macro influences within the business world.
According to the latest research by Professor Liqun Wei (Department of Management) from Hong Kong Baptist University School of Business, below are recommendations that businesses should follow for better management in 2023:
1. Dig deep into diversity
Although racial diversity is utterly essential, businesses need to go further and embrace less-visible factors such as religion, sexual orientation, class, and political affiliation. Recently, Sun Life Insurance’s new office in downtown Hartford, Connecticut, set up a new “Quiet Room”, intended for meditation and prayer, which also included a Muslim foot washing station.
This level of accommodation will be required more and more moving forward to provide diversity and added incentive for employees to spend more time in the office during the age of hybrid working.
The result will ultimately be an enhancement of businesses as a whole as these initiatives permeate through the company culture and into the consciousness of consumers.
2. Carefully considered corporate responses towards societal events
In recent years, societal events have ignited public debate and significantly influenced opinions about diversity-related issues, most notably those of race and gender. These events are requiring organisations to ask important questions, such as: What is our position in relation to all these societal debates?
Sportswear brand Adidas recently faced backlash for its delayed response to Kanye West’s anti-Semitic remarks. The brand’s statement on the matter came too late, leaving consumers to speculate that the delayed response was due to their existing money-making business partnership and that profit was the priority.
In managing a business, diversity is both internal and external facing. This means that leadership needs to be committed to a set of core values and upholds diversity in all its forms, think three steps ahead for any potential issues, and be prepared to make courageous decisions at the moments when it matters most.
Although there may be a short-term impact on such actions, long-term consumer loyalty will be gained by demonstrating steadfast dedication to diversity.
2023 is expected to be the year when businesses finally emerge from under the cloud of the pandemic but will face new challenges from the global economy. To meet the expected increase in consumer demand, companies will require strong branding to attract and retain internal talent, while also protecting their market share externally.
A balanced CSR policy to ensure a common corporate goal for good, and a deeper commitment to diversity are two major paths towards success that all business leaders need to be mindful of as we move into this new era.
