In a March Twitter post, NAACP President and CEO Derrick Johnson sent a clear and unambiguous message to companies who don’t back their words with action: “We intend to hold all corporations who have made commitments to the fight for social justice accountable. Our communities, lives, and democracy are at stake.”
Likewise, Larry Fink, CEO of BlackRock, the world’s largest asset management firm, made his expectations equally explicit in his 2021 letter to chief executives, issuing a strong call for far more ambitious and transparent ESG goals and directing CEOs to “disclose a plan for how their business model will be compatible with a net zero economy.”
These exacting expectations are creating an entirely new dynamic for business leaders as they seek to earn the trust of broader groups of stakeholders, while reshaping their companies and navigating a complex world that is being impacted by everything from worsening climate change to growing populism.
There is no doubt that events of the last year have put an increased burden on corporate leaders who feel a greater responsibility to take a stand on societal issues and be responsive to the surge in stakeholder expectations. But with this increased sense of responsibility comes a new era of accountability – an era comprised of three converging waves of responsibility.
The first wave is the one business leaders are currently riding – the wave of commitments. Across every sector, business leaders are standing up and making commitments. Commitments to protect the well-being and welfare of employees. Commitments to advance diversity, equity and inclusion, especially within their higher ranks. Commitments to the environment and accelerating to a lower-carbon future. And commitments to address countless other pressing issues like systemic racism, human rights, and gun control. Often, these commitments are made based on the bold and growing demands of employees, customers, investors, NGOs, and policy makers.
But public proclamations are not enough, which begets the second wave of accountability – the wave of performance. In this wave, words are cheap and actions matter. While many might argue that actions have always mattered, the big difference now is that people are watching and taking names. Just as Messrs. Johnson and Fink have made their expectations clear, the U.S. Security and Exchange Commission (SEC) recently set up a climate and ESG enforcement task force. According to the SEC, their Climate and ESG Task Force will develop initiatives to “proactively identify ESG-related misconduct,” including identifying any material gaps or misstatements in an issuer’s disclosure of climate risks. Others, like the social platform 100K Pledge, are tracking the progress of corporate pledges to Black communities.
Ultimately, this will lead to the third wave of accountability – the wave of consequences. The wave of consequences may be the most challenging of all because it is coming sooner than business leaders anticipate. If leaders live up to their commitments, they will be rewarded in terms of greater bonds with their employees, customers and investors; stronger ties to their communities; and far less contentious relations with regulators. But that is easier said than done.
Unless great effort is made to set uniform expectations, different pressure groups will set different deadlines and expectations for change to be accomplished, leading to discontent amongst those who feel companies have failed to honor their public commitments. Logical reasons for not delivering on one’s commitments – no matter how justified the reasons might be – will not pacify those driving for swift and necessary change, putting the company and its leaders at risk.
Here is the crux of the issue for today’s business leaders. What is evident in this era of accountability is that accountability is the crucible of trust. After all, nothing builds trust more than fulfilling a public commitment – and nothing erodes trust more than failing to meet it.
Dave Samson is Global Vice Chairman, Corporate Affairs for Edelman
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