Younger employees consistently rank corporate responsibility at or near the top of their criteria for working at a particular company. This means community actions are key, but not just from a talent perspective. BCG senior partner David Young notes that companies act in an “ethical capacity” when they are acting to preserve and nurture communities, whether they’re the geographical locations where the company is located or across locations where customers live. “When I can bring something that helps society function more effectively to help communities, then that is a source of both commercial and brand value,” he says.
Young, who heads the firm’s societal impact and sustainability practice, talked with Signal360 about the reasons and ways companies can demonstrate community, for good and for growth. The following is a transcript of the conversation, edited for length and clarity.
Why should companies care about community impact?
It’s the connection between community and long-run company performance. That shows up in everything from what kind of brand do I build over time, to the knock-on effects of that brand, to the way my employees feel about the company, with respect to how I am engaging in community.
When we fail to think deeply from a community perspective, we can run afoul of those things you would have otherwise seen. For example, [mining company] Rio Tinto wanted to do an expansion of operations in Australia. They say that they received approvals from local political bodies, but in the process they ended up destroying an Aboriginal site. It completely undermined the entire ESG program that had been put together over years and years of responsible corporate citizenship.
The interests of the company and the interest of the investor can create the linkages between community and a company’s future. And therefore the quality of the investment and the reduction of risk, and the opportunity to enhance the well being of the community and in places.
In other words, if you really mess it up, it will cascade. Some would say these are pre-financial indicators, a way to think about risk and longevity and opportunity in the business.
Many companies give to local charities — what does that do for investors’ perceptions?
This is sometimes where people get a little bit more confused. If I’m an investor, I care about the linkages. Giving to the arts, giving to a local community of culture, employing a match for the soup kitchen, focusing on eliminating homelessness — these might be a set of things that are evidencing the sort of quality of citizenship that a company is displaying, in a way that comes to life for my employees or my customers, and to evidence the purpose as a company.
Are there other communities that organizations have to think about?
Community-building is critical to employee engagement, and we know there’s a connection between employee engagement, discretionary effort and all overall company performance. There’s plenty of evidence of that linkage. And so when you’re creating community within the employee base, you can enhance the employee value experience, reduce attrition and lower recruiting costs.
If I use BCG as an example, with our young extended diverse distributed workforce, we have lots of things to enhance affiliation that are about communities within communities. Yes, we have offices where there’s community building, but we have interest clubs, like a soccer interest club, stories club, Olympics club, all kinds of things. We have an affiliation for different members of LGBTQ for community. So to actually say to yourself, this is part of the way I enhance employee value talent retention, which is why we’re regularly ranked among the top best places to work.
When should a company greenlight a community project — what are the goals and outcomes to consider?
Where both companies and investors benefit by taking a community lens is understanding what a community cares about and how it’s connected to the business. Issues that are material to particular stakeholders and important to the company should be where we focus on demonstrating impact. For instance, programs in the tech space that are about digital literacy, or that are about rapidly growing coding skills, or Girls Who Code, STEM — you can go down a long list of things — there’s a lot of positive not just to feel good about, but there’s a logic and a rationale as to why it makes sense and plays into the future of the business.
The really important thing is for the company to just help investors understand how are they thinking about the role of community to stakeholders, and how that connects to your performance as a business over time.
How should companies present community to investors?
Let’s pick our extreme example — the mining company – which is all about risk and that’s probably one of the clearest linkages: Why do I care about your community program? Why do I care about your relationship with the indigenous population? Why do I care about human rights within your supply chain? Simple. Because your business has gotten in trouble and you’re not attending to these things right. And so in that case, the connection is quite clear and alive.