BlackRock CEO Tells Companies To Contribute To Society. Here's Where To Start
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Some events stand out as watershed moments that re-define the
environment and re-direct the course of events. Bill Gates writing his
“Tidalwave of the Internet” memo in 1995. Steve Jobs holding up the
iPhone in 2007. I believe we’re seeing another such moment: on January
12, BlackRock CEO Larry Fink sent a letter to CEOs of public
companies telling them that they’re responsibility not only to deliver
profits, but also to make “a positive contribution to society.”
In his letter, which I received from BlackRock today, Fink lays out a number of
requests which one might find surprising from a $6 trillion asset
manager. He cites the pre-occupation with short-term, reactive
measures to drive quarterly profits and asks CEOs to focus
on “investments in employee development, innovation and capital
expenditures that are necessary for longer-term growth.”
Even more electrifying, however, was Fink’s clarion call for CEOs to
seize the mantle of leadership in making the world a better place,
beyond simply delivering profits. He sees governments as failing in
their duty to address the major challenges that loom in the future: “As
a result, society is increasingly turning to the private sector and
asking that companies respond to broader societal challenges.”
To make this case, Fink explicitly raises the issue of purpose as the
critical North Star to guide corporate decisions: “ Without a sense of purpose, no company, either public or private,
can achieve its full potential. It will ultimately lose the license
to operate from key stakeholders. ” He cites environmental impact, workforce
diversity, community engagement and employee re-training as among the
larger issues companies must grapple with.
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The reason Fink’s letter is so striking is that it goes straight to the
heart of a raging debate about the role of social purpose in a brand’s
agenda. One camp, call it Team Jim Stengel, argues that embracing purpose is not only essential to developing
resonant customer relationships, but it also drives better corporate
performance. The opposing camp, call it Team Mark Ritson, believes that social causes are for one’s private life and
that the purpose of business is to drive profits.
Fink’s letter says they’re both right. Make no mistake, the outcome Fink
seeks is a healthy long-term return for the millions of individuals
whose investments he stewards—he offers no easy outs for disappointing
performance. The challenge he lays out is to simultaneously walk and
chew gum, to find that magic resolution of the seemingly competing
mandates: deliver financial returns and make the world better at the same time.
In his letter, Fink pulls the rug out from under that most common
and potent objection to embracing a broader purpose beyond selling
product: that shareholders don’t value your lofty ideals, they only
want profits. Executives can no longer point to Wall Street as a reason
for staying safely on the sidelines of the uncomfortable challenges and
debates around social, environmental and political issues.
Many companies are already well down this path, with a range of results
from laudable to cringeworthy. The Dove brand has won many kudos for
its stirring campaigns focused on the notion of real beauty; Pepsi, on the
other hand, earned widespread condemnation for its ad that featured Kendall Jenner defusing a social protest with a can of soda. Even
leaving aside the question of how purpose relates to profits, embarking
on a brand agenda for social good is no simple matter.
Here is a set of key steps to follow, for companies that are either
contemplating their first step into the social sphere, or that are
already down that path but unsure of their progress:
Start with core values and beliefs. Any effort to weigh into the bigger social issues must be grounded in
a set of deeply held values and beliefs. The worst thing a brand can do
is to jump on the bandwagon of an issue that is hot but not
sincerely meaningful to the company or its leadership. Savvy consumers
will quickly sniff out a phony purpose and the brand will suffer. What
issues genuinely motivate the company’s leaders? Its employees? What was
the gleam in the eye of the founder? Where does the business model
intersect with social concerns, such as sustainable supply chain,
diversity, health care, or others? For this work, it’s always worth
re-watching Simon Sinek’s inspiring Ted Talk, “Start with Why”.
Assess your risk profile. When wading into the arena of social purpose, there is a spectrum of
choices: from a generally uncontroversial purpose (e.g. real
beauty) to a sharper, more current issue (e.g. voter registration) to a
polar position on a hot topic (e.g. opposing Trump’s immigration
policy). As you move along the spectrum, you increase both the
likelihood of resonating powerfully with people who agree, along with
the risk of alienating those who don’t. Be sure to align with
leadership, board and other stakeholders as to where you’re ready to
land, as you don’t want second-guessing and finger-pointing in the event
of any backlash.
Pick a focused, credible issue. Resist the temptation to take on overly broad, ill-defined problems.
Instead set your sights on a concern that is clear and defined. A fuzzy
mash-up of social strife set Pepsi up for failure, whereas Frito-Lay
more successfully zeroed in on voter registration among young people. Make sure there is an
appropriate and credible role for your brand in your chosen issue. To
the point of walking and chewing gum, the challenge is to find that
golden intersection of issues that are meaningful to society and
relevant to your brand. Heineken took on the lack of civil
dialogue amidst conflict and credibly showed people discussing
their differences over a beer.
Get the right guidance. The meaningful issues that make up brand purpose are fraught with
nuances and pitfalls that can trip up well-meaning brands and unleash
indignation. Shades of word choice and imagery can trigger powerful
unintended reactions. Even the much-lauded Dove experienced this
backlash from an online ad that showed an African-American woman pulling off a
brown t-shirt to reveal a white woman in a white shirt underneath. Bring
in voices that can represent those most affected by the concerns you’re
addressing.
For a private sector company to take on the challenge of making society
better, a good dose of courage and intestinal fortitude are required.
By issuing both permission and a mandate to play a broader
societal role, Larry Fink has hopefully provided CEOs with that last
push needed to step up to the challenge.
Peter Horst is a Fortune 500 CMO and Founder of CMO Inc., a marketing consultancy. He is also the author of the bestseller, "Marketing in the #FakeNews Era." Join the conversation @PeterHorst.
