Reposted from GreenBiz March 18, 2021

Corporate sustainability has evolved, and companies have made significant strides in recent years. But their sustainability strategies often neglect their political involvement. And their political activities may not be fully aligned with their sustainability activities or their stated values.

Following the Jan. 6 attack on the U.S. Capitol — and ensuing pressure from employees and external stakeholders — many companies have pulled back on their political contributions and are rethinking their political activities. They realize that creating a just and sustainable future will require both private-sector efforts and supportive public policy, and that an important way to support that future is to align their political engagement with their mission and purpose.

The right hand may be unaware of what the left hand has been doing. A company’s sustainability team may take a strong public stance on climate action, while the government relations team lobbies against new policies — or doesn’t view them as a high priority. Companies may commit to support racial justice but fail to recognize how their third-party political engagements have contributed to gerrymandering and other problems that disproportionately affect people of color.

To help companies respond quickly to these pressures, the Erb Institute at the University of Michigan is convening a Corporate Political Responsibility Taskforce that will help businesses better align their political activities with their commitments to purpose, values and stakeholders. It aims to raise the bar on corporate political responsibility (CPR) for the private sector in order to address key systemic issues.

The Erb Institute works to transform markets toward systemic sustainability, and a key step in this market transformation is policy. “What companies do in the political domain is as important for sustainability as what they do in the sustainability domain,” said Erb Institute Faculty Director Tom Lyon. Sensible public policy may be the critical factor in aligning incentives and unleashing innovation at the scale and speed needed to address our broad sustainability challenges.

“Many business leaders have not fully appreciated how a sea change in political spending over the past 40 years has contributed to distrust and dysfunction.”

Terry Nelidov, Managing Director, Erb Institute for Sustainability in Business

What’s at stake?

Companies’ inattention to CPR can jeopardize their reputation, raise alarm with employees, block needed action and destabilize the business and civic environment. “Contradictions between what companies say publicly and what they do in their political engagements are a major cause of the current collapse of public trust,” said Elizabeth Doty, former Lab Fellow at Harvard University’s Safra Center for Ethics, who will serve as director of the task force.

After the attack on the Capitol, some companies became seriously concerned about damaging the foundations of our democracy and the rule of law, Doty said. “This is a matter of conscience for many business leaders — whether they believe business should stick to business or think it should do more to help solve society’s problems.”

A failure to act is bad for business and bad for progress on sustainability. “We see this as the beginning of a movement of greater demand for corporate transparency, accountability and responsibility in the political sphere,” Lyon said.

Many business leaders have not fully appreciated how a sea change in political spending over the past 40 years has contributed to distrust and dysfunction, Doty said. With so many avenues for political influence, including lobbying, political action committees, trade associations and politically active “dark money” nonprofits, it can be difficult to keep track. “Most executives just don’t have an integrated view of everything that they’re doing and how it is perceived by external stakeholders,” she said.

For companies to minimize risk to their reputation, foster a more stable civic and business environment, honor their own values and be part of the solution to urgent systemic issues, they need to consider CPR a key lever for influence and accountability. Doing so positions companies to deal with the next generation of consumers and employees, because millennials and post-millennials expect companies to understand the role they’re playing in the political process, and they expect companies to stand up for what they say they believe in, Lyon said.

The task force

In pursuing CPR, companies generally face three challenges: lack of awareness, complexity, and difficulty weighing trade-offs to arrive at a firm-wide perspective they can articulate clearly.

To help with these, the Corporate Political Responsibility Taskforce will review and practice applying a framework for CPR to issues of pressing concern to members. This will include reviewing and refining CPR guiding principles and developing a CPR strategy that aligns practices and policy advocacy with their larger commitments to values, purpose, sustainability and stakeholders.

The task force is intended for executives concerned about sustainability, inclusive capitalism, corporate purpose and long-term value — and who recognize the need for urgent, principled action. The task force offers “a super-efficient way for companies to get the lay of the land, understand how stakeholders (and future employees) are thinking and address a pressing issue of concern,” Doty said.

As the University of Michigan’s business sustainability hub, the Erb Institute is well-positioned to coordinate and facilitate this work and the key experts, stakeholder perspectives, research and resources needed.

This work is complex, so many companies will need support — and input from diverse perspectives — to tackle it. “We hope it will encourage companies to work more collectively towards the higher goals that may be difficult for them to reach alone,” Lyon said. “When it comes to sustainability, we need proactive efforts to transform markets and raise the bar for everybody.”

Photo by Annie Spratt on Unsplash