Social responsibility becoming a strategic, long-term imperative

by Keith Nunes
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Keith Nunes

The role corporate social responsibility plays in a company’s strategy is evolving from meeting consumer expectations to a metric some in the investment community are using to gauge a company’s long-term value. That is the message of a letter sent to the chief executive officers of publicly traded companies throughout the world from the chairman of the investment firm BlackRock this past January. It is a message worthy of attention.

With assets under management of approximately $1.6 trillion, BlackRock’s opinion matters. Of particular note in this message, though, is the closely related recognition that management teams too often are more concerned with meeting quarterly and annual financial expectations than creating a path to long-term shareholder value.

Corporate social responsibility is not a new phenomenon. As consumer concerns have grown around such issues as the environment, public health and social welfare, corporate management teams have sought to ensure their companies are responsive to such issues and viewed in a favorable light.

Corporate social responsibility
Embracing social responsibility has become a prerequisite for companies seeking to establish a sustainably attractive investment profile.
 

But Laurence D. Fink, the leader of BlackRock and author of the letter, sees social responsibility becoming an integral part of a company’s overall strategy. Mr. Fink is not the first to express this sentiment, but his voice may be considered “louder” due to the oversize investment footprint of BlackRock.

“I want to reiterate our request, outlined in past letters, that you publicly articulate your company’s strategic framework for long-term value creation and explicitly affirm that it has been reviewed by your board of directors,” Mr. Fink writes. “This demonstrates to investors that your board is engaged with the strategic direction of the company. When we meet with directors, we also expect them to describe the board process for overseeing your strategy.

“The statement of long-term strategy is essential to understanding a company’s actions and policies, its preparation for potential challenges, and the context of its shorter-term decisions. Your company’s strategy must articulate a path to achieve financial performance. To sustain that performance, however, you must also understand the societal impact of your business as well as the ways that broad, structural trends — from slow wage growth to rising automation to climate change — affect your potential for growth.”

Mr. Fink goes on to say corporate leaders must ask themselves what role their company plays in the community, how companies manage their environmental impact and whether they are creating a diverse workforce.

He concludes, “Today, our clients — who are your company’s owners — are asking you to demonstrate the leadership and clarity that will drive not only their own investment returns, but also the prosperity and security of their fellow citizens.”

Food and beverage chief executives should heed Mr. Fink’s words, because consumers interact with their products daily in the most personal ways. Embracing social responsibility as a long-term strategic pillar has become a prerequisite for companies seeking to establish a sustainably attractive investment profile.

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