2018 was quite the year for corporate activism and, of course, the brands taking stands movement. We’ve seen more companies taking a stand on the most stubborn social and political issues, including gender equity, data privacy, race relations, immigration and tariffs.
Well, if we had a crystal ball, what can we expect in 2019?
The next best option is available to us other than a crystal ball – and a fine one at that - is Barie Carmichael, senior counselor at APCO Worldwide, Batten Fellow at The University of Virginia’s Darden Graduate Business School and with the late James Rubin, is co-author of Reset: Business and Society in the New Social Landscape.
In Reset, Rubin and Carmichael argue that businesses must be aware about their “inherent negatives,” i.e., the negative impacts embedded in the company’s business model, strategies or policies. As these inherent negatives end up intertwined within a company’s business model, the long-term outcome could be that as the company grows, so do its negative impacts.
As a result, these inherent negatives can become powerful accelerants to public outrage and are difficult to remedy after the harm is done. Anticipating inherent negatives is a strategic challenge in the new social landscape for business where the “ramp time” for outrage can be instantaneous. Conversely, anticipating and mitigating inherent negatives early in the business life cycle can result in solutions that in the long run could benefit both business and society.
TriplePundit had the opportunity to catch up with Carmichael recently to hear what she thinks could unfold on the corporate activism front in the coming year.
Silicon Valley will be under even more scrutiny
“I think the hall pass on criticism for Silicon Valley and the wider technology industry has reached its expiration date,” said Carmichael as she started her conversation with 3p.
“The recurring pattern for Silicon Valley has been to prioritize gaining scale and then look at social impact. As these companies have grown, so have their products’ negative impacts on everyday life — from hate speech or privacy concerns the potential impacts on the social development of youths — making it a daunting task to retroactively address. Just look at how more parents in Silicon Valley are prohibiting screen time for kids — that should tell you about what’s happening in this space,” observed Carmichael.
Carmichael believes that with the U.S. federal government’s reticence to enact substantive regulatory guardrails, controversy will continue to surround companies like Facebook, Google and Twitter during 2019. We may see some attempts at self-regulation – such as Apple’s move last year to notify users about their weekly screen time – but when considering the market penetration these companies have achieved, look for more visibility on their social impact to hit the newswires and public pressure to modify their strategies.
The struggle with next-generation technologies will hardly be a Silicon Valley phenomenon. As the Internet of Things (IoT) becomes more integrated into everyday products, watch for additional traditional manufacturers to face similar challenges. “But they may benefit from seeing the issues in advance and take preemptive safeguards,” said Carmichael, who has long argued that companies .
The ability to innovate and be nimble in today’s economy is often a top concern for CEOs as they consider future business challenges. “But innovating without fully anticipating or imagining the social footprint of these innovations is like playing tennis without a net or without boundary lines,” insisted Carmichael. “Like a net and lines in a tennis match, social impact is a real factor that must be considered. Otherwise there is a risk that a new innovation cannot be sustainable – or, let’s put it this way, we won’t have a real tennis match.”
From Carmichael’s point of view, having this line of sight is central to sustainable innovations. “Being agile and innovative requires more than a good idea. It requires active leadership that cultivates curiosity, diverse perspectives and an engaged speak-up culture,” she said.
Scale could catapult more companies into trouble
For years in business school, we were told to discover an underserved market, develop that product or service and then finally, exploit it. Unfortunately, there have been many examples of where too much focus on a supposedly innovative product or service, without anticipating unintended negative impacts, can end up causing headaches for companies, their customers and executives.
“Take a look at JUUL, whose damage was accelerated by rapid scale,” explained Carmichael.
The e-cigarette startup was launched by a couple entrepreneurs who wanted to find a healthier alternative to smoking. The problem, however, was that teens took to JUUL like wildfire – and it turns out the brands’ nifty and flavorful products contained way more nicotine than conventional cigarettes. JUUL has changed its marketing tactics, but so far they have not been enough to satisfy parents and public health advocates; and its customers have not been happy with the changes either. As the controversy over these products surged last fall, the company was silent on Twitter for over a month until it responded to a U.S. Surgeon General’s advisory on e-cigarettes. JUUL has since sold a 35 percent stake in the company to Altria.
Pivoting back to the tech sector, watch for Amazon to be at the center of more angst over its decision to expand in the Washington, D.C. and New York City metropolitan areas. “Amazon will be hit as their physical presence hits Northern Virginia and NYC; like the experience in Seattle, remember the experience of Seattle and Silicon Valley, and look for high visibility criticism on the social impacts — as in how the influx of workers could strain access to affordable housing while substantially increasing traffic gridlock,” noted Carmichael.
More employee-driven activism against companies’ labor policies
Watch for more employees, across many industries, to speak out publicly about their companies’ policies and business decisions, advised Carmichael. After all, statistics on sexual harassment show the odds are that any company of any size has had unreported sexual harassment as well as gender pay issues.
“But the difference today is employees are benefitting from a strong labor market - they can speak up knowing they can get another job,” said Carmichael. “Furthermore, they have the online means to form communities of protest.” Online tools such as coworker.org can be monitored for early signals of what will drive employees to take grievances with their employers public.
Increased pressure from investors and employees on more issues
According to Carmichael, the data shows companies who perform well in areas such as diversity and sustainability are more likely to have better long-term growth prospects. Investors are starting to flag these challenges, as well as employees. As Carmichael explained in her blog:
“Corporations are now entering what meteorologists call a convergence zone, where prevailing systems interact to disrupt the status quo. External forces like investor activism are converging with internal forces like employee activism to disrupt business and change the way boards and c-suites are forced to see and respond to risk.”
The latest predictions about the economic impacts of climate change will also add fuel to ongoing concerns about environmental sustainability. Hence an interesting question for 2019: will this data help influence the markets and consumer behavior? After all, with the relaxation of corporate average fuel economy (CAFE) standards enacted under the Trump White House, more consumers have moved away from smaller cars and to larger crossover vehicles and trucks, as Ford and GM have been withdrawing from the sedan business. During the 1970s, spiking gas prices drove consumers to smaller cars. Will consumers’ concerns on climate change change their purchase behavior, absent the personal impact of rising gas prices?
Don’t forget the positives
The news isn’t all negative on the corporate activism front. Look for businesses to step in and fill the vacuum that has been left by government inaction to the most intractable social challenges. And they will often do so by entering into creative partnerships with organizations that are in vastly different sectors.
One example Carmichael points out is a recent plan announced by Smithfield Foods and Dominion Energy. The companies have agreed to each spend $125 million over the next decade to capture methane gas from hog lagoons in three U.S. states – a huge step in waste-to-energy technology if this project succeeds. Tyson Foods and the Environmental Defense Fund recently announced a partnership with the goal to accelerate sustainable food production. The jury on these partnerships’ success is still out but such solutions have the potential to be good for business and society, which is now the new “sweet spot” for business strategy.
The upshot, Carmichael explained as we wrapped up this interview, is to be proactive and vigilant.
“Today, businesses that preemptively anticipate social impact from inherent negatives and innovate shared solutions are positioned to thrive in this new social landscape for business, she said. “But that requires a critical examination of the social impact of the full business lifecycle, including the business model itself. Each year, more than 70 percent of headline producing crises concern matters within management’s control. Seeing it coming requires strong leadership that cultivates a speak-up culture to break through the blind spots.”
Image credit: Patrick Nouhailler/Flickr