Introducing the Stakeholder Impact Officer

How COVID and 2020 will forever change CSR

Introduction

The ancient Greeks had two words for time: chronos and kairos. The former refers to chronological or sequential time, while the latter signifies a proper or opportune time for action (h/t Lockie). Last year left behind a global path of destruction that has turned time on its head (chronos); however, Covid and the multiple simultaneous crises of 2020 and early 2021 ultimately will be remembered more as a “kairos” moment for corporate social responsibility (CSR). It was a turning point. CSR is moving to the front lines of corporate strategy and purpose where it’s primary responsibility will be helping to align the enterprise’s assets and stakeholder relationships to societal impact. In doing so, the role of CSR is transforming to the Stakeholder Impact Officer (SIO). Below I explain why the SIO role is emerging, what the role entails, and how it will fundamentally and forever change CSR and society.

Why the Stakeholder Impact Officer (SIO) is Emerging

Years from now, we will look back at this time as when a new era of stakeholder accountability was ushered in, across every sector, but most notably in the private sector. This new era is rooted in stakeholder impact, not just disclosing a firm’s environmental, social, and governance measures (ESG) but the active management of the enterprise’s impact on people and planet.

This represents a pendulum shift in corporate strategy, solidifying trends driving structural change in how value is created and how corporation performance is measured and managed. Recent events have shined a spotlight on the inequality, health, climate, racial justice, and intolerance crises — and the compounded intersectional effects of these together — highlighting the long-standing reality that all is not well in our world.

It also represents a shift for CSR professionals who have been on the front lines like no other time in history, doubling down on the culture of service that defines our profession. It is increasingly evident that the next normal will not be a return to the recent past and that business does not operate in a vacuum. The needs of the world outside a company need to be considered in business strategy and that is increasingly CSR’s job to be done. As Richard Edelman, CEO of Edelman, notes, “The events of this past year reinforced business’ responsibility to lead on societal issues.”

Covid and these other multiple crises accelerated the movement to restore trust with greater accountability and transparency, but many of the underlying trends have been ascendent for some time. The primary drivers include shifting expectations, a surge in ESG reporting, harmonization of ESG standards, acceleration of ESG regulatory action, and better performance of purpose-driven companies.

Shifting Expectations

Expectations and public sentiment around sustainability and corporate purpose have been shifting for some time. All things equal, consumers want to buy from — and employees want to work for — brands that stand for something. That shift, along with increasing evidence of stronger financial returns for purpose-driven companies, is influencing investors’ desires as well. By 2025, global investments on ESG are projected to exceed $53T. That’s one-third of all assets under management (AUM). That, of course, is also driving C-Suite CEOs’ expectations. A recent survey of more than eleven thousand C-Suite executives indicates social impact is the top factor used to measure success when evaluating annual performance.

Surge in ESG Reporting

This expectations shift is also driving a surge in ESG sustainability reporting among companies. In less than 10 years, we have seen a complete 180 degree shift; the percentage of S&P 500 companies doing ESG reporting has gone from 20% to more than 90%.

Harmonization of ESG Standards

Thanks to efforts like the Impact Management Project and the International Business Council, there is also an important convergence taking place on what to measure. The former is driving harmonization efforts among the world’s leading standard setters. Last September, the International Business Council (IBC), an initiative of the World Economic Forum, issued a harmonized ESG reporting blueprint with 21 “core” metrics in the areas of people, planet, prosperity, and governance. More than sixty major companies have already embraced the framework.

The Sustainable Development Goals (SDGs) have also helped drive convergence. Today, 82% of the 250 largest global companies are aligning their businesses to the SDGs and, by doing so, helping to drive greater alignment on measurement frameworks regardless of industry or company.

Regulatory Push for ESG Disclosure

The expectations, reporting, and convergence are also accelerating regulatory momentum requiring sustainability disclosures. Recently, the European Commission adopted a package of measures to help direct capital towards sustainable initiatives. In March, the Biden Administration announced a new task force in the U.S. Securities and Exchange Commission focused on climate and ESG. The pro-ESG position was reinforced even more recently in the Biden Administration’s $2T infrastructure proposal that invests heavily in combating climate change.

Better Performance of Purpose-Driven Companies

All of these drivers sit atop the most important driver of all, which is that there now are reams of research demonstrating the correlation between performance and companies that lead with purpose and values. Notable findings include: 30% higher levels of innovation, 40% higher levels of employee retention, 57% reduction in employee turnover, and 100% higher returns of stakeholder-focused companies over the S&P 500. This “purpose pays” evidence is driving new, innovative hybrid business models including B Corps and social enterprises. We’ve seen a 30-fold increase in the percentage of B Corps in less than 15 years.

With that as a backdrop, it is not surprising that Larry Fink, CEO of BlackRock, the largest asset management firm in the world, said, “Within the next 5 years, all investors will measure a company’s impact on society, government, and the environment to determine its worth.”

What is the Stakeholder Impact Officer’s Function?

Now that we’ve covered why stakeholder impact is emerging, let’s turn to what the role entails. The Stakeholder Impact Officer’s role is chief champion of stakeholder interests and helping align the business to societal impact. It is about helping to integrate a business’s overall societal impact into core corporate strategy and business performance management systems. It is rooted in, but an elevation of, traditional corporate social responsibility functions.

Stakeholder impact management is grounded in the recognition that every business, every organization, has an impact — positive, negative, intended, and unintended — on a variety of stakeholders, including stockholders, customers, employees, partners, the planet and the communities in which we work and live. Measuring and managing this impact is becoming a larger and more important part of a company’s overall performance.

This is achieved via active stakeholder impact management, the set of practices and capabilities to continuously manage & report outcomes across common dimensions of societal impact: people, planet, and community. This involves coordinating and connecting three key processes covering an enterprise’s key stakeholders: 1) Impact Program Measurement, learning from what was done yesterday 2) Impact Program Management, actively managing current impact programs today, and 3) Monitoring & Learning, continuously improving future impact .

Specifically, Stakeholder Impact Management encompasses the following core responsibilities:

• Impact Identification and Stakeholder Management

Identifying key stakeholders and areas of stakeholder impact is where the job begins. This process inevitably produces an exhaustive list of stakeholders and issues reflecting just how many stakeholders are affected by the actions the company takes. While the day-to-day management of stakeholders may not be the SIO’s responsibility, it is a backdrop to ensure expectations are clearly set around the most important stakeholders, internally and externally. Stakeholder analysis tools can be of great assistance.

• Impact Portfolio Prioritization

Whittling down the list is the next job to be done, and this is where “materiality” comes into play, that is defining the stakeholder impact topics that matter most to a business and its stakeholders. Materiality assessments and risk mitigation and management are useful tools to help guide this process. The goal is not to do everything; instead, it is about prioritizing stakeholder issues grounded in business values. The past year has demonstrated that what is deemed material can change very fast. It is critical that the SIO be agile and flexible, constantly monitoring and preparing around current events.

• Corporate Social Innovation

Among the greatest opportunities for the SIO role is helping to identify positive new value creation opportunities, or corporate social innovation (CSI). CSI efforts co-create breakthrough value for both shareholders and stakeholders and the stakeholder era is unleashing enormous CSI opportunities for businesses. Reports indicate the Sustainable Development Goals could generate US$12 trillion in business savings and revenue across just four sectors (energy, cities, food and agriculture, and health and well-being) by 2030. These initiatives most often get discovered when companies provide open platforms seeking sustainable and/or impactful project ideas from their employees, partners, and other stakeholders and that is where CSR comes into play. CSR leaders know where to find values and purpose-driven employees, teams and partners, key enabling conditions for CSI. Our own model at Salesforce.org is a great example and more and more CSI examples are emerging every day.

• Impact Portfolio Execution

The ultimate goal, of course, is societal change — meaningful, measurable, sustainable change for stakeholders, and that comes via execution, for example, the active management of a stakeholder impact portfolio. Stakeholder priorities — both corrective measures and those that advance social innovation — must be converted into work plans for execution. Tools, like the V2MOM framework, can help communicate not just vision and values but also drive alignment and ongoing execution to everybody in the organization and can be incredibly helpful to securing buy-in and approval.

• Impact Continuous Learning & Improvement

While accountability and transparency are watchwords, it is critical to remember that performance is at the heart of the stakeholder impact strategy. Continuous improvement for stakeholder impact requires the same tools, processes, and skills necessary to facilitate continued learning in other aspects of the enterprise. Sadly, the Corporate Executive Board (CEB) found that only 10% of companies make use of true learning cultures. Positive examples here include NACD’s ESG Oversight Continuous Learning Cohort and the Network for Business Sustainability. This includes not just setting clear goals and regularly reviewing progress but future planning as a way of identifying what can/cannot be achieved with currently available resources.

Where does the Stakeholder Impact Officer Belong?

The corporate C-suite does not expand easily or often, and so it is with stakeholder impact. Many executives and boards see the value in the role; yet, they balk at adding a new seat to the C-suite table, positioning the role further down the food chain. In such instances, the natural question is, “Where is the role best positioned for success and to deliver maximum business value?”

Just like CSR, there are multiple options today, each with various pros and cons associated with them. Stakeholder impact is fundamentally and increasingly about measuring and managing performance. Therefore, it has important synergies with the chief finance officer, who is responsible for producing the enterprise’s performance measures and responsible for investor relations/engagement. Corporate strategy is another good option precisely because of the numerous dimensions of stakeholder impact that must be managed and the increased likelihood of identifying new ways of creating business value.

Employee success, corporate relations, and philanthropy are other possible answers, as is corporate marketing. The potential danger with the latter option is mistaking accountability with marketing. There inevitably will be those who believe they can “fake” their way with splashy PR announcements in a haste to jump-start a nonexistent or immature stakeholder impact strategy. They will seek to employ greenwashing or impact-washing campaigns and spend heavily on cause marketing. While they may experience a short-term bump, it will ultimately backfire as firms providing traceable impact data and evidence will leave those who cut corners in the dust.

Regardless of where the position sits, the opportunity is deep integration across the enterprise. Whereas CSR is often siloed as “nice to do,” stakeholder impact management must drive authority over business decisions impacting stakeholder concerns. Here, a related and harder immediate challenge is securing the resources necessary to effectively carry out the role. Today most CSR teams are vastly under-resourced for the job to be done.

Over time, there will be a transfer of resources across the enterprise associated with the continued evolution of the role. In the short term, sadly, too many c-suites believe they can just pile on the new workload and provide incremental support for enlisting CSR and impact consultants. To be sure, there is an enormous role for CSR and ESG consultants to play. Ultimately, however, what gets measured gets managed and having full-time employees on the payroll designated for stakeholder impact is necessary. Preventing burnout requires C-suite sponsorship and support, particularly from enlightened CFOs, who are key partners to help uplevel CSR and set it up for success in this new era of expanded responsibility.

Across my networks, I hear anecdotally about more inquiries about C-suite stakeholder impact roles, as the bottom-line results of those who lead with stakeholder impact matures and the business value for managing stakeholder impact becomes more evident. This will likely take some time to show up in research but as Denis Pombriant reminds us, “Ultimate corporate responsibility resides in officers who have Chief embedded in their titles.” These executives’ primary role is to influence not only their fellow C-suite occupants but also set the stakeholder agenda and secure approval with the Board and investor community.

Conclusion

Stakeholder impact represents an enormous opportunity for CSR to fulfill its true potential. It was just a few years ago when CSR was doing well if it secured 1% of the firm’s resources toward giving back, but Steve Rochlin, CEO at IMPACT ROI, has noted that the new focus must be on the other 99%.

The path forward for CSR has never been clearer, and that path starts with change. The most important goal is not a metric but a mindset. CSR must see itself as a change agent to transform your organization to managing stakeholder impact, integrating a business’s overall societal impact into core corporate strategy and business performance management systems. It is to see and seize the broader opportunity to help restructure society and the global economy to better align with people and the planet.

If you are a servant leader, a relationship builder, who can wield influence even when lacking direct control, this is your time. If you are inquisitive and flexible and possess sound business judgment and if you’re able to execute in partnership with others, this is your moment. Above all else, if you have what Tim Mohin, Executive Vice President and Chief Sustainability Officer at Persefoni, notes, “passion for the cause,” there has never been a better opportunity to help make the world a better place. Help restore trust in capitalism and usher in a new chapter of accountability and transparency, and upgrade the social contract for the next generation. Look out C-suite, here we come.