CEO’s Letter: The Two Towers

CEO’s Letter: The Two Towers

By Elliot H. Clark

No, in the headline, I am not revisiting the Tolkien trilogy in our philosophical analysis of the corporate responsibility world (but remember the little guys win in that story, so it is inspirational). I propose and we will highlight two important components of the corporate responsibility world at our upcoming COMMIT!ForumTM in New York, October 8-9. These two towers are the “sustainable workforce” and the “responsible supply chain.” And, yes, we would argue that they are linked.

First, the sustainable workforce is a complex thing to describe. To view the workforce from the perspective of sustainability, you have to look at not only the functioning of the current workforce, but the foundations of the workforce of the future.

This futuristic aspect brings in a lot of different perspectives. The role of the workforce and its level of engagement have been clearly tied to corporate financial sustainability. There is considerable evidence to suggest that the more engaged a workforce is, the more productive it is. We did a study through our sister HR publication, surveying 358 companies, and then comparing the performance of publicly traded firms (their financials were available). We found companies that tied their HR metrics to business metrics such as customer satisfaction outperformed their peer group 58 percent of the time. But the margin of performance was astounding: They outperformed by 200 percent. Alexander Mann Solutions, our sponsor of the research, will present the findings at the COMMIT!ForumTM. The take-home is we know that treating employees with greater respect, offering them the opportunity to develop skills and helping keep them well will lead to greater engagement, productivity and overall financial success.

Related to this issue of engagement is, of course, competence. People do best when they enjoy and are competent in their work. Also, hiring incompetent people and treating them well is not a recipe for success. Ergo, sustainable workforce brings in issues of childhood education, literacy, veteran hiring (a high quality pool of historically under-utilized workers), and even prison reform. A recent national study found 60% of prisoners were functionally illiterate. If they received literacy training there was a 16% likelihood of recidivism versus 70 percent if they received no educational development.

Fundamentally, corporate responsibility is also about culture and the ethical environment of the business. We have seen too many scandals in the public eye—ones where one must ask “what were they thinking?” The answer is they were not. They did not think long term or ethically. We need to clearly identity who owns responsibility for managing the “ethical spirit” and culture of a business.

Ethical culture extends into the second tower of how people behave in business. Who we choose to do business with says a great deal about who we are. The term “shared value” has gained a lot of traction, but do we universally apply it to the supply chain of our business? There are a plethora of ratings and rankings and disclosure programs (GRI while most popular is far from alone and is mostly self reported). In addition, many companies have their own disclosure requirements based on RFP questions. This confusion is further confounded by the lack of a standard for what supply chain compliance means. Some companies such as Walmart have been very public about enforcing packaging guidelines on suppliers and choosing vendors based on sustainability practices. We congratulate them for getting out in front, but it begs a different question: Why doesn’t everyone?

Imagine a world where responsible companies would only buy or sell to other responsible companies and where there was a global standard or accord that companies acceded to. GRI is a reporting standard, not a behavioral standard. Companies that lacked the ethical standing would be at such a competitive disadvantage that they would be boxed out of the market.

I believe in Adam Smith’s assertion in the Wealth of Nations that market forces will drive behaviors. In fact, I think market forces are equally if not more potent than regulations, which, after all, become more complex, arcane and, in many cases, avoidable, as time progresses. If we focus on the people we work with and the people we do business with–and make sure they have similar values to us—then business will truly have a more positive impact on world society.

Posted August 8, 2014 in 25115