This story first appeared in the Washington Business Journal.
2023 was a year of contradictions in corporate social impact and ESG (environmental, social and governance), equal part triumphant and challenging. Customers, investors, employees and community stakeholders have continued to call upon corporations to embrace social responsibility, from how they make their products to how they engage employees and communities, and everything in between.
Yet the challenges have also stacked up this year. New ESG regulations in California and the European Union, the Supreme Court ruling on affirmative action and wars in the Middle East and Eastern Europe are testing the resilience of U.S. corporations and the risks they are willing to take to align with their values.
Despite challenges and the recent ESG backlash, companies remain committed. Recent data supports the continued relevance of ESG practices, underlying their critical role in risk mitigation and financial success. A June 2023 study from the Center for Audit Quality found that ESG reporting among the S&P 500 is now approximately 99%.
Contrary to the narrative that companies are scaling back or abandoning ESG, most are continuing to prioritize progress toward ESG goals. And the professionals that drive this work have demonstrated tremendous resilience this year.
Addressing the social and environmental priorities of companies is a source of passion and pride for the people who make up the corporate workforce. Employee engagement in volunteerism rebounded in 2023, a welcome sign following a decline during the pandemic. Data from our own 2023 CSR Insights Survey showed that 61% of companies reported an increase in 2023 employee volunteer activities.
Companies are embracing the benefits of engaging employees in community initiatives, with 84% now offering time off or flexible scheduling to participate. This incentive for engagement supports the belief that in today’s highly competitive talent market, workers seek employers that lead with purpose and encourage community building. Seventy percent of job seekers report being more likely to apply for and accept an offer from socially responsible companies, and volunteerism is part of that equation.
2023 also saw a rise in the diversity of CSR teams, those leading partnerships in communities on behalf of their companies. Diverse perspectives and experiences result in greater community impact, especially as corporations work to build stronger, more resilient, and more equitable communities. However, representation at the senior leader level in these departments continues to be a challenge, evidenced by a decline in the percentage of BIPOC Social Impact department heads in companies.
Even though 2023 saw ESG and CSR wins, efforts to advance justice, inclusion, and sustainability didn’t come without significant challenges. Chief among those challenges has been facing head-on the demonization of the work, hindering companies’ pursuit of critical ESG and DEI goals in some states with anti-ESG legislation and affirmative action lawsuits. Results from a pulse survey we conducted in October showed that 70 percent of ESG and CSR professionals are concerned about the future impact and repercussions that the Supreme Court’s rollback of affirmative action will have on corporate diversity, equity and inclusion initiatives.
Corporate responses to new and ongoing geopolitical crises have consumed the spotlight in the fourth quarter. The war between Israel and Hamas exemplifies the unpredictability and complexity of challenges that can appear at a company’s doorstep overnight. Many companies responded by making internal statements, supporting humanitarian NGO’s serving victims of violence in both Israel and Gaza, and prioritizing the safety and security of employees. Many also reemphasized their “no tolerance” anti-discrimination policies to protect employees and customers from rising antisemitism and Islamophobia. Matching gift programs have been deployed, in some cases with temporary increases to the typically allowed contributions.
The primary responsibility of CSR and ESG practitioners is to help their companies advance social and environmental outcomes and navigate the range of challenges, ensuring leaders can stand by their social impact commitments and advance business strategies. Yet despite the increasing demands these opportunities and challenges present, budgets for corporate citizenship initiatives mostly remained flat in 2023, with some industries experiencing declines.
The data is overwhelmingly clear: Being a good corporate citizen benefits the bottom line. A good social and environmental impact strategy is a good business strategy.
Most leaders recognize that demands are increasing. According to KPMG’s 2023 CEO Outlook report, 69% of CEOs have embedded ESG into their business as a means of value creation. They also recognize that there is more work to do. 68% indicate that their current ESG progress is not yet strong enough to withstand the scrutiny of stakeholders and shareholders. But progress won’t continue if resources are not commensurate with the expected growth.
Now is the time to stay the course and double down on CSR & ESG practices. In a post-pandemic world, millennial and Gen Z employees flourish at companies whose values align with their own. And if they don’t align, those valuable employees will move on to companies where they do.
Companies must recognize that strategic and responsive purpose driven work is a key driver in their business’ ability to thrive. They must commit to making 2024 the Year of Impact.
Carolyn Berkowitz is president and CEO of the Association of Corporate Citizenship Professionals, a membership organization advancing the practice of corporate social impact.