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Skip to main contentThe problem: Most organizations are not prepared to face questions around how their social impact priorities align with commercial goals.
Why it matters: Stakeholders are increasingly evaluating organizations on ESG concerns, and ESG initiatives are a major factor driving strategic value and financial performance.
The solution: Incorporate social impact into corporate affairs by creating a Chief Impact Officer role or putting it under the purview of the Chief Communications Officer.
Economic uncertainty is usually anathema to a bank. But to Kimberley Goode it is an opportunity. Goode, Chief Communications and Social Impact Officer at BMO Financial Group, sees the current economic environment as an avenue to strengthen ties between the bank and the customers and communities it serves by staying true to its purpose.
“Stakeholder perceptions are shaped by how well organizations perform in good times and bad and by how they address environmental, social, and governance issues,” says Goode. “To earn trust, our actions, not just our words, need to reflect that.”
The pandemic and purpose movement fundamentally altered the corporate affairs function. Today, where an organization stands on certain political issues, how it is addressing climate change, and the diversity of its employees and leadership team is just as important—if not more so—than maintaining close relationships with investors and legislators, communicating financial performance, and advising on business strategy, says Peter McDermott, a senior client partner in the global corporate affairs and investor relations practice at Korn Ferry. “Having the right person leading this strategy will have commercial benefits, impact consumer behavior, employer branding and retention, and public and government perception of your organization,” says McDermott.
Where environmental, social impact, and governance issues were once of little import to corporate affairs, now they are major factors driving strategic value and financial performance. Goode says in industries like banking, where the products and services are all essentially similar, social impact can serve as a point of differentiation for organizations.
In fact, more and more organizations are integrating social impact into the corporate affairs function. Some, like McDonald’s and pharmaceutical company Indivior, are creating Global Chief Impact Officer roles that report directly to the CEO and sit above communications, investor relations, government affairs, and corporate affairs. Others, like BMO and Ralph Lauren, are adding responsibility for social impact to the ever-evolving chief communications officer role.
But those companies are in the minority. At most organizations no executive or function owns such reputational concerns. “They are organizational jump balls,” says Richard Marshall, global managing director of the Corporate Affairs and Investor Relations Center of Expertise at Korn Ferry. It’s new territory, and the issues are complex, so deciding how the organization should address them and who is accountable can be challenging. Yet, as Marshall notes, scrutiny of an organization’s social impact is only going to deepen, making it more critical than ever that organizations align their actions with what they say publicly. “The more forward leaning organizations, and the more progressive corporate affairs leaders are now filling that void and demonstrating the ‘value add’ it brings,” says Marshall.
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In August 2019, The Business Roundtable, with the endorsement of nearly 200 CEOs, redefined the purpose of a corporation to extend beyond profit generation to include improving society and meeting the needs of all stakeholders. The announcement not only acknowledged the shifting cultural expectations about how businesses should operate, but also gave the purpose movement credibility.
It also solidified the role of corporate affairs, particularly the chief communications officer, as a trusted advisor and strategic business partner to the CEO and senior leadership team. “It elevated the CCO to the C-suite inner circle,” says Korn Ferry’s McDermott.
To be sure, the role of the CCO in strategy has been growing steadily over the last decade. Ten years ago, corporate affairs executives were only expected to interpret the business to outside stakeholders. Now, they are expected to understand it and be a contributor to its growth. That means not only communicating what’s happening inside the company to stakeholders, but also reflecting what the outside world thinks and feels about the company to the leadership team to help influence business decisions, says Katie Ioanilli, Chief Global Impact and Communications Officer at Ralph Lauren.
The pandemic and purpose movement helped crystalize the need to link social impact to business strategy. Far from conflicting with financial goals, ESG initiatives are now primary drivers of them. Take Pfizer, for instance. The COVID-19 pandemic put the biopharmaceutical industry front-and-center, underscoring the link between research and development and public health in a way few people thought about before. “The pandemic required us to be more visible and more outspoken about fighting misinformation and educating the public on vaccine development and a new technology called mRNA,” says Sally Susman, Executive Vice President and Chief Corporate Affairs Officer at Pfizer. The response by Pfizer and others to the pandemic reminded the public of the value of scientific innovation—something not possible without a thriving biopharmaceutical industry. As Susman says of the link between impact and financial performance, “If biopharmaceutical companies want to dependably reward shareholders, they need to be doing the right things for patients, colleagues, and all stakeholders.”
The reverse is also true, however—organizations that dismiss ESG concerns risk financial and reputational damage. “One of my closest business partners has to be my chief financial officer,” says Ioanilli. “They have to understand how impact strategies create value for the company.” Part of the reason why organizations are integrating the responsibility for impact into the corporate affairs function is because it is one of the few areas that has insight across the entire enterprise and its stakeholders. The scope of areas corporate affairs oversees includes: corporate and business line communications, government relations, media relations, public affairs and policy, employee communications, consumer and community relations, philanthropy, and sometimes marketing and investor relations.
McDermott says the broad canvass gives corporate affairs executives a unique viewpoint on how social impact can be embedded into an organization’s actions to drive financial performance, regulatory change, consumer perception, and even talent recruitment and retention. “You need a holistic view of the organization in order for impact strategies to make a difference,” he says.
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One of the challenges with social impact is that it is such a hot area that everyone wants in on it. It isn’t hard to envision communications, public affairs, and investor relations all staking claim to an initiative around, say, net-zero carbon emissions.
To avoid such turf wars, Beth Fowler, a senior client partner in the global government affairs practice at Korn Ferry, says impact leaders need to act like political campaign coordinators, helping individual corporate affairs units tailor messages to their unique audiences and tying it all together for the benefit of the entire organization. “Each area has accountability for a different aspect of the overall narrative,” says Fowler. For instance, communications could message consumers and the media to enhance brand reputation around a net-zero initiative, while public affairs could target politicians and environmental activists and investor relations could appeal to institutional investors and shareholders.
Another important audience to target with social impact messages is the employee base. In fact, employees may be the most important audience, say Nina DeLorenzo, Chief Global Impact Officer at Indivior, a pharmaceutical company focused on treatments for substance use disorders and other serious mental illnesses. At a time when employees are leaving because of burnout or sheer frustration and managers are struggling to connect with their teams in a remote work environment, DeLorenzo says social impact initiatives can be a route to increasing engagement and attracting and retaining talent. She says part of the reason Indivior created the impact officer role was to advance its mission of not just treating people with opioid addiction and other illnesses, but also to help families and communities dealing with the disease. “What better way is there to get employees excited and engaged than for them to see the effect their work can have on the world beyond what they see in their day jobs,” DeLorenzo asks rhetorically.
In fact, that excitement and engagement is already happening in the corporate affairs function. Fowler notes that the rise of social impact is attracting new kinds of talent to the corporate affairs function. She says recent client searches have included candidates from media, political office, technology, academia, and more. She says leaders from non-traditional areas are looking to come into corporate affairs because they view the impact component as a career development opportunity. “The talent available is improving and growing,” says Fowler.
Still, talent with the ability to span such a broad purview is scarce, and demand for it is growing. Certain knowledge and skills beyond communications expertise are critical. An impact leader needs to have business acumen, a global perspective, knowledge of the legal, regulatory, and policy issues, and the ability to foster collaboration and build influence internally. They also need the ability to leverage data to build strategic communications plans and digital chops to get those messages out across channels and platforms and measure results.
Beyond those hard skills, BMO’s Goode says soft skills like curiosity, empathy, and optimism are critical to building enthusiasm for social impact. “The goal of social impact isn’t just to enhance an organization’s reputation,” says Goode. “It is to inspire others to make social impact a priority to create a better world for us all.”
For more information, contact Richard Marshall at richard.marshall@kornferry.com, Peter McDermott at peter.mcdermott@kornferry.com, and/or Beth Fowler at beth.fowler@kornferry.com.
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