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Sep 01, 2023

Should companies speak out on social issues? IROs give their take

We put the findings from IR Magazine’s new report on corporate social activism to wary IROs in the world of ‘woke’

Part of the rise of ESG in recent years has been an increasing demand for companies to engage in social issues. This is not just about a company being held accountable for its own internal performance on these matters; it’s also about the extent to which it is actively seeking to effect change in wider society.

In March, IR Magazine released its Corporate Social Activism report, which examines the extent and effects of how companies engage in social and political issues. The report looks at how important corporate engagement on issues of social concern is to both IROs and investors and whether this will have any effect on a company’s investment possibilities.

A key finding from the report is the support for companies’ involvement in social activism. When presented with the statement, ‘It is important for companies not just to show their corporate social responsibility but also to actively engage in effecting change’, three quarters of IROs agree while just 5 percent disagree. Investors also share this view, with 68 percent agreeing and 12 percent disagreeing.

Graham Stanley, vice president of IR at US healthcare company Henry Schein, is heartened that only a small percentage of IROs and investors disagree with this approach. ‘Social responsibility has been a cornerstone of our business philosophy, along with balancing priorities for our five main constituents: investors, employees, suppliers, customers and community,’ he says. ‘We believe that to be successful as a company, it is important to balance each of these.’

Friederike Edelmann, vice president of investor relations at Central Garden & Pet, agrees. ‘It is important that a company’s social and environmental activities are aligned with the business purpose and values, thus mitigating risk, enhancing reputation and contributing to the business results,’ she says. ‘By doing so, the company is actively engaging in driving change: as a result of its CSR efforts, employee engagement increases and the company leaves a green(er) footprint and sets a good example for others to follow.’

Core mission

While there is clear support for corporate social engagement, there is also support – to a lesser degree – for companies limiting their messaging to their core mission. Another finding in the report shows 45 percent of IROs and 49 percent of investors agree that ‘companies should focus on their core mission and only comment on issues that directly affect that mission’, while 22 percent of IROs and 21 percent of investors disagree.

At first it seems contradictory to have wide agreement both for the view that companies should speak out on social issues and also that they should speak only on issues that directly affect their core mission. But this signifies the extent to which IROs and investors view social engagement as vital to their company’s fundamental objectives.

‘I agree that companies should be strategic in their commitment to social and environmental issues, and should focus on those that are most directly related to their core mission and business,' says Héctor Wilson Tovar García, head economist at Colombian brokers Acciones & Valores.

‘But it is also important to recognize that there is a growing interconnection between social, environmental and economic issues and that companies can have a significant impact on these issues. Therefore, companies may find that a focus on CSR is critical to their long-term business and financial success, while also contributing to social and environmental well-being.’

Julia Vater Fernández, IR director at VTEX, sees a balance that needs to be struck. ‘Companies need to devote their attention to their core business, but they should also remain mindful of the impacts their operations may have on the environment and society,’ she points out. ‘Due to prevailing macroeconomic conditions, companies have had to redirect a proportion of their efforts toward their core business but, once we overcome these challenging times, I firmly believe the focus on ESG responsibility will gain significant momentum.’

Mike Wang, IR manager at Taiwan technology company Bizlink, favors a targeted and organic approach to social engagement. ‘It’s important when setting corporate sustainability goals not to set too many, but to be clear on what needs to be done in order to achieve these select few goals,’ he explains. ‘These goals should be just for the core mission and center on what makes the most sense for the company.

‘If the costs and effort needed outweigh the benefits, it will be an uphill battle; they should come naturally and be incorporated into the values and objectives of the company. Real corporate sustainability is not about ‘being woke’, virtue signaling or checking off lists.’

The ‘woke’ distraction

The term ‘woke’ has become popular in the past decade among young progressives to describe a worldview including the intersectionality of social justice, identity and privilege. To its detractors, it is a fashionable doctrine that creates an orthodoxy precluding any skepticism or dissent.

The problem with discussing wokeness is that it is a vague concept that means different things to different people, depending on whether they are for or against it. To be pro or anti-woke is more a display of cultural identity than anything else.

Even so, woke and anti-woke sentiments are having a clear impact on attitudes toward corporate social activism. The most notable recent example is Disney's criticism of Florida’s policy on the schooling of LGBTQ+ issues. This provided a test case for corporate pronouncements on social issues, with Governor Ron DeSantis describing Florida as the state ‘where woke goes to die’.

This has led to a conflation of wokeness with corporate social activism. One investor in the research for our report comments: ‘Companies are not tools for whims/trends/social pressures. Bowing to short-term pressures shows that a company’s management may not be truly focused on the long-term underlying mission of the business. It should be focused solely on providing a better product/service to create more value to the firm’s direct stakeholders (employees, customers, shareholders). If a company wants to effect social change, it should register as a charity.’

It is a legitimate concern if an investor thinks a company is engaging in social activism just to be trendy, although being able to adapt to current trends is something investors usually reward companies for. But while wokeness may be seen as mere whimsical fashion, the social issues underlying it are anything but.

Different battles

The IR Magazine Corporate Social Activism report covers not just the extent to which companies engage in social activism in general, but also their level of engagement in specific social issues. Some areas of social concern may be more central to a company’s core mission than others.

In the report we identify eight separate areas to examine the level of engagement by both IROs and investors: employment rights, environmental attitudes, general democratic rights, invasion/war/displacement of people, LGBTQ+ rights, public health, racial discrimination and women’s rights. 

IROs consider the most important issues for a company to have a stated position on to be employment rights, environmental attitudes, racial discrimination and women’s rights. More than four in five IROs consider these four areas to be important and a majority think a position on the first three to be very important.

But there are differences in how much impact these issues would have upon investment, with employment rights and environmental attitudes more likely to affect an investor’s decision than racial discrimination or women’s rights. 

Overall, seven in 10 investors say employment rights and environmental attitudes would affect their decision, compared with 45 percent saying the same for racial discrimination and just 42 percent for women’s rights.

García finds this disappointing. ‘While it is encouraging that a large majority of investors view employment rights and environmental attitudes as important, it is concerning that fewer investors value the importance of racial discrimination and women’s rights,’ he says. 

‘This may indicate a gap in understanding the interconnectedness of social issues or a lack of awareness of the importance of these issues for long-term business and financial success.

‘By proactively addressing these issues, companies can contribute not only to social and environmental well-being, but also to their own ability to attract and retain investors and customers over the long term.’

It is understandable that investors more easily view employment rights and environmental attitudes as central to a company’s core mission. Employment rights are fundamental to any organization's day-to-day operations and environmental attitudes are the inescapable E in ESG. It can further be expected that assessment of employment rights includes consideration of non-discrimination and diversity.

Stanley explains his company’s experience: ‘We typically have equal discussions with investors on diversity, equity and inclusion (DE&I) and environmental matters. Given the evolving landscape on environmental reporting standards, it is often harder to provide clear metrics on that. But DE&I is clearly an area shareholders do consider and can measure, particularly by the governance departments within investment firms.’

Beyond woke

The majority view of both investors and IR professionals is not just positive toward corporate social activism in general; it is also positive toward the importance of company engagement on the specific social issues. More than two thirds of IROs consider it important for companies to have a stated position on each of the eight issues we identify, while LGBTQ+ issues is the only area where a majority of investors did not agree on the importance of a corporate position.

Fernández sees a new landscape of social and economic interaction. ‘In my opinion, there has been a significant change in the world over the past five years concerning ESG considerations,’ she says. ‘Merely purchasing a green bond to offset the negative impact of one’s business is no longer sufficient. Investors are embracing a trend that is not exclusive to them.

‘Looking beyond this, it is evident that consumers are becoming increasingly mindful of brands that positively contribute to society. In this regard, everyone is becoming more aware, and I think this trend will continue to grow in importance in the future.’

Edelmann agrees. ‘CSR is here to stay – and enhancing a company’s CSR will impact your sales, employee motivation and carbon footprint, sometimes directly and sometimes indirectly,' she says. ‘It is important, though, to explain the connection and impact on the company’s mission.’

‘No two companies are the same: stakeholders, strategies, goals and operational environment will all vary,’ says Wang. ‘Corporate sustainability efforts will be different and the scope and degree of change will not be the same at any two firms. 

‘What is important is that companies should effect change in their own way and on their own timeline. This will lead to more meaningful and continuous change.’

This article is the result of discussions with IR Magazine’s research panel of IR professionals. If you wish to join the panel, please email with your full name and company.