INVESTING IN SOCIETY
INVESTINGIN SOCIETYInvesting in Society is the authoritative source toassess the corporate sector’s progress toward beingincreasingly purpose and stakeholder driven. CECP’sassessment combines rigorous analysis with research,trends, and cases from the ESG landscape, examined“ Investing inSociety providesa quantitativeand qualitativeexamination intothe current stateof corporatepurpose.”Kari Niedfeldt-Thomas,Managing Director, CECPthrough the lens of CECP’s engagements with morethan 200 of the world’s leading companies.Investing in Society organizes its insights as a companymight in its own scorecard: Priorities, Performance,People, Planet, and Policies (the five “Ps” framework).Investing in Society is the must-read digest for thestate of corporate purpose.
ABOUT CECP:CECP is a CEO-led coalition thatbelieves that a company’s socialstrategy—how it engages with keystakeholders including employees,communities, customers, andinvestors—determines companysuccess.Founded in 1999 by actor andphilanthropist Paul Newman andother business leaders to createa better world through business,CECP has grown to a movementof more than 200 of the world’slargest companies that represent 11.2 trillion in revenues, 23 billion in total communityinvestment, 14 million employees,30 million hours of employeeengagement, and 21 trillionin assets under management.CECP helps companies transformtheir social strategy by providingcustomized connections andnetworking, counsel and support,benchmarking and trends, andawareness building and recognition.For more information,visit cecp.co.Download additional copies of thisreport at cecp.co/iisWhen referencing findings from thisreport, please list the source as:Investing in Society.Copyright 2021 by CECPContact us: 1 212.825.1000or info@cecp.co
CONTENTSExecutive Letter. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2Priorities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3Performance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7People. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9Planet. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12Policies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13ESG Factor Analysis. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15NEW THIS YEAR:In keeping with past years’ framework, Priorities, Performance, People,Planet, and Policies (five “Ps”), this report adds a new assessment of thestate of corporate purpose. CECP conducted a Factor Analysis whichexplores the degree to which financial and ESG metrics are correlatedwith each other and explains changes within five “Ps” framework.You can download more information about CECP’s ESG Factor Analysishere. Turn to page 15 to read the full Factor Analysis.CECP INVESTING IN SOCIETY1
Dear Colleagues,CECP is pleased to share the 2021 edition of Investing in Society. This highly anticipated release highlights theissues that are top of mind for corporate leaders and their teams, and areas of consideration for companieslooking to the future. Unique in the industry, Investing in Society provides a quantitative and qualitativeexamination into the current state of corporate purpose. This year’s report analyzes the latest trends onenvironmental, social, and governance (ESG) metrics for companies in the Fortune 500 , summarizing thesefindings through three tools woven throughout Investing in Society: CECP’s ESG Factor Analysis, StakeholderScorecard, and CECP’s Thought Leadership and sector-wide literature review.Past editions of Investing in Society have demonstrated how companies have pivoted their strategies toaddress the needs of all stakeholders, including employees, customers, communities, suppliers, and investors. Inkeeping with past years’ framework, Priorities, Performance, People, Planet, and Policies (five “Ps”), this reportadds a new assessment of the state of corporate purpose. CECP conducted a Factor Analysis which explores thedegree to which financial and ESG metrics are correlated with each other and explains changes within five “Ps”framework. For instance, is the Percentage of Women in the Workforce a better predictor of social improvementor better corporate governance? Each section of the report will show the reader which metrics were groupedmore strongly into each ESG factor and will also provide an indicator of the corporate sector’s performance onthose factors overall. Your company can use these findings to explore which actions have more importance undereach ESG factor and may need more action and more public disclosure. The analysis showed that, particularly, thelack of disclosure on many social and governance metrics hinders a better understanding of the importance andcorrelation of those metrics with each ESG pillar.Corporate leaders can also support their internal ESG metrics review by referring to CECP’s StakeholderScorecard used throughout Investing in Society to benchmark their performance against peers in the Fortune500 ranking. World events from 2020, including, but certainly not limited to, a global pandemic derivedfrom the novel Coronavirus 2019 (Covid-19), racial justice movements throughout the U.S. and world, andan emotionally charged U.S. presidential election, have been deeply considered in this report, particularly inthe Priorities section. The understanding of such societal dynamics was supported by a series of actions CECPinstituted over the last year including weekly Pulse Surveys that addressed in real-time different world eventsand the corporate sector’s response to them; peer-to-peer conversations on the corporate response to Covid19; and a series of meetings on racial equity. This report is evidence that companies are taking the lead inrevitalizing and reenergizing society during this critical moment.We are confident that CECP’s research will contribute to integration and standardization of ESG metrics to helpcompanies address the needs of all key stakeholders. As always, we welcome your feedback for how to makeInvesting in Society better every year. CECP is proud to work alongside many of the companies highlightedwithin; we look forward to partnering with you as collectively we advance the state of corporate purpose.Sincerely,Kari Niedfeldt-ThomasManaging Director, Chief Executives for Corporate Purpose (CECP)CECP INVESTING IN SOCIETY2
PRIORITIESThis section refers to current corporate priorities. This year, elements of CECP’s Priorities section includedcorporate responses to Covid-19, recent developments in corporate purpose, and predictions about the nearfuture in the corporate sector. While there are few widespread data points that could potentially be used for aFactor Analysis, this aspect is no less important than those included in the Factor Analysis.CORPORATE PURPOSE DEFINING STAKEHOLDER CAPITALISMCEO leadership now and in the future is crucial given the current global pandemic that (at the time of writing)has taken the lives of over two million people worldwide and has caused a global recession. Particularly in theU.S., CEOs have stepped in to fill a leadership vacuum during recent political turmoil in the aftermath of a highlydisputed presidential election, and in the context of much more needed social justice and racial equity. Here are fivepriorities for corporate purpose leadership in 2021.1. COMMUNICATINGWITH A DIVIDED NATION,GOVERNMENT, ANDWORKFORCE:The current health crisis has shownthat we are not necessarilyall in this together. The currentpandemic has exacerbated someof the preexisting economicdisparities and made evenmore visible previous politicaldifferences. However, thecorporate sector can act as acatalyzer to help propagateempathy and listening betweenopposing groups.2. ADAPTABILITY ANDINNOVATION:The current pandemic has made itclear that not all sectors were readyto respond to a changing climate.The corporate sector is definitelyleading the way to help bring societyto a new normal by adjusting workfrom home policies, upgradingtechnology, and particularly, cuttinginnovation time from years tomonths.3. EMPLOYEE WELL-BEING:Taking care of employees starts atthe top of corporate leadership.CEOs’ role in providing safetyfor employees, especially in thecurrent context, is more importantChief Executives for Corporate Purpose, Pulse Survey, August 2020. Topic: Focus of company’s corporate responsibility strategy,field dates: Sept 1 - Sept 9, 2020than ever. Supply chain, essentialand front-line workers wereespecially at risk when theCovid-19 pandemic started.Fifty-four percent of companieshave had at least some changesin how they work in the areas offuture of work/reskilling/upskillingof employees as a response ofCovid-19 (Source: CECP PulseSurvey, August 2020).4. FOCUS (WHERE EQUITY ISTHE STANDARD):We saw companies support voting,make statements condemningracism, and care for communitiesstruggling with Covid-19. Ascompanies reflect on their role inadvocacy, they will find efficiencies,as they always do. They will identifytheir niche, their market.5. TRACKING ESG RESILIENCE:According to the 2020 EdelmanTrust Barometer, “social” is themost important ESG priority forinvestors, including a healthycorporate culture. Our collectivegoal is to extend the capital timeframe, or as Rebecca Hendersonsays, “re-wire the capital markets”.We see growing evidence thatcorporate responsibility andinvestor relations (IR) are workingtogether.CECP INVESTING IN SOCIETY3
EMBRACING CORPORATE PURPOSELEADING COMPANIES HOLDPURPOSE AT THE CORE OFTHEIR STRATEGYCECP’s CEO Investor Forum’sreport The Return on Purpose:Before and During a Crisis,clearly illustrates why leadingcompanies hold purpose at thecore of their strategy. Financialperformance between highpurpose and low-purpose brandswidened during Covid-19. Thepurpose score gap betweentop- and bottom-quartile totalshareholder-return-performersincreased during the pandemic.Companies with the best purposescores generally moved up andinto the top quartile of totalshareholder return performance,suggesting that the capitalmarkets expected companies withstronger corporate purpose tomaintain a stronger connection totheir consumers and deliver moreresilient financial performance.BLACKROCK CEO LARRYFINK’S 2020 LETTERBlackRock CEO Larry Fink onceagain reinforced through his letterin 2020 to company executivesthe importance of embracing astrong sense of purpose and acommitment to stakeholders,which help companies connectmore deeply to its customers andadjust to the changing demands ofsociety: “Ultimately, purpose is theengine of long-term profitability”.In this sense, there is an increasingset of conceptual frameworks toguide businesses and lawmakerstoward policies and practices thatshould help corporate “profitablysolve the problems of people andplanet,” and prevent companiesfrom doing harm.CORPORATE PURPOSESTATEMENTS ARECONTINUOUSLY EVOLVINGCorporate purpose statementsare continuously evolving.Sixty-two percent of companieshave changed their corporatepurpose statement in the lastfive years (Source: CECP PulseSurvey, July, 2020). However,as reflected in McKinsey’sOrganizational Purpose Survey,a corporate purpose gap formswhen there is disconnect betweenpublic perceptions of business andits potential for good, or whenthere is a disconnect betweenemployees’ desire for meaning atwork versus what they experience.This corporate purpose gap isalso reflected in the fact that“contributing to society” and“creating meaningful work,” thetop two priorities of employees,are the focus of just 21% and11% of purpose statements,respectively.Chief Executives for Corporate Purpose, Pulse Survey, August 2020. Topic: Changes in corporate purpose statements,field date: July, 2020Chief Executives for Corporate Purpose, Pulse Survey, August 2020. Topic: Budget changes due to COVID-19 response, field dates:April - May, 2020CECP INVESTING IN SOCIETY4
COVID-19 HAS DISRUPTED CORPORATE PRIORITIES AND CHANGES AREHERE TO STAYCOVID-19 IMPACTEDCORPORATE BUDGETS IN 2020AND 2021Covid-19 hit corporatebudgets in 2020 and 2021:47% of companies stated theircommunity investment budgetincreased in 2020 due toCovid-19 response. Subsequently,18% of companies predicted theircommunity investment budgetswould increase in 2021 (Source:CECP Pulse Survey, April-May,2020). Corporate purposeprograms rapidly adapted toCovid-19 by responding to theneeds of community partnersquickly through grantmaking andemployee donations.COMPANIES MAINTAINEDCOMMUNITY INVESTMENTBUDGETSCompanies maintained communityinvestment budgets, increasedengagement from employeesin the form of more corporatematches, increase in virtualvolunteering, and evolved thinkingon issue areas of focus such asfood security.ADMINISTRATIVE PROCESSESAND CORPORATEINFRASTRUCTURE ADJUSTEDAS WELLAdministrative processes andcorporate infrastructure alsohad to adjust to the new reality:only 22% of companies plannedto return to in-person work in2020, 34% had a timeline toreturn to work in 2021, whereas44% were undecided (Source:CECP Pulse Survey, October,2020). Eighty-five percent ofcompanies reported they hadunique Covid-19 response efforts,such as altering manufacturing toproduce hand sanitizer, howeveronly 54% were able to measurethem (Source Pulse Survey,May 2020).work,” the top twopriorities of employees, are thefocus of just 21% and 11% ofpurpose statements, respectively.Chief Executives for Corporate Purpose, Pulse Survey, April 2020. Topic: Predicting Changes to their 2021 CommunityInvestment Budget due to COVID-19, field dates: Oct 14 - Oct 20, 2020Chief Executives for Corporate Purpose, Pulse Survey, October 2020. Topic: Return to work, field dates: Oct 14 - Oct 20, 2020CECP INVESTING IN SOCIETY5
PURPOSE CONTINUES DRIVING BRAND/CUSTOMER RESULTSCUSTOMERS EXPECT BRANDSTO MAKE A PROFIT ANDIMPACT SOCIETYThe Edelman Trust Barometer2020 shows that customersexpect brands to act: the percentof belief-driven buyers increasedfrom 2017 to 2019. These typesof buyers believe that brands canbe a powerful force for changeand choose brands based on theirstand on societal issues.is being honest when it takesa stand. Moreover, corporatepurpose, as a force for good,has a positive effect on demand,loyalty, consumer advocacy,price premium, strategic clarity,innovation, effect of diversity,brand reputation, and growth.GEN Z BELIEVES COMPANIESMUST ACTMore granularly, 90% percentof Gen Zers believe companiesmust act to help social andenvironmental issues and 75% willdo research to see if a companyCECP’s Giving in Numbers: 2020Edition shows that companiesknow how important it is tomeasure the business value ofcommunity investments throughemployee and brand/customermetrics: 4 out of 10 companies didCOMPANIES KNOW HOWIMPORTANT IT IS TO MEASURETHE BUSINESS VALUE OFCOMMUNITY INVESTMENTSso in 2019. This is slightly up fromprevious year, especially for brand/customer metrics (33% in 2018).The business value of brands havinga well understood “Purpose” hasrevealed a strong business benefitto such purposeful brands and theircompanies, as consumers arefour to six times more likely tobuy from, trust, champion, anddefend companies with a strongpurpose. Purposeful brands growtwice as fast as their competition.Over a period of 12 years, thebrands with high perceived positiveimpact have a brand value growthof 175%, versus 86% for mediumpositive impact and 70% for lowpositive impact.CECP INVESTING IN SOCIETY6
PERFORMANCEPerformance factor: CECP’s ESG Factor Analysis showed that variables associated with financial performanceand economic distribution, had a very high correlation with each other and grouped into a common underlyingfactor. Although financial metrics were included in the calculation of the Factor Analysis, the main analysiscentered on Planet, People, and Policies.CECP’s Stakeholder Scorecard showed that companies in the Fortune 500 ranking had very mixed financialperformance when comparing fiscal year 2017 and 2019. During that timeframe, Revenue and EBITDAincreased, however, Market Capitalization decreased.THE ROLE OF STAKEHOLDER CAPITALISM IN LONG-TERM THINKINGSource: Bloomberg TerminalWorld Economic Forum, Measuring Stakeholder Capitalism: Towards Common Metrics and Consistent Reporting of Sustainable Value Creation, 2020CECP INVESTING IN SOCIETY7
Chief Executives for Corporate Purpose. 2020 Global Impact at Scale: Corporate Action on ESG Issues and Social InvestmentsESG AND THE EARNINGS CALLThe interconnection betweenfinancial performance and ESGprioritization may be more clearlyevidenced in the long-term. CECP’sCEO Investor Forum’s report, ESGand the Earnings Call, sets outpractical recommendations forcorporates to embed ESG contentinto earnings call discussions.The recommendations sit inthree broad categories: using theearnings call schedule; operationalprocess approaches to developrelevant ESG content; andnarratives and metrics to disclose.The paper surveys the literatureon short-term concerns and therise of ESG into the capital marketsmainstream. It also connectsCECP’s work on long-termdisclosure to the shorter-termaccountability environment offeredby the quarterly call.THE IMPORTANCE OFPROSPERITY AND EQUITYProsperity is recognized by theSDGs and the World EconomicForum (WEF) as a critical area ofimportance. The importance ofimproving financial performancein the corporate sector goes inhand with having a more equitableand prosperous society. Longterm value creation is critical forbusiness performance, competitiveadvantage, mitigating risk,and strengthening stakeholderrelationships. Even when thereis not yet a direct link betweenachieving the SDGs and financialperformance, stakeholders haveindicated that reporting on thesemetrics is important for sustainablevalue creation.GLOBAL IMPACT AT SCALECECP’s 2020 report, GlobalImpact at Scale, found that theunprecedented global health crisisof the Covid-19 pandemic hasmade social inequalities starker,in turn increasing the urgencyand relevance of the SDGs.Global companies prioritizingthe use of SDGs are on the rise bymore than 20% compared to theprevious year.LONG-TERM IMPLICATIONSOF COVIDAs organizations address thelonger-term implicationsof Covid-19, it is imperativeto focus on the needs of allstakeholders—from customersto suppliers to shareholders and,specifically, employees—to ensureno one is left behind.CECP’s CEO Investor Forum (CIF), NYU Stern School of Business, Center for Sustainable Business.ESG and the Earnings Call. Communicating Sustainable Value Creation Quarter by Quarter, 2020CECP INVESTING IN SOCIETY8
PEOPLEPeople factor: CECP’s ESG Factor Analysis showed 45% of companies in fiscal year 2019 had Factor Scoresgreater than zero for the People factor. In other words, these companies’ values showed greater weight andcorrelation with diversity, as opposed to companies with Factor Scores less than zero.CECP’s Stakeholder Scorecard showed that companies in the Fortune 500 ranking had substantial improvementin social and workforce investments between 2017 and 2019. Both Giving in Numbers’ Total CommunityInvestment and Bloomberg’s Community Spending figures have increased
Investing in Society organizes its insights as a company might in its own scorecard: Priorities, Performance, People, Planet, and Policies (the five “Ps” framework). Investing in Society is
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