Despite the increased demand for purpose-led businesses, many corporate leaders continue to miss the mark on how to embed purpose into their organizations’ DNA. They’ve learned how to say the right things; they have been less effective at actually co-creating a better society. It may be tempting for a corporation to slap a statement of purpose on its website without transforming its business practices, but employees and customers are increasingly holding companies accountable for not following through. Big-ticket charitable donations for Black Lives Matter or encouraging employees to volunteer in their local community may make for feel-good headlines, but without deeper change they risk being derided as tokenistic marketing ploys – as was the case with a Pepsi ad pulled for co-opting the BLM protest movement.

To uncover why many companies are failing to embed social purpose into their business, we have to unpack the foundational systems used to do business, so much of which in North America is built on an economic system founded on slavery. In many ways, 21st-century business models echo the slave practices of generations past – so much so that we now call the worst corporate practices in distribution warehouses, on fishing vessels, in cocoa plantations and in sweatshops “modern slavery.”

The most striking parallel between slavery and contemporary business management can be found in the “task idea,” which 19th-century management pioneer Frederick Winslow Taylor described as “the most prominent single element in modern scientific management.” The task system is closely identified with Henry Laurence Gantt. Born to a slave-owning family in Maryland, Gantt developed a “task and bonus system,” which paired a flat task and a time wage with bonuses for overwork. It has a much longer history beyond Gantt and Taylor, and was one of the principal methods of organizing labour under slavery.

Management tools can separate us from our humanity.

—Caitlin Rosenthal, author, Accounting for Slavery

Contemporary business leaders are still trained to see “bonuses” as an essential management tool to reward overtime. The concept has been entrenched in our work culture across industries and has rarely been called into question. In the apparel industry, for instance, the concept typically drives the use of “piece rates,” where workers are often paid less than the legal minimum wage to try to meet gruelling production targets.

In addition to his task and bonus system, Gantt also developed a horizontal bar chart to track every worker’s progress for the day. The Gantt chart is still a popular scheduling tool, though business textbooks rarely highlight the slavery-era roots of these management systems.

“Our management tools can separate us from our humanity,” Caitlin Rosenthal told the Harvard Business Review. Rosenthal, a professor at the University of California, Berkeley, and the author of Accounting for Slavery: Masters and Management, studied account books from American plantations and found that slave owners developed management tools that are still in use today, including depreciation and standardized efficiency metrics – tools that “help maximize the value and the surveillance of human capital.”

“If you want to use those metrics for different purposes, then it’s going to be a difficult job,” Rosenthal added, calling it an “uphill battle to turn metrics produced to reveal profit into something that can help us to be more humane.”

Perhaps, then, we shouldn’t be surprised that today’s corporations are struggling to add social purpose on top of existing structures. That wasn’t the purpose of the modern corporation – companies aren’t built to be socially driven.

Fishing for change

In an era where employees and customers expect more from businesses, it may be time to reconsider how we incentivize labour. Giving employees an opportunity to make a difference at work, providing a platform that allows each employee to express their individual capability, and ensuring a collaborative environment to achieve more than each employee could do on their own are all things today’s business leaders must now see as a core element of their management strategy. Combining compassion with accountability can go a long way to creating a psychologically safe workplace and motivating teams.

Instead of a bonus program based on efficiency or overwork, how about a profit-sharing or stock-option plan? That was the thought process of Eileen Fisher, a pioneering designer who responded to an emerging contemporary feminist sensibility that demanded easy-to-wear professional clothing. In the 1980s, Fisher started a clothing company that shared her name, and as her success grew, she thought about what would happen to her company after she retired. At first, selling seemed like the best option. She tested out the viability of an IPO: “I remember being up on stage and looking out at a roomful of men in suits – no women wearing my clothes, no conversation about clothes. It was all about the numbers. It was really just about the money,” she told CNN last year.

Knowing that investor-controlled, capital-focused companies hinder leaders’ efforts to adapt to a world of finite resources and growing inequality, Fisher decided to sell shares to employees instead of going public, and today 40% of the company is held by its employee stock ownership plan (ESOP). Her decision allowed her to keep her company’s actions aligned to its purpose. Eileen Fisher was also one of the first clothing companies to offset 100% of its carbon footprint, and it’s become a pioneer in advancing localized, sustainable production.

In a world that is dynamic and hyper-connected, and where companies are being held accountable not only for outputs but, more importantly, how those outputs are achieved, are organizational charts still relevant? Employees often have hybrid responsibilities that make it difficult to categorize them on an organization chart. Shifting a business’s structure toward one that drives profit through purpose is an evolution that will require fundamental operating and cultural changes, and it’s a difficult first step to navigate.

Purpose-driven companies are thriving

One of North America’s original purpose-driven companies, Dr Bronner’s, has become a leader in the personal care industry, with more than US$120 million in sales annually, by staying true to its original mission of serving people and the planet. In Honor Thy Label, a book released earlier this year, the company’s vice-president of special operations, Gero Leson, details the challenges of building – and ethically scaling – organic, fair trade and, most recently, “regenerative organic certified” agricultural supply chains across the Global South when those supply chains did not yet exist. The company motto of “all-one!” has permeated its business model in which social responsibility and environmental consciousness serve as uncompromising components of corporate structure, both in its global supply chains and at home in California. In a country where the median CEO-to-worker pay ratio exceeds 300 to 1, Dr. Bronner’s capped CEO salaries at five times that of their lowest-paid workers, who make a minimum wage of $18.71 an hour in a state where the minimum wage is $14.

You can call almost anything ‘purpose-aligned.’ We [prefer] ‘purpose-driving.’

-Maureen Young, director, Coast Capital Savings, Social Purpose Office

In Canada, where B.C.’s Coast Capital Savings is expanding its footprint, the credit union is leaning into social purpose, placing it firmly at the centre of its business strategy as it grows into a national organization. On top of the 10% in profits that Coast Capital Savings already invests into its communities, it’s applying a purpose lens to everyday business decisions, putting programs, initiatives and products into three categories: purpose driving (helping to advance the social-purpose economy), purpose neutral and purpose contra (or detracting from their mission).

“We initially used ‘purpose aligned’ as opposed to ‘purpose driving’ and quickly realized it was a weasel word,” says Maureen Young, director of Coast Capital Savings’ Social Purpose Office. “You could call almost anything purpose aligned. We eventually landed on purpose driving – placing an emphasis on maximizing purpose-driving actions and surfacing purpose contra and addressing them quickly.”

Corporate leaders that do the hard work of tying social purpose to all aspects of business with committed leadership and financial investment have generated sustained results, stayed relevant in a rapidly changing world, and deepened ties with stakeholders. The 2018 Global Leadership Forecast found that firms without a sense of purpose underperform the market by 40%, while purpose-driven companies outperform the stock market by 42%.

The future is tenuous but also ripe with opportunity for those who understand the need to truly connect with stakeholder expectations and are not afraid to turn business-as-usual on its head to create a human-centred economy. This may now seem like an option, but soon it will be the only way forward.

Shilpa Tiwari is executive vice-president of social impact and sustainability at Citizen Relations and the founder of Her Climb.

The post Are companies with purpose-driven pledges accounting for slavery? appeared first on Corporate Knights.

That new reality is evident in the business world’s response to the snowballing Black Lives Matter movement. Polling indicated that most Americans were opposed to BLM when it started taking hold in 2013. But in the weeks following the police killing of George Floyd in Minneapolis in May, BLM supporters had come to outweigh opponents by 28 percentage points, according to a survey by Civiqs, an online research firm.

Business reaction has hardened from feel-good statements against racism to more tangible measures with a longer-lasting impact. Netflix has promised to earmark 2% of its cash holdings – up to US$100 million – for banks to “directly support Black communities in the US.” That’s in addition to the US$120 million that Netflix CEO Reed Hastings donated to historically Black colleges and universities two weeks prior. Netflix has also added a Black Lives Matter genre to its lineup, celebrating the work of Black artists and Black history.

The power of social media has undoubtedly played a key role in shaping the response. Three of the United States’ biggest retailers – Walmart, Walgreens and CVS – said they would no longer display African-American beauty products behind locked glass after Twitter lit up with images of juxtaposed photos: one of easily accessible generic beauty products, the other of locked-away items aimed mainly at Black customers. One month later, Walmart also committed US$100 million over five years to create a new centre on racial equity.

Several companies have set specific targets for broader representation in their senior ranks.

Google, for example, has pledged to boost its leadership diversity by 30% within the next five years, in addition to pledging US$175 million to Black businesses and start-ups.

There is still a long way to go. While Black people make up about 13% of the U.S. population, they hold just 3.2% of executive and senior management positions and fewer than 1% of Fortune 500 CEO spots, according to the Center for Talent Innovation. Corporate Knights found that less than 1% of corporate leaders at TSX 60 companies are Black.

Zero

Yes, it is possible to go from Hero to Zero in a few short months. Just ask the workers at Walmart, Loblaws – Canada’s biggest supermarket chain – and the U.K.’s Tesco and Marks & Spencer, among others.

As the COVID-19 pandemic broke in early spring, food retailers lauded the contribution of cashiers, shelf-stackers and warehouse staff by jacking up their pay and benefits as compensation for the risks they were taking to get food to our tables. The typical raise was 10 to 15%, or about two dollars an hour.

Alas, Hero Pay did not last long.

By June, most of the companies had rolled back the increases. Loblaws chairman Galen Weston justified cancelling the “temporary pay premium” on the grounds that “things have now stabilized in our supermarkets and drugstores. After extending the premium multiple times, we are confident our colleagues are operating safely and effectively in a new normal.”

Some employers sought to soften the blow with other benefits. Loblaws added a one-time $160 bonus to workers’ July pay, pro-rated to a 40-hour work week. Walmart offered extra counselling services and higher staff discounts on purchases.

Not surprisingly, the workers, many of them at the bottom of the pay scale, are nonplussed. “The pandemic is not over,” noted Jerry Dias, the president of Unifor, Canada’s biggest private-sector union. “The danger has not passed. These workers are no less at risk and are no less essential today than they were yesterday.”

It’s not as if the employers could no longer afford to be generous. Empire Co., the Canadian group behind the Sobeys, FreshCo and Safeway chains, hiked its dividend less than a week after chopping its Hero Pay program. The company reported a 47% jump in net earnings for the quarter ended August 1.

Two dollars an hour may not be a huge amount of money – either for those giving or receiving it. But the extra wages did signal respect and appreciation for a group of workers who enjoy few other perks of corporate life and have exposed themselves to greater risks than most others outside the healthcare sector.

This was a perfect opportunity to narrow the widening gap in pay between those at the top and the bottom of the corporate ladder. Too bad that the grocers weren’t heroes for long.

The post Heroes & Zeros: Black Lives Matter vs. Loblaws appeared first on Corporate Knights.

Until recently, that’s how many may have imagined anti-Black racism in business: isolated acts of discrimination performed by a prejudiced few. But the death of George Floyd – an unarmed 46-year-old Black man killed by a Minneapolis police officer onMay 25 – and the widespread protests that have erupted globally in response are forcing Canada’s business community to rethink racism.

In the weeks since Floyd’s death, businesses around the world have been scrambling to make diversity pledges. On June 8, the Financial Times reported that major corporations had recently donated more than $450 million to American civil rights groups. Last month, the Business Council of Canada had over 130 CEOs sign a statement denouncing all forms of racism. But anti-racism advocates say corporations will need to go beyond words and donations, particularly since research reveals that systemic racism in offices and executive suites isn’t a deviation from the norm – it is the norm.

A study to be released next month by Ryerson University’s Diversity Institute analyzed the diversity of companies in Vancouver, Montreal, Calgary and Toronto in 2019. Of 1,639 board members from 178 corporations, they found only 13 Black board members (0.79%), while white members held 1,483 spots (91%), and other racialized members held 61 spots (the institute was unable to classify some members). To put that in context, almost a tenth of Toronto is Black, while Black people make up 3.5% of Canada’s population, according to the most recent census.

Corporate Knights did its own count. After analyzing S&P/TSX 60 companies, we found that only six of the 799 senior executives and only four of the 686 board members at all 60 companies were Black. That’s less than 1%.

How Canadian companies are responding

Corporate Knights reached out to S&P/TSX 60 companies for comment. Of the 60 firms, the only companies that had Black leaders in their boardrooms or showcased on their websites’ leadership pages at the executive level were CIBC, CP Rail, Brookfield Asset Management, CGI Inc., TD Bank, Emera Inc. and Enbridge. (Corporate Knights restricted its executive count to those featured on companies’ leadership webpages. For example, two of Gildan’s VPs are Black but were excluded from our count because of this criteria.)

Of the companies that had no Black representation at the board or executive level, Restaurant Brands International (RBI) – which owns such companies as Tim Hortons and Burger King – acknowledged that change was needed. “We absolutely agree that we need more gender and racial diversity within our board and leadership teams,” said an RBI representative. To ensure there is “a permanent diversity shift that permeates our culture,”this week RBI’s CEO, José Cil, committed to ensuring that at least 50% of final-round candidates interviewing for roles at RBI offices will be from “demonstrably diverse backgrounds, including race.”

Suncor says it’s reviewing its inclusion and diversity strategy, which currently focuses on women, Indigenous peoples and the LGBT+ community, to ensure a more active involvement of Black and racialized communities.

A number of companies said that they have established diversity and inclusion (DC&I) councils, including Canadian Tire, Bell, BMO, Bausch Health, Agnico Eagle, Telus and Magna International. Magna stated that its DC&I council is “aligning with our talent review process to ensure we have broader visibility and opportunity to increase our diversity in leadership roles.”

Some corporations also highlighted their financial support for the cause: BMO donated $1 million to a number of social and racial justice groups while Canadian Tire donated $800,000 to various Black organizations. Canopy Growth noted it has been a longtime supporter of Cage-Free Cannabis (which provides legal services to communities of colour that have been disproportionately harmed by the war on drugs).

Canopy Growth says it’s also “rolling out a number of D&I [diversity and inclusion] initiatives, including benchmarking diversity and publicly reporting on our progress.”

Fortis Inc. said that while there are no Black executives in its holding company, several of its subsidiaries have Black executives and directors. Notably, FortisTCI recently appointed Ruth Forbes, a Black woman and current VP of corporate services, as its incoming president and CEO.

Teck Resources said that it considers diversity in the selection criteria for new board members and senior management team appointments and that “4 out of 12, or 33%, of directors on Teck’s board are visible minorities.”

Telus and Loblaw have both stated that 18% of their executives identify as “visible minorities”. Like most companies%, Loblaw acknowledged that it didn’t “break those numbers down further.”

Telus, which has been named one of the Best Diversity Employers in Canada by Mediacorp nearly a dozen times, told Corporate Knights, “We are committed to increasing the presence of underrepresented groups across key areas of our organization, including our Board.” Telus shared no specific targets.

Push for concrete corporate commitments

Wes Hall, executive chairman of Kingsdale Advisors, finds Corporate Knights’ TSX 60 data unsurprising. “We live those numbers every day,” he says. “We’re not shocked by them.”

Though Hall says he has seen companies increase diversity when they set their minds to it, drawing a parallel to the recent corporate push for gender diversity at the board level. “All of a sudden last year, every single company on the TSX 60 has a woman on their board, right? Because they put their mind to it. But where were the women before? They were stuck in middle management, they were stuck at that glass ceiling, looking up.”

On June 10, Hall formed the Canadian Council of Business Leaders Against Anti-Black Systemic Racism. The council’s membership is a who’s who of Canadian business, including CIBC CEO Victor Dodig, Cisco Canada president and CEO Rola Dagher, and Fairfax Financial Holdings CEO and chair Prem Watsa. It aims to ensure that businesses deliver on promises they’ve made to fight systemic racism and support the Black community.

The council’s BlackNorth Initiative, which will hold a summit on July 20, is urging CEOs to sign a pledge to remove systemic anti-Black barriers. Commitments include earmarking 3% of corporate donations and sponsorships to create economic opportunities in the Black community, ensuring that at least 3.5% of executives and board roles based in Canada are held by Black leaders, and hiring at least 5% of our student workforce from the Black community, all by 2025.

“We need to be uncomfortable and embrace the challenge to grow,” says BlackNorth Initiative co-chair Dagher. “It is absolutely time for us to stand up . . . A statement without a commitment is not anything at all.”

Broadening the recruitment pool 

While businesses are being called out for fumbling on diversity, public boards are making progress. Ryerson’s Diversity Institute says government-appointed boards – like those on publicly owned energy utilities, public transportation agencies and cultural institutions – boasted 63 Black board members out of a total 2,684 (2.35%). While the percentage is still small, it’s almost three times that of corporate boards.

That jump in diversity could be key to colour-correcting corporate Canada. Wendy Cukier, director of the Diversity Institute, says corporations often overlook talent found in public boards. She noted that non-profit boards often recruit candidates with corporate experience – but it’s not a two-way street. “There are lots of racialized people – and specifically Black people – who are lawyers, accountants and IT specialists that represent community organizations and could make significant contributions to corporate boards,” she says.

A study by Stacey R. Fitzsimmons, associate professor of international management at the University of Victoria, observed how often hiring happened through informal networks: 73% of Canadian board members reported that the most common method used to recruit board members involved recommendations by existing directors. Cukier says informal networks like these consist mainly of people with similar backgrounds, thus excluding qualified, diverse candidates.

“People tend to associate with people just like them, who belong to the same golf clubs,” says Cukier. Case in point: a 2014 study published by the Public Religion Research Institute, which found that 75% of white people in the U.S. have completely Caucasian social networks.

Some companies are now vowing to address this bias by changing how they hire. RBI reps say the company has “updated our search criteria for all senior positions to urge our recruiters to increase the diversity of candidates being forwarded,” adding that a steering committee of senior leaders is heading up its diversity and inclusion efforts.

Cukier says moves like this encourage budding Black leaders to envision themselves in leadership roles, which affects their aspirations and their access to mentorship.

The rewards of cultivating diverse leadership are well documented: a study by the management consultant firm McKinsey found that companies with more gender- or racially diverse executives were 33% more likely to have above-average profits. Those with diverse boards were 43% more likely to see above-average profits. Inclusively staffed companies enjoy broader talent pools, the ability to respond to a diverse set of markets, and reduced legal and reputational risk, researchers say.

But even when Black Canadians break into the boardroom, they still brave racism both overt and covert. Scarborough-Guildwood MPP Mitzie Hunter described how, after giving a speech for the Toronto-based technology incubator she was then the CEO of, a man told her she was the most “articulate Black person” he had ever heard.

“I’m pretty sure he thought he was giving me the highest compliment,” says Hunter. “Right in that moment, I stopped being the CEO . . . on a big stage representing my organization, and I became almost a little girl because of his words.”

Hunter says such comments can leave Black people feeling undermined and exhausted.

“That’s a waste,” says Hunter. “Your energy and your creativity and your talent and your thoughts and your ideas should be going into solving challenging problems that you’re there to do, rather than guarding yourself against this type of aggression.”

It’s also a wasted opportunity to reduce risk and group-think, says Cisco Canada’s Dagher, who fled Lebanon as a child.“You don’t want to hire people that look like you, that speak like you, that think like you; you want to hire people that can challenge you,” she says.

Regulating diversity 

Some diversity advocates question whether the recent corporate pledges can translate into real change. Canadian Senator Ratna Omidvar says that, while the recent response from corporations is encouraging, lasting change comes from regulation.

“What we have to rely on, then, is the law. It is the law that changes behaviours,” she says.

When it comes to long-standing efforts to improve gender diversity on boards, Senator Omidvar’s statement is largely backed up by empirical evidence, which shows that the countries that have made meaningful progress in increasing the number of women on boards all have legal targets or quotas driving that progress.

Canada’s legal system has only recently begun supporting corporate diversity. Introduced by Navdeep Bains, Minister of Innovation, Science and Economic Development, Bill C-25 makes companies disclose or explain why they’re not creating plans to increase the number of women, racialized people, persons with disabilities and Indigenous citizens they hire in senior management and board positions. As of January 1, 2020, this applies to federally incorporated companies such as airlines and banks.

A growing number of companies, including Calgary-headquartered Cenovus Energy, now have formal board diversity targets. Cenovus says it has “an aspirational target to have at least 40% of independent directors be represented by women, Aboriginal peoples, persons with disabilities and members of visible minorities.”

Omidvar hoped that Bill C-25 would make such targets mandatory, but her amendment to the bill making this so was not approved by Parliament.

“I’d describe the government’s legislation as a tap on the shoulder of business to do the right thing, whereas I would have preferred a nudge,” Omidvar says.

The post How to colour-correct corporate Canada’s diversity problem appeared first on Corporate Knights.

Data released by the U.S. Centers for Disease Control and Prevention show that nearly one-third of COVID-19 patients are black, even though they make up just 13% of the U.S. population. Numbers are similar for COVID-19 death rates. This pattern is true across nearly all jurisdictions that collect data.

In Canada, we don’t collect race-based data, but the information we have indicates a similar trend. People in North Montreal, the lowest-income neighbourhood in the Montreal Metropolitan Area, are falling ill and dying in greater per-capita numbers than in other neighbourhoods. Stats from Toronto Public Health show higher infection rates in areas with greater proportions of low-income people or newcomers.

Like climate change, COVID-19 is a threat-multiplier. Both crises compound and highlight existing inequities. As early as 2009, Scientific American pointed out that climate change will impact the poor most. Those who’ve had the smallest role in creating carbon emissions will pay the greatest price.

These days, there’s much talk about stimulus and recovery investments that could help us build back better, putting us in a stronger position to weather future shocks and crises. These are crucial discussions, but they must address equity.

Recent Anstice polling shows that we’re more compassionate and caring right now. People generally want others to be safe, have food, be able to pay their rent and have a chance to thrive in the future.

Even before the pandemic, an Abacus Data survey showed that Canadians are more supportive of climate and energy transition policies if policymakers demonstrate that they’ve thought about equity and included measures to ensure people who have been more marginalized aren’t negatively impacted by these policies.

And in a recent Ipsos public opinion poll, 61% of Canadians expressed that in the economic recovery from COVID-19, it’s important that government actions prioritize climate change.

Taken together, these polls suggest a path forward. If values have shifted toward care and compassion and away from consumerism, and if people in Canada are more supportive of energy transition policies and investments, then now is the time to advance policy and investments that address equity and reduce climate risk while creating more just, inclusive communities.

There are reasons to be hopeful.

The Canadian Urban Sustainability Practitioners have a new tool that explores energy poverty.  It shows that in my community, Vancouver, visible minority households are twice as likely to experience energy poverty. Often inequities are hidden, but if we can see them, we can begin to address them. And this will likely resonate with people, especially right now. Tools like this could help governments make decisions that address greenhouse gas reductions, job creation, health and equity.

For example, instead of incentives for single-family housing retrofits, there may be more co-benefits to addressing retrofits for low-income, multi-family housing or social housing. There may also be more public support for these initiatives.

In online meeting rooms across the country, elected officials and government staff at all levels are debating how to advance climate policies that also improve health and resilience as we emerge from the pandemic. Some are putting active transportation infrastructure in place to help with physical distancing and provide healthy mobility options that get people outdoors. Others are considering building retrofit projects that create jobs.

I hope they also consider the polling that shows people’s values are coalescing around empathy and caring, and that even before the pandemic, there was higher support for policies that address equity.

We now have the opportunity to work together to build a future that’s headed toward net-zero carbon, that’s more resilient, healthier, equitable and inclusive. We’ll need to rely on our values, clarity of purpose and courage to try new things, and to learn and adapt so that we can truly build back better.

Sherry Yano is the community renewable energy manager at the David Suzuki Foundation

The post Leaders must address equity to build back better appeared first on Corporate Knights.