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Eyes Are on Corporate Responses to Current Events

Using metrics such as environmental impact and workplace diversity, financiers have started to gauge a company’s viability as an investment by examining its social responsibility record. Recent events have only increased investors’ desire to fund organizations with policies that address social issues for a simple reason: They believe those companies will weather financial downturns better than those that do not.

Some companies have responded to the pressure to do good. To fight the pandemic, perfume companies Christian Dior, L’Oréal, and Estée Lauder started producing hand sanitizer. General Motors switched gears from manufacturing cars to making face masks. GM also converted one of its factories to help produce ventilators. One Italian energy firm made its supercomputer available to researchers looking for ways to battle the coronavirus.  

But perhaps most noteworthy to investors is the way in which organizations have begun to reexamine their internal hiring practices. Some investors are pressuring organizations to prioritize diversity and inclusion by publicizing their workplace demographics and initiating plans and to bring underrepresented groups into their workforce, according to an article in The Wall Street Journal. However, all companies are not eager to share their employee demographics because more often than not, those data do not demonstrate a commitment to workplace diversity.

Indeed, advocates for change say that the drive for more inclusion in corporate America will be an uphill battle. As an example, they point to the actions of the global sportswear company Adidas. At the beginning of the Black Lives Matter movement, Adidas declared its anti-racism stance; nevertheless, actual change within the organization backing up those words remains aspirational.

Still, the new reality is clear: Companies that address human rights, employee well-being, and diversity catch investors’ attention. Firms that adapt are more likely to thrive, says one analyst. Those that don’t will fail.

Discussion

  1. Why have the pandemic and social unrest in the U.S. forced companies to rethink their operations?
  2. Why do you think research shows that diverse workforces outperform those that lack diversity? 
  3. Which factors prompt investors to use their influence to effect change in U.S. companies’ behavior?