Business Shaking Hands. Successful Businessmen Handshaking After

What is Corporate Civic Engagement, and Why Is It Important?

This is the first in a three-part series on the rise of corporate civic engagement, an increasingly important component of good governance for an evolving business community and an evolving nation.

In 1971, the Committee for Economic Development issued a report titled, “Social Responsibilities of Business Corporations.” In what became known as a “social contract” between business and society, the nonprofit and nonpartisan business policy organization argued that the business community needed to take more responsibility for improving the environment and other societal issues.

“The discontinuity between what we have accomplished as producers and consumers and what we want in the way of a good society has engendered strong social pressures to close the gap – to improve the way the overall American system is working so that a better quality of life can be achieved for the entire citizenry within a well-functioning community,” the CED wrote.

That is quite different from economist Milton Friedman’s statement the previous year that “the sole purpose of a business is to generate profits for its shareholders.”

More than 50 years later, many corporations are still trying to find the right balance as they answer not only to shareholders but also customers, host communities, politicians, and activists. But now, as the nation has become increasingly polarized, the answers are harder to develop because seemingly every issue, every option has – unfortunately – become another battleground in the partisan culture war that has engulfed the nation. 

But we at the Common Ground Committee have been studying this evolution and believe there are ways to be productive corporate citizens and increasingly profitable enterprises.

In just the past few years, some of the nation’s most prominent brands have taken stands in line with their corporate beliefs but at odds with a significant portion of the American public (and an even higher share of elected officials). As a result, they have faced intense backlash from those who oppose either their positions or even the fact that businesses are “straying from their lane” to engage in social concerns. Think Disney and Delta Airlines.

Much like the divergent views expressed by Friedman and CED, companies are still wrestling with two competing opinions, according to Elizabeth Doty, who researches the social impact of business as director of the Corporate Political Responsibility Taskforce at Michigan University’s Erb Institute for Sustainability in Business. 

“People tend to come at this … from two biases,” Doty explains. “One says the question is, ‘Should companies get in?’ And another says, ‘They’re too in and they need to get out.’”

But, according to Doty, there is a model for proper social engagement – one that requires transparency, accountability to commitments, and responsibility when it comes to impact on systems. “How are you affecting people’s civic participation, their confidence in the civic institutions and government,” she says. “We even go so far as to say, ‘How are you affecting an informed public?’”

And data shows that stakeholders – customers, employees, and investors – want to see more corporate engagement. The latest edition of the widely respected Edelman Trust Barometer found that 58% of people will support brands based on their beliefs and values, 60 percent will consider beliefs and values when determining where to work, and 80% will invest based on beliefs and values.

In fact, business is trusted more than the government, NGOs, or the media, according to Edelman. But, the research argues, while politicians and media are pushing divisions and disinformation, businesses and NGOs are being pressured to tackle social issues – beyond their current capabilities.

However, many companies have resisted taking a stance on some of the most divisive issues in recent years. According to a study by the Conference Board, racial equity is the only issue that has prompted more than half of companies to take a public stance since 2020.

While most companies have shied away from issues like LGBTQ+ rights, elections and voting, economic equality, and reproductive rights, the rise of stakeholder capitalism is sure to push those percentages higher in the coming years, possibly as soon as 2024 and the next presidential race.

This series will both explain the concept of corporate civic responsibility and offer resources that corporations can turn to when developing a CCR plan or responding to a public relations crisis related to its stance on civic issues. Profit-making, civic responsibility, and politics are sure to continue to intersect and, at times, cause division. With proper preparation and support, businesses can continue to thrive even as stakeholders evolve.