Should Companies Take a Stand on Social Issues?

Nike and Bud Light have been in the media spotlight over the past two weeks with both brands experiencing some significant consumer backlash over their use of trans-activist Dylan Mulvaney in recent social-media campaigns.

As the world becomes more socially conscious and politically active, many brands are taking up the cause and showing their support for various social justice movements. From supporting LGBTQ+ rights to championing environmental issues, companies are becoming more vocal about their values and transparent in their stance on social issues.

But can championing a social cause become counter-productive and damage profitability or, as some media commentators have posited, “If you go woke do you go broke”?

Silicon Valley Bank (SVB) went bust last month. It pledged $5bn to green investments and donated $73m to Black Lives Matter and other causes. Board member Elizabeth Burr claimed in a 2021 interview that “racism and white supremacy” were more important considerations than focusing on the numbers. So much so, that SVB had a ‘Diversity, equity and inclusion’ executive but no chief risk officer. That was its undoing.

The bank was exposed to falling bond prices and anxious customers withdrew their funds starting a run on the bank. Now obviously the failure was more to do with the absence of a risk officer than the presence of a diversity officer, nevertheless, on the basis that ‘form follows function’ it seems that the bank’s executives made some choices about where they should prioritise their attention.

Worth the Risk?

There is no doubt that taking a stand on social issues can be a risky move for brands. After all, the world is divided, and what one group sees as progress, another sees as an attack on their values. Brands that take a bold stance on social issues risk losing customers who disagree with them.

So, is this risk worth taking?

I believe that the answer is “yes.” Brands that become socially aware can, and do, succeed. Research shows that consumers are increasingly likely to choose brands that align with their values. A study of over 30,000 consumers in 35 countries by Accenture found that 62% of consumers want companies to take a stand on social, cultural, environmental, and political issues, and 65% of consumers say that they are more likely to buy from a brand that supports a cause they care about. Brands that adopt a social stance can also benefit from positive media coverage and increased brand awareness. When a company takes a stand on a social issue, it generates buzz, attracts attention, and helps it to stand out from competitors.

Of course, there are risks involved. Brands that make a point of basing their marketing around social issues can be accused of “virtue signaling” or of not doing enough to support the cause they are championing. There is also the risk of alienating some traditional customers, who may feel that the brand’s values no longer align with their own.

But the risks of not having a point of view on social issues are perhaps even greater. Consumers are increasingly demanding that brands take a stand on issues that matter to them. Companies that remain silent risk being seen as apathetic or out of touch. In today’s world, consumers are looking for more than just a product or service – they want to support brands that share their values. Patagonia, for example, has a long history of environmental activism and corporate responsibility. Their commitment to sustainability has only bolstered their brand image but created customers who are passionate advocates for the brand, proving that ‘woke’ can work when it is done well.

Authenticity… or an Ad Campaign?

However, not every brand has been so successful. Take Gillette’s 2019 ‘The Best Men Can Be’ ad campaign, which sought to address toxic masculinity. The campaign sparked a backlash from some consumers, who felt the brand was attacking men. The controversy led to a reported $8 billion write-down for the company. The difference is that whereas Patagonia is authentic and ‘lives’ its brand purpose, Gillette was merely running an ad campaign.

Many executives support the view that focusing on anything other than the bottom line is bad for business. That was certainly the view of the academic and economist Milton Friedman who published his book ‘Capitalism and Freedom’ in 1962 which shaped economic thinking for the next 50 years.

The Wall Street Journal found that in the period 2021 to early 2023, the S&P 500 was down 1.8%, whereas firms considered to be ESG focused (Environmental, Social, and Governance) scored worse, losing between 2.5% and 6.3%. This suggests that companies that trumpet social responsibility underperform. However, I believe that these results may not be reflective of usual performance because of the recent rush towards energy stocks during this time of crisis. When times get tough, investors are prepared to compromise their principles perhaps?

Brand Purpose that Builds Shareholder Value

What should brands do to make sure that their purpose works both in terms of customer support as well as longer-term shareholder returns?

1. Authenticity is crucial: Brands must ensure that their social stance aligns with their core values, what target customers truly care about, and are a genuine reflection of their corporate culture. Inauthentic or superficial attempts to jump on social or cultural bandwagons can easily backfire and damage a brand’s reputation.
2. Educate and engage: Brands must try to understand the issues they are addressing and be willing to engage in meaningful conversations with their consumers. Listening to and incorporating feedback from a diverse range of voices is essential in ensuring that social initiatives are well-received.
3. Be consistent: Brands should maintain a consistent commitment to their social purpose across all aspects of their operations, including marketing, customer experience, product development, and supply chain management. Inconsistencies can lead to accusations of hypocrisy and undermine consumer trust.
4. Measure and report progress: Regularly tracking and reporting on the impact of a brand’s social initiatives can help demonstrate transparency and accountability to stakeholders. By setting clear objectives and tracking progress, brands can show that their commitment to social purpose goes beyond mere marketing tactics.

Finally, brands should be prepared to weather the storm. Taking a stand on a controversial issue can be risky, and there may be backlash from some consumers. Brands must be prepared to stand firm and explain how this aligns with their values, even in the face of criticism.

In the case of Bud Light, Anheuser-Busch quickly distanced itself from the campaign; Alissa Heinerscheid the marketing executive who oversaw the effort has taken a “leave of absence’ and the brand issued a statement saying the moves “will help us maintain focus on the things we do best: brewing great beer for all consumers, while always making a positive impact in our communities and on our country.” And that takes us neatly to the importance of being clear about your brand purpose.

Elements of Brand Purpose

In our book, “On Purpose, delivering a branded customer experience people love” we argue that there are, in fact, three elements to a purpose: The Brand Purpose (customer and employee focused), the Commercial Purpose, (shareholder-focused) and the Social Purpose (ESG focused). If firms prioritise delivering value to customers, they will succeed commercially and if they do that in a socially responsible way, they can sustain their success in the long term.

We have helped several leading brands to define their purpose and then carefully align their customer and employee experience with it. In my view, it must be done in that order and the keys to doing so successfully are intentionality and consistency, but the most important consideration is that these three elements must work in harmony.

Let’s take Amazon as an example. Since its inception, Amazon has focused relentlessly on its brand purpose “To be the earth’s most customer-centric company”, creating tremendous value for customers, rather than focusing on the return for shareholders or even its employee experience. Amazon is now one of the world’s most valuable companies and Jeff Bezos is one of the wealthiest people on the planet.

The company has pledged $10bn to address climate change and has a target of using 100% renewable energy by 2025. So, the brand started with a clear brand purpose that focused on customers, which, in turn, achieved its commercial purpose and created value for shareholders which, in turn, allowed it to have the financial resources to ensure it is socially responsible. Providing Amazon addresses some of the poor employee practices it has been criticised for it will be able to sustain its success. Balance is vital.

Take a Stand

In conclusion, taking a bold stance on social issues can be a powerful tool for building customer loyalty, generating positive media coverage, and increasing brand awareness. Yes, there are risks involved, but the risks of not taking a stand on issues that are important to your target customers are even greater. So, if your brand is considering its broader purpose, don’t be afraid to take a stand, just make sure that it is genuinely aligned with your brand and product values, embraced by your target customers, and balanced with commercial considerations – your shareholders may thank you for it.