This week on Handful, I answered a listener question: How can we hold big businesses accountable to stated social impact goals?
What we can do as individuals
The first thing we can do is to simply ask businesses how they’re reaching their goals. As individuals, this can be hard to do – perhaps we could reach out on social media and ask corporations what action they’ve taken. Journalists are really well-poised to ask and obtain information, and they have the skills and contacts to get answers. The right journalist with the resources and free speech rights to ask questions can be effective in holding businesses accountable.
In a way, we have to assume the worst– if companies aren’t publicly sharing how they’re meeting those goals, they may not be making actual progress towards those goals. Another way to look at this is that if companies are making progress towards their goals, that’s a really good thing that they’ll want to share. And if they’re not making progress, then it makes sense why they’re not sharing about it.
It’s easiest to hold companies accountable when they make really clear goals. For example, if a company says they’re going to be more inclusive in their hiring practices, there has to be a way to measure that– otherwise there’s no way to hold them accountable. On the other hand, when a company has a really clear goal, and especially if those goals are quantifiable, then it’s not hard to determine whether or not they’ve actually created social impact.
For example, in June, Walmart made several commitments to increasing diversity and furthering racial equity. One of their commitments is to “continue our efforts to build a more inclusive company”. This is incredibly vague– what are the existing efforts? How will you build upon them? What does a more inclusive company, and therefore success in reaching this goal, actually look like?
One of Walmart’s most concrete goals was creating a Center for Racial Equity, with the primary goal of distributing their $100 million commitment to philanthropic initiatives in line with their other stated goals. So this center will support their work in the financial system, healthcare, education, and the criminal justice system. It’s going to be really easy to hold Walmart accountable for this goal. In the future, we can ask Walmart, “Does the center for racial equity exist?” If it does, it will be easy for Walmart to point to the center and its impact. In fact, I would expect that they will share its impact as part of their marketing and public relations.
Of course, just the fact that the center for racial equity exists won’t mean that it’s actually making an impact. We’ll need proof– data and other hard and fast outcomes — to demonstrate that Walmart has distributed that $100 million and that doing so was effective and impactful.
How do we know that a company is telling the truth when it says that it has met its goals or that it is environmentally responsible? Third-party verification, such as FairTrade, B Corp, certified carbon neutral or others are thorough evaluations of a company and its practices. What would a certification for a diverse and inclusive workplace look like? Or a certification of a transparent supply chain? In a world where consumers are more aware of the impacts of corporations than ever, these certifications would be so valuable in holding companies accountable.
Often, accountability simply requires asking and putting public pressure on companies to be accountable for their actions, or their lack of action.
The role of collective action in accountability
One step towards holding brands accountable is consumer collective action.
In 2019, ethical fashion brands Able and Nisolo launched the Lowest Wage Challenge. This campaign highlighted the fact that only 2% of fashion brands pay their workers a living wage. By publishing the lowest wage in their supply chain, these businesses allow consumers to hold them accountable to their commitments to be socially responsible. Through the Lowest Wage Challenge, consumers can ask their favorite brands what the lowest wage paid in their supply chain is, encouraging transparency, and ultimately, accountability.
In 2020, as COVID-19 spread around the globe and the economy and supply chains were affected, garment workers were especially vulnerable. With the economy and retail sales in decline, major brands like ASOS and Kohl’s cancelled orders from their suppliers, mostly located in Asia, in countries like Bangladesh. It added up to about $3 billion worth of cancelled orders, and the large majority of these were orders where suppliers had already bought the raw materials to produce clothing and refused to pay for production costs. Because of these cancelled orders, “58% of factories surveyed report having to shut down most or all of their operations.”
That’s obviously catastrophic for factory workers, many of whom are migrant workers and lack even basic protections under the law.
But, a campaign was created to hold major companies accountable. The Pay Up campaign urged brands to fulfill their contracts and pay for their orders. A change.org petition and social media pressure resulted in thirteen brands paying for their orders, and over $600 million of those orders ultimately being paid for.
The Pay Up campaign was successful for holding at least some of these brands accountable. The issue is that the brands weren’t being held accountable for any stated impact goals– they were simply held accountable for fulfilling basic contracts and payments. But, this mechanism of accountability seems to be effective. It could be applied to the hundreds of American companies that made commitments to advancing racial justice in the US.
What can government do to advance business accountability?
There are a few legislative options to hold business accountable. Most of what the government can do in the arena of social impact is limited– but, well-crafted legislation can ensure that businesses aren’t discriminatory, pay fair wages, and otherwise act responsibly.
The problem comes when the minimum wage is lower than the living wage.
The Lowest Wage Challenge aims to ensure that all garment workers are paid a living wage— that is, that their employer pays them enough that they can meet their basic needs, like food, housing, and education. A living wage is different from the minimum wage. While a living wage is defined according to the costs of goods and services that people need to meet their basic needs, the minimum wage is a legal wage set by the government.
The problem comes when the minimum wage is lower than the living wage– meaning that employers can pay their work less than the amount necessary to meet their basic needs. But if the minimum wage is at or above the living wage, this won’t be a problem, and in this way, government regulation could require businesses to meet this social impact goal, if those minimum wage laws are actively enforced.
Another way that companies can be held accountable through legislation is by their legal structure. In 37 US states, companies can incorporate as a Benefit Corporation. A Benefit Corp is similar to the B Corp certification that I talked about last week– but instead of an independent certification, a Benefit Corp is a legal structure. Instead of incorporating as an LLC, a company would incorporate as a Benefit Corporation. In this way, the legal structure of the company ensures that it considers how it impacts all stakeholders and that it’s accountable and transparent.
You’ve probably heard the news from earlier this week that Charlie Scharf, CEO of Wells Fargo, said, “While it might sound like an excuse, the unfortunate reality is that there is a very limited pool of Black talent to recruit from.” He said this in the same memo in which he called for more diverse representation among the company’s executives. On June 19, following the death of George Floyd, Scharf committed to doubling Black leadership at Wells Fargo in the next five years, among a host of other commitments to furthering racial justice.
Clearly, Wells Fargo has a ways to go in meeting their diversity and inclusion goals. We can take this as an example of the work that needs to be done in holding businesses accountable to their social impact goals. We won’t always have a blatantly racist statement from the CEO to measure a lack of progress– so I hope that this week’s Handful episodes give you an idea of how you can play a role in bolding big business accountable.
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