After North Carolina passed a bizarre transgender bathroom law with sweeping implications (one that, according to the Justice Department, is probably illegal), an impressive list of big companies made their displeasure known. The CEOs of dozens of corporate giants — including Alcoa, Apple, Bank of America, Citibank, Facebook, Google, IBM, Kellogg, Marriott, PwC, and Starbucks — sent an open letter to the governor to defend “protections for LGBT people.” PayPal canceled plans for an operations center in the state, and Deutsche Bank announced it would freeze the addition of 250 employees in the state because of the law.
The floodgates of business proactively influencing societal norms and public policy are finally opening. And while some people may get nervous about this use of corporate power, I believe that businesses can have an enormous impact for good. Many other issues could, and should, follow.
At the same time, it’s worth asking why is this happening now — and what are the implications?
The facile answer, at least to the first question, is that societal norms have changed and business is just following customers. But the reality is more nuanced.
In 2006 55% of Americans opposed same-sex marriage and 35% supported it. And yet by that same year over half of the Fortune 500 offered domestic partner benefits. In the last decade the percentage of these large companies that prohibited discrimination based on gender identity skyrocketed from 16% to 66%, well ahead of mainstream acceptance of transgender rights. Many business sectors started marketing to and hiring talented members of the gay community years ago.
Equality efforts in the corporate world have not been perfect, but stepping back, it’s clear that there’s a dual logic for companies to jump into public policy: the moral imperative of a workplace without discrimination is intertwined with the reality of running a business catering to diverse customers and employees. So business has often acted years ahead of public sentiment.
And while societal shifts like this bring out enormous emotion and backlash — in some cases, it’s two steps forward (the Supreme Court legalizes gay marriage) and one step back (states try to squelch LGBT rights) — the language of the corporate rebuke to the North Carolina law shows that big businesses are now willing to step up in a very public way and challenge legislation directly on economic grounds. As the open letter puts it, “…such laws are bad for our employees and bad for business. This is not a direction in which states move when they are seeking to provide successful, thriving hubs for business and economic development.”
In theory, then, any moral issue that moves us away from thriving economically is also a business problem — so why stop at LGBT rights? A large number of issues could fall under the same dual logic: avoiding brand-damaging human-rights issues in the supply chain, fighting income and opportunity inequality (including supporting minimum wages), and, of course, tackling big environmental issues such as climate change.
There has been some corporate movement on the latter. Before the 175-country signing of the Paris Agreement on April 22, a group of 100 large U.S. companies, assembled by the NGOs Ceres and WWF, publicly supported the move. And tech giants Apple, Google, Amazon, and Microsoft took an unusual step recently, filing an amicus brief to support the Obama administration’s Clean Power Plan(one of the lynchpins in the U.S. commitment to the Paris Agreement).
But the current track record of pro-climate lobbying in particular, though growing, is still spotty and lacks the passion behind the moves to support LGBT rights. Let’s go back a few years to another state rule, also in North Carolina and also ridiculous. While writing a new law covering coastal development, the state legislature pointedly ignored a science panel’s estimates on sea level rise. The story flew around the web as a meme that North Carolina made talking about sea level rise illegal. Not 100% accurate, but close enough.
So shouldn’t companies pounce on that kind of law, with its shocking level of ignorance and poor strategy, as “bad for business”? After all, rising seas will have a real impact on business and economic development. But the business reaction to the sea level law was nearly nonexistent.
Compare that to the scale and speed of the reaction on the anti-LGBT law. The business community has acted in a visceral way. Big companies are saying, “We may not bring our business to North Carolina if you don’t get your act together.”
In short, talk is cheap. Signing a public declaration is one thing. Taking your business elsewhere, or threatening to do so, is quite another. At this point companies almost never shift their business based on the environmental performance of their suppliers or the climate laws in the regions they operate in.
We’ll only see local, regional, and federal support for laws that move the needle on climate change — a carbon tax, public-private investment in renewables, auto and appliance efficiency laws, and so on — when companies make it clear they only want to do business in places and with partners that have pro-climate rules in place.
Of course, comparing business’s action on LGBT issues with its action on climate change isn’t exactly comparing apples to apples. However, it allows us to more closely examine what might cause companies to take a stand on an issue that’s important to humanity but that would traditionally be considered the domain of society and government rather than business (a line that’s getting blurrier by the day).
So what’s missing when it comes to climate change? A lack of understanding by business about the economic and moral arguments, though that gap is closing. On the economic side, tackling climate change has reached the tipping point, entering no-brainer territory. A shifting climate is on track to cost investors and the global economy many trillions of dollars.
The human toll of extreme weather is hard to ignore as well. And big voices are making the moral case. In his amazing encyclical last year and in his speeches for the U.S. Congress and UN General Assembly, Pope Francis made the connection between climate change and human rights very clear. Major development organizations such as the World Bank are singing from the same hymnal. A new, systemic view of our challenges should help light a fire under companies to take a stronger stand.
What businesses will tolerate in society — and vice versa, what society considers acceptable business practice — is changing fast. I believe that business leaders will continue to get more comfortable leaning in on big environmental and social issues, including climate change. Their pressure may be our only path to real change.
[After I posted this last week on HBR, it occurred to me that there was another example of a local climate/energy related law that companies should be fighting. In Nevada the government and the Public Utility Commission took a huge step backward on renewables. The recent moves to slash payments for solar power that customers generate (on their homes and buildings) have made solar drastically more expensive in the state (and decimated the solar installation business). Big business should be fighting this kind of law aggressively.]
(This post first appeared at Harvard Business Review online.)
(Andrew’s book, The Big Pivot, was named a Best Business Book of the Year by Strategy+Business Magazine! Get your copy here. See also Andrew’s TED talk on The Big Pivot.
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