Is Social Accountability Changing Leadership?

Business stakeholders—customers, investors, and team members—are now demanding more from the businesses they “work” with. Millennials and Gen Z want to know that the businesses they engage with have a social purpose and are behaving in a responsible manner. This societal accountability is changing the face of business and how leaders behave.

A number of recent surveys from McKinsey research have identified three traits that are becoming leadership imperatives to respond to this growing demand for social accountability.

Transparency

As consumers are more and more demanding that they see the provenance of items they purchase to ensure they align with their values, leaders are being forced to rethink their supply chain and the materials that they use. Especially as some two-thirds of consumers around the world say they would switch, avoid, or boycott brands for their stances on controversial issues.

Given that millennials will make up 75% of the buying population by 2025, and 52% of them say that they always research background information before buying goods or services—compared with 45% of Generation X consumers and 41% of baby boomers—the onus on leaders to pay attention to the ripple effect their business is creating is significant.

One way some companies are seeking to be more transparent is by adopting B-corp status. In order to become a B-corp, a company must pass an assessment that measures its impact on its employees, customers, community, and environment. Ben & Jerry's and Patagonia are two such companies that have shifted to becoming B-corps in a bid to be more transparent and socially responsible in how they operate.

Cognitive Empathy

In 2015, the World Economic Forum predicted that emotional intelligence would be one of the top 10 skills demanded by employers by 2020. Emotional intelligence (EI) relates to qualities such as empathy and curiosity, the so-called traditional business soft skills that enable effective communication and relationship building.

However, it turns out that there is more than one type of empathy. Emotional empathy involves:

• feeling the same emotion as the other person
• feeling our own distress in response to their pain
• feeling compassion toward the other person

This is distinct from cognitive empathy, which seeks to recognise and understand another person’s emotional state. When leaders practice cognitive empathy, they practice taking the perspective of another person. In essence, you imagine what it might be like to actually be this person in their situation and put yourselves in their shoes.

For leaders to be socially accountable, it is essential that they practice this type of empathy, as it enables them to fully understand and appreciate the perspective of all their stakeholders so they are able to make better decisions, as they consider the holistic impact of what they are doing.

Purpose and Values Driven

Consumers are also demanding that business recognizes the impact it has on society and that it aligns the 3P’s—purpose, profit, and planet. No longer is it acceptable for CEO’s to focus on short-term gain to line their pockets. Rather, business leaders need to take a longer term approach, which means no longer being driven by the 90-day reporting cycles of the world’s stock markets.

In his new book The Infinite Game, Simon Sinek refers to these leaders as being infinite in their approach, as they understand that long-lasting success only occurs if they build long-term value for customers, which translates into healthy enduring for the business.

Salesforce CEO Marc Benioff is an example of an "infinite leader" who understands the importance of social accountability, as he always strives to ensure that the company lives up to its values of trust, innovation, equality, and customer service. "There will be times when prioritizing values, especially trust, will come at the expense of profits. In the short term, that is," he is quoted as saying. "But the money your company makes in any given quarter will never be more valuable than the trust you stand to lose over time."

What do you need to do to shape your leadership, so that it meets the needs of all stakeholders and recognises the social accountability that consumers now demand of business?