Four Key Steps to Transform Corporate Commitment into Meaningful Change

Since 2020, corporate America has pledged hundreds of billions of dollars in long-term commitments to improve racial equality, both within their organizations and in society at large. While the level of corporate commitment is high, companies are wrestling with how best to deploy these resources to make a meaningful and measurable societal impact on reducing inequality that goes beyond the dollars donated or even the number of individuals served. While the private sector can play a key role here, it is also abundantly clear that companies, either individually or collectively, cannot go it alone.

This report provides insights on the roles corporations can play in making meaningful progress in addressing racial equality, drawn from a Center Briefing held by The Conference Board ESG Center in collaboration with knowledge partner The McKinsey Institute for Black Economic Mobility.

Insights for What’s Ahead

• Begin by identifying underlying community needs and where your firm can best contribute to addressing them. Engage with firms, government agencies, nonprofits, and academic institutions to identify existing gaps in racial equality. Then determine which areas are most relevant for your company to address, in terms of both geography and subject. For many companies, local or regional education and economic development are a natural fit.
• Having identified relevant needs, evaluate the multiple ways your company can address racial equality, including but not limited to philanthropic, supplier diversity, and internal DEI programs. The greatest impact your company can make is likely through the products and services you offer, as well as how and where you operate their business.
• Work with other companies and institutions in setting collective and individual goals. The private sector can play a crucial role through partnership with government, including contributing data that provide more granularity to public statistics.
• Commit to measuring and reporting progress toward those goals. While complex long-term change in racial equality is rarely easy to quantify, your company can follow common steps for improving measurability and comparability.

The good news is the breadth and depth of the US corporate commitment to racial equality. McKinsey estimates that US companies have pledged over $200 billion toward “racial equity” since May 2020. Beyond the dollars pledged, there are ample other indicators that the corporate commitment is genuine. According to The Conference Board C-Suite Outlook survey fielded in late 2021, US CEOs rank addressing racial equality as their company’s most important social priority, second only to the related goal of driving economic opportunity and equality.

The reasons companies have provided reflect a durable commitment that goes beyond responding to stakeholder or peer pressure. In our June 2021 survey of corporate citizenship executives, respondents indicate these reasons include alignment with company values (84 percent), the perceived ability to make an enduring change (51 percent), and alignment with the company’s core business (31 percent). Furthermore, Center Briefing attendees told us that many US corporate pledges are external commitments related to promoting economic opportunities in society at large (e.g., increasing affordable housing and homeownership), in addition to internal commitments to promote diversity and inclusion (e.g., hiring of diverse groups).

Moreover, a large percentage of the commitments are long term. Thirty percent of respondent companies in our June 2021 survey have made commitments for four to five years or greater. The pace at which companies have disbursed funds is also evidence that they are taking time to look at what they’ve done in the past, consult with experts, and think through how they can have the most impact.

At the same time, it is concerning that, as we learned in the Center Briefing, a number of published commitments US firms have madesince May 2020 have not explicitly stated where funds would be allocated. Even if there are good reasons for companies to maintain flexibility in their public commitments, clarity on objectives will enhance the corporate community’s potential for measurable impact on racial equality.

So, what should companies do to make meaningful progress on racial equality?

1. Companies should collaborate with other institutions to conduct a needs assessment to identify existing gaps in racial equality, focusing on areas that are relevant for the company both in terms of geography and subject.

Racial inequality plays out in multiple ways in our society: jobs, education, health care, and housing.

In 2020, some companies made commitments to areas such as criminal justice and housing. But the leading areas were economic inequality/poverty (combined 24 percent), followed by education (21 percent). These are natural areas for corporations to focus on, as they are inherently economic engines that require an educated workforce, and they can provide ongoing skills development for current and prospective workers.

Resources are available to corporations to help identify community needs in these areas. For example, The Center for Economic Inclusion has developed a set of indicators that capture progress toward an inclusive regional economy. While focused on the city of Minneapolis, the model can be replicated widely. The center’s approach includes 19 indicators in five categories that cover multiple dimensions of economic inclusion—and exclusion—within a specific region.

In conducting a needs assessment, companies should not only focus on data, but also engage in candid dialogue with the communities they seek to serve. As discussed in our report Listen to Lead: How Community Expertise Can Improve Corporate Philanthropy, this kind of clear understanding of how the company’s business intersects with the social issues at hand can maximize impact.

2. Having assessed needs, companies should evaluate the multiple ways they can address racial equality, including but not limited to philanthropic, supplier diversity, and internal DEI programs.

The greatest impact companies can make is likely through the products and services they offer, as well as how and where they operate their business. For example, the bulk of hard-dollar commitments to racial equality from corporate America has come from the financial services industry, which is a natural outgrowth of their role in providing credit to businesses and individuals. JPMorgan Chase, for instance, has pledged to invest $30 billion over five years into helping “close the racial wealth gap among Black, Hispanic and Latino communities,” largely through financing homeownership and preserving affordable rental housing.

Further, how companies treat their employees generally, and where they locate their operations, can have an enormous impact. Nearly half of Black private-sector workers (approximately 6.7 million people) work in three industries that have a large frontline-service presence: health care, retail, and accommodation and food services. These industries also have some of the highest shares of workers making less than $30,000. This underscores how companies can affect racial equality through general compensation, benefits, and training programs, not just those focused on DEI. Focusing on economic opportunity and security can also strengthen a company’s reputation with consumers: The Conference Board/The Harris Poll research shows the top sustainability issues consumers care about are fair labor conditions and fair wages (ahead of climate).

3. Companies should engage with other companies, government agencies, nonprofits, and academic institutions to see what work is already being done—and to set goals.

Eighty-five percent of respondent companies that made financial commitments to racial equality in 2020 made them on their own. To be sure, they were often commitments to national or local nonprofit organizations who receive funding from multiple sources. But the lack of communication among funders can leave it to nonprofit partners to set goals and figure out how to leverage resources from multiple sources.

We suggest that companies engage with other funding entities to set collective and individual goals; to determine which metrics to use; and to collect and analyze data to measure progress. The Newark Alliance exemplifies such a collaborative approach, bringing together many of the city of Newark, NJ’s largest employers to reduce poverty and unemployment. Through the Alliance’s Hire.Buy.Live.Newark initiative, for example, partner institutions collectively leverage their philanthropic assets, organizational assets, and business capabilities to drive inclusive economic growth in the city. Each organization has set specific targets and numeric goals for employing more Newarkers and increasing procurement of goods and services from Newark-based businesses. The insights, data, and expertise from community leaders; experts in economic development; and research from Newark-based corporate foundations continue to play a pivotal role in shaping goals and in the decision-making process.

This collective approach also allows for the pooling of data held by various local, county, state, and federal governmental authorities. However, many governmental data sets are not fully broken down by race, ethnicity, gender, and other key demographic variables. This lack of data has cascading effects and impedes efforts to measure and advance equality. While the federal government is working to improve “racial equity” data quality, these efforts will take time to materialize.

The private sector can play a crucial role in filling this need through partnership with government, including contributing more granular, real-time data to supplement public statistics. Companies often hold significant troves of useful data and information internally, which is often dispersed across departments and functions. The Center for Economic Inclusion’s Racial Equity Dividends Index—a tool for companies to assess their policies and practices across seven dimensions of the workplace—speaks to the depth and breadth of data companies already hold. Companies can also gleam significant data from their community and nonprofit partners, including through such coalitions as the Newark Alliance.

4. Companies should commit to reporting impact.

Once a company has identified relevant gaps in racial equality, assessed its own capabilities to address those gaps, and engaged with other organizations to set goals and measure progress, it is also vital—if only to demonstrate the authenticity and credibility of the company’s commitment—to report on progress.

While complex long-term change in racial equality is rarely easy to quantify, companies can follow common steps for improving measurability and comparability: only 11 percent of companies that participated in our August 2022 roundtable poll believe they are “very successful” in reporting on progress toward racial equality.

To improve their reporting efforts, companies should:

• Ensure goals and related metrics are clear from the outset.
• Guide nonprofits and other partners to gather data to measure outputs (number of people served) and outcomes (impact on societal measures of equality). Partners can use sampling, extrapolation, and forecasting when needed to reduce their data collection burdens.
• Credibly estimate what changes were catalyzed by the company’s engagement and resources, recognizing that a corporate investment is usually just one of many inputs to impact.
• Evaluate how the company’s investments performed and which strategies and partners returned the highest impact; compare these results to those of other donors and improve future programming as needed.

Conclusion

Corporate America has made an unprecedented commitment of financial resources toward improving racial equality. The challenge that many corporations have set for themselves is to channel those resources effectively to bring about real progress for individuals, communities, and society at large. While companies have more work to do in assessing societal needs, inventorying their own capabilities, collaborating with others to set goals, and collecting data to measure and report on progress, there are good models for them to follow. The ability to translate corporate commitment to racial equality into measurable societal change across America is on the visible horizon.