How Companies Should Weigh In on a Controversy

On April 1, 2023, just as the March Madness college basketball tournament was getting underway, the transgender influencer Dylan Mulvaney uploaded a sponsored post to Instagram to promote Bud Light. The backlash was immediate and cut deep. The beer brand was condemned by social conservatives across the United States, who launched a boycott.

In its first public statement, made two weeks after the uproar began, Anheuser-Busch, the brand’s parent, avoided any direct mention of the controversy or of Mulvaney, who had been the target of bitter attacks. She made clear her dismay. “For a company to hire a trans person and then not publicly stand by them is worse, in my opinion, than not hiring a trans person at all,” she said. The controversy is estimated to have cost Bud Light $395 million in U.S. sales, and the brand lost its place as America’s top-selling beer by revenue.

In contrast, consider Natura, the Brazilian cosmetics giant. In July 2020 the company made headlines after it hired the transgender actor Thammy Miranda to promote its Father’s Day campaign. Conservatives accused Natura of attacking “family values,” flooded social media with hate speech, and demanded a boycott of the company’s products.

Natura quickly stood by its decision to hire Miranda, stating, “Natura celebrates all ways of being a man, free of stereotypes and prejudices, and believes that when this masculinity meets fatherhood, relationships are transformed.” Brand experts observed that the company’s actions were consistent with its history: “Natura has been working with this purpose [inclusiveness, diversity, acceptance] for over a decade,” Adriano Sá, a professor at Saint Paul Escola de Negócios, told UOL Economia. “The campaign only reinforces the company’s positioning.”

The backlash didn’t seem to negatively affect Natura. Two days after the vitriol broke out, the company’s shares had jumped 6.7%, and Natura ended the week with more than 100,000 new social-media followers. And although the entire category suffered in this period because of the pandemic, Natura’s online sales shot up 225%.

A first lesson to be gleaned from this tale of two transgender spokespeople is that companies “speak” through their actions. People saw Mulvaney and Miranda as expressions of the companies’ values, whether intended or not. Natura’s actions were judged to be consistent with its long, visible record of support for diversity and inclusion. Bud Light, in contrast, took many of its stakeholders by surprise. The brand was not widely recognized for its decade-long support of LGBTQ+ rights, so its association with a trans spokesperson came across as a niche message that did not play well with its core consumers. Michel Doukeris, the CEO of Anheuser-Busch’s owner, AB InBev, described Bud Light drinkers this way: “One, they want to enjoy their beer without a debate. Two, they want Bud Light to focus on beer. Three, they want Bud Light to concentrate on the platforms that all consumers love, such as NFL, Folds of Honor [a scholarship program for children of fallen members of the armed forces], and music.”

Despite the rhetoric of shareholder primacy, 73% of respondents globally say that the primary duty of a company is to benefit all stakeholders.

A second lesson is that outcomes may be related less to an issue itself than to how the company responds to it, especially in the face of pushback. Natura doubled down on its principle of inclusivity, whereas Anheuser-Busch initially appeared to ignore the issue. (It may be tempting to argue that Brazil is simply more accepting of transgender people than the United States is, but a 2021 study by UCLA’s Williams Institute found that the two were virtually identical in their acceptance of LGBTQ+ individuals, ranking 23rd and 24th respectively among 175 countries.)

One point is crystal clear: Executives need guidance about managing their organizations’ engagement with societal issues, including hot-button topics such as gender, climate, and racial discrimination. We believe that companies can take a stand on such issues and successfully navigate both internal and external pushback if they acquire a more sophisticated understanding of their stakeholders’ concerns. Success does not mean avoiding public controversy or achieving unanimous support among key stakeholders. Rather, it results from adhering to processes and strategies that over the long term will lead to increased competitive advantage and an enhanced license to operate while also helping manage any short-term heat and scrutiny.

We don’t provide a simple playbook or easy solutions. We use recent survey research, along with examples from managerial best practice, to provide insights into how to prosper in a world where the private and public spheres are uneasily blending and businesses are expected to address major societal issues. We propose an approach that is both anchored in data and sensitive to values and context. It is intended to help leaders figure out which issues to address and how, ameliorate stakeholder disappointment, and manage any blowback. Data can tell you what your various stakeholders care about, but judgment is needed to carefully consider their conflicting preferences while remaining true to your company’s values.

Expectations of Business

In three separate surveys, administered in 2021 and 2022, we reached more than 75,000 people in 28 countries. We asked them about the role of business in society, which stakeholder groups’ interests should be prioritized, which issues (if any) they believed companies should weigh in on, and how business in general was accounting for stakeholders’ interests and performing on key issues.

About the Research

This article features results from the following global online surveys:

The 2022 Edelman Trust Barometer was a 28-country survey of a nationally representative sample of approximately 1,150 respondents in each country in November 2021. The full details and results are available online.

The 2022 Edelman Trust Barometer Special Analysis: The Changing Role of the Corporation in Society was a 14-country survey of a nationally representative sample of 1,000 respondents in each country from April 26 to May 10 of 2022. The full details and results are available to download.

The 2023 Edelman Trust Barometer was a 28-country survey of a nationally representative sample of approximately 1,150 respondents in each country in November 2022. The full details and results are available online.

Even granting that the public may be underinformed about the inner workings of corporations, we believe that people’s views regarding the proper role and the current performance of business in society matter, because the public consists of employees, consumers, investors, and voters—the broadest swath of stakeholders. We ignore their judgments at our peril, given their importance in determining a corporation’s long-term prospects.

Around the world people are clear about the core economic function of business. Its main job, acknowledged by the vast majority (85%) of those we surveyed, is to produce safe and reliable products, create jobs, create wealth, grow the economy, and drive innovation. But its second job is nearly as important: The societal duties of business were also deemed central by 75% of our respondents. Those duties include, for example, tackling climate change, addressing discrimination, supporting local communities, and stepping in when government is ineffectual. Clearly, societal expectations haven’t superseded traditional economic expectations; they are simply being added to business’s plate.

These results reveal an optimistic population that assumes business can make a difference. More than 70% of those surveyed, on average, believe that business can have a positive impact on access to health care, the quality of information, poverty, climate change, discrimination, and inequality, with 23% to 31% saying that the impact on those issues could be “game-changing” if business “devoted a significant amount of its attention and resources to solving them.”

Unfortunately, the public doesn’t believe that business has done enough to address those challenges. We have found big gaps globally between what people think business should be emphasizing and what they think it is doing well on, with its actions to address climate change and poverty, social problems, and supporting communities accounting for the largest gaps.

The Finer Points of Stakeholder Management

In addition to judging business poorly on societal performance, people across the world have clear views on whether companies should prioritize the interests of shareholders or of stakeholders. Despite the rhetoric of shareholder primacy, 73% of respondents globally said that the primary duty of a company is to benefit all stakeholders rather than just to maximize profits for its owners.

One criticism of a stakeholder focus is that it lacks the specificity of a shareholder focus. In our research we asked people which stakeholders’ interests should be given high priority in corporate decision-making. Globally, the interests of customers and employees were named most often. When it came to companies’ performance in considering stakeholders’ interests, a majority of respondents felt that employees, communities, and future generations were not being well served. In contrast, shareholders’ interests, though the least likely to be seen as meriting high priority, were the most likely to be seen as being well served. Clearly, companies need to do more when it comes to stakeholder management.

The first step is to identify stakeholders’ needs and interests to ensure that their voices are heard. Because companies have traditionally overemphasized shareholders’ interests, they often lack a refined understanding of customers, employees, communities, and future generations. Instead of viewing them as simply consumers of their products or employees of their organizations, companies must consider them as multidimensional human beings who worry about issues that affect them, their communities, and those they care about.

To begin, companies should include an assessment of views on societal issues in their market and employee-satisfaction research. That will help them develop new insights, avoid blunders, and convert their management of those issues into a competitive advantage. They should also do a better job of communicating how they are addressing the issues their stakeholders care about. Only 31% of consumers and 51% of employees we surveyed in 2022 said that companies are good at making clear what their values are and how they are supporting those values in society. We have found that when customers are aware of a brand’s societal initiatives and see the positive impact of those initiatives, their loyalty and trust increase. Similarly, employees exhibit greater trust, loyalty, and advocacy when a chief executive’s social-issue commitments are backed up by action.

If companies regularly monitor the issues that matter to their employees and customers, they can develop a dynamic issue-priority map to identify current areas of stakeholder accord and potential sources of friction or conflict. Such a map can also facilitate more-effective communication about related company actions.

Contending with discordant opinions on societal issues becomes considerably more complicated when politicians exploit those issues to get media attention.

Inevitably the issue map will reveal topics on which you will be expected to take a stand but your stakeholders do not agree. Thus a second key element in stakeholder management is mitigating disappointment when making tough calls. Listening and responding to stakeholders does not necessarily mean either achieving consensus or granting any one group everything it wants. Given the likelihood that views will conflict among and within stakeholder groups, a company should aim to make clear why it has acted as it has rather than to achieve agreement with what it has done. Still, it is important to make all stakeholders feel respected.

Doug McMillon, the CEO of Walmart, which was the top U.S. gun and ammunition vendor in 2015, became an unlikely advocate for what he called “commonsense” gun control. Many of Walmart’s customers objected, but McMillon directed the chain’s stores to stop selling handguns, military-style assault weapons, and high-capacity ammunition. Walmart also went beyond federal government rules to establish stricter background checks and age requirements. At the same time, however, McMillon apologized for inconveniencing some of Walmart’s customers and stressed his commitment to supporting hunting and sports shooting.

Walmart took a position that respected both its customers’ choice to own guns and the concerns of most Americans about specific types of weapons. Its approach was designed to bring disappointed stakeholder groups along with the company. In 2019 McMillon reported that Walmart accounted for only 2% of total U.S. gun sales, which represented just 0.2% of its annual revenues. Pulling back does not appear to have hurt the chain.

How should a company decide which stakeholders to disappoint when goals and expectations conflict? Our data doesn’t offer a simple answer, but it does indicate criteria that employees, customers, and communities may use to judge your decisions.

First, no one stakeholder group should always take precedence. When we asked our respondents, “Which group should be prioritized if there are conflicting interests?” customers and employees were named most frequently—but only by 20% of respondents. “It depends on what the issue is” was the next most common response, at 14%.

Second, the two stakeholder-oriented considerations you will most likely be expected to take into account are (a) who is most responsible for the long-term success of the company and (b) who is going to be the most affected by your decision. When the answers to both questions are the same, prioritization is straightforward. But often they are not, which means that other considerations will have to be brought to bear.

We asked people, “If a company is being pressured to decide which side of a controversial societal or political issue to support, what do you think are acceptable ways for that company to behave?” Respondents reinforced the importance of accounting for customer and employee preferences. They also mentioned taking the position that the executive management team believes is the morally correct one and the position that would be the most beneficial to the financial health of the business.

It is no easy task to balance stakeholder concerns, your company’s moral values, and financial-risk considerations, but problems arise when an organization emphasizes any one of them at the cost of the others. Arbitrating the trade-offs is sensitive work that requires managerial judgment.

Target is a case in point. In June 2023 the company featured merchandise that celebrated LGBT Pride month, as it had every June for more than a decade. But that year the pushback was louder and more violent than ever before: Protesters tore down merchandise displays, threatened sales associates, and encouraged people to boycott the chain.

Target’s response represented an attempt to balance three considerations: the need to protect its employees’ safety, its desire to support its many LGBTQ+ customers, and its duty to remain steadfast in its long-held value of inclusivity. The company moved Pride-themed merchandise in U.S. Southern states (which tend to be more conservative) from the front of its stores to less-prominent locations. At the same time, it continued to sell almost all its nearly 2,000 Pride-themed products, removing only a few items, such as a swimsuit with a larger crotch for trans women, which some protesters alleged (incorrectly) was intended for children.

Company executives said they couldn’t tease out the direct impact of the negative reaction on their business, but violent incidents subsided once the changes were made, and overall sales improved in July. Target’s actions illustrate how to be true to your values and to the stakeholders who are loyal because of those values while also addressing the concerns of other stakeholders.

Which Issues to Prioritize?

We found strong links between issue engagement and the key prerequisites for business success. Engagement increases customer loyalty: A majority of consumers (58%) say they buy or advocate for a brand when their values align with its values. Engagement helps win the war for talent: Job seekers say that a company’s public support of issues such as access to health care and gender equity increases the likelihood that they will choose to work for that organization. Engagement attracts investors: A majority of retail investors (64%) say they take a company’s values and social actions into consideration, while 88% of institutional investors say they scrutinize environmental, social, and governance matters as closely as they do operational and financial ones. That said, our research clearly suggests that people don’t expect organizations to weigh in on every issue—or even on every issue important in their stakeholders’ lives.

When it comes to determining whether a company has an obligation to take a stand, people divide societal issues into two tiers. In the top tier are issues that directly affect customers and employees; that are associated with where and how the company’s products are made and any potential effects of using them; that are related to its core values; and that affect the physical environment in which the company operates. A majority of respondents expect companies to take a stand on such issues.

In the second tier, where few people think it’s necessary or appropriate for companies to weigh in, are issues that are important to society at large but not directly related to the company’s business or business practices; that are important to the CEO personally but not related to the company’s business; that the company really does not care about but thinks could help it win new customers; and that the company does not plan to remain involved with over the long term. These lower expectations reflect a general sentiment against virtue signaling, CEO vanity activism, and opportunism.

Many respondents said that companies should actively avoid issues related to partisan politics, and close to half of those in the United States, South Korea, South Africa, the United Kingdom, Japan, and Canada said that this is a line business should not cross. Most people neither expect nor want companies to develop an allegiance to a party or a candidate. They understand the difference between weighing in on an issue and getting involved in partisan politics.

When you do engage on an issue, be prepared to fully demonstrate your commitment. People recognize that posturing and action are two different things. They want to see evidence of your commitment to an issue in whom the company hires and how it treats its employees, how its products are made and brought to market, where and how its parts and raw materials are acquired, and in which states, regions, or countries it chooses to do business. Thus compartmentalizing your issue engagement or aiming your messaging only at stakeholders who support the stand you’re taking is almost impossible.

Managing issue engagement, especially when stakeholders disagree on which issues are important or on what position to take on them, is complicated. To deal with this complexity, companies need new governance structures and organizational practices. One approach is the nested structure Michelin has devised. At the board level a Corporate Social Responsibility Committee ensures appropriate commitment regarding nonfinancial objectives, compliance, and ethics. In addition, the CEO and the executive team provide oversight of Michelin’s Sustainable Development and Mobility Committee, which oversees governance in four areas: the environment, human rights, employee health and safety, and ethics. Responsibility for promoting sustainable development on a day-to-day basis belongs to a network of representatives from each major world region, who help roll out local initiatives and report on the implementation of objectives set by the Sustainable Development and Mobility Committee and the governance teams. Senior leaders meet annually to get input from a stakeholder committee of prominent thought leaders representing scientific, governmental, NGO, and other perspectives. Local managers are responsible for stakeholder relations and are expected to engage in dialogue with stakeholders at the local level.

Embracing another emerging practice, HP and other companies have found that an issues committee, led by a government- or public-affairs officer or a chief marketing officer, can get a companywide view of topics that stakeholders care about. Such a committee can keep track of the status of the company’s efforts to address issues and can raise questions about whether organizational values are being considered and how they are being applied in various situations.

Finally, certain practices can help ensure that board members are aware of the views of shareholders, customers, employees, and communities when they make decisions about how to respond to controversial issues. Some practical steps in this regard, identified by The Conference Board, are: making stakeholder engagement an ongoing board agenda item, writing responsibility for stakeholder management into board committee mandates, and ensuring that the CEO is transparent with the board about how various stakeholders view the company. Additional Conference Board recommendations include building shareholder and stakeholder relationships into evaluations of the CEO and company performance and taking seriously board responsibilities to review ESG-related filings with regulators and the underlying reports and activities that drive them.

From Conflict to Politicization

It’s difficult enough to contend with discordant opinions on societal issues, but things become considerably more complicated when politicians exploit those issues to court the more extreme elements of their base and to get media attention. That dynamic raises not only the heat but also the stakes for companies seeking to be responsive to their stakeholders or to remain true to their values.

Consider climate change, on which the science is currently well established and widely accepted by the public. Yet even to admit a link between greenhouse gas emissions and changes in our climate is a litmus test in U.S. politics. Politicization has turned the issue into a flashpoint of divisiveness and the basis for partisan attacks on business. A case in point is a July 6, 2023, letter from three members of the U.S. House of Representatives Judiciary Committee claiming that decarbonization would have a “harmful effect on Americans’ freedom and economic liberty” and that any cooperation among corporations to achieve that end might constitute an antitrust violation.

To push back against politicization, companies can double down on their core values or recast the conversation around a value that has wider acceptance.

The public recognizes the reality of politicization: In 19 of the 28 countries surveyed for the 2023 Edelman Trust Barometer, fewer than half of respondents thought businesses could avoid being politicized if they addressed contentious societal issues. In the current polarized atmosphere, utterly nonpolitical things can often be politicized. For example, in 2022 the restaurant chain Cracker Barrel announced that it was adding a plant-based sausage to its traditional, meat-based breakfast menu. Strong reactions followed. Some people complained that the company should not be offering meat alternatives and decried the “woke” addition to the menu. A simple, market-driven decision was reinterpreted as a political statement, and choosing to go (or not) to Cracker Barrel restaurants became one as well.

Politicization is almost impossible to avoid in the current environment, but it can be managed. We recommend four strategies that seem to have helped some companies.

Be diligently and transparently values-driven. Champion values that are authentic to your organization and work to consistently translate them into actions and policy, as Target did in its decade-long support of the LGBTQ+ community, and Natura did with its long-term dedication to inclusiveness. A history of dependable behavior around an explicit set of values is hard to dismiss as opportunism or as jumping on a bandwagon for commercial benefit.

Connect your societal-issue actions to your corporate duties. Demonstrate that engaging with societal issues is not separate from your fiduciary responsibilities but, rather, integral to fulfilling them and staying competitive.

Apple CEO Tim Cook’s championing of privacy as a fundamental human right tightly couples a moral stance and a business model. In 2015 Apple’s new phones were equipped with a default encryption system that prevented the company and law enforcement agencies from accessing customer data without permission. To some, that looked like a troubling disregard for the company’s responsibility to help protect public safety. Cook insisted that he, too, was concerned about safety, arguing that Apple had a duty to protect users’ privacy to keep them personally safe.

Privacy protection is a brand differentiator for Apple versus competitors with ad-dependent business models that rely on customer information. It aligns the company with concerns about the societal impact of technology and enables it to comply more easily with regulations such as the EU’s General Data Protection Regulation (GDPR), which enforces users’ ownership of personal data. And it puts Apple in a position to move in concert with the AI-driven privacy regulations coming in countries around the world.

Push back against politicization. The key here is to regain control of or redirect the narrative. This strategy has several versions: You can double down on your core values; you can recast the conversation around a value that has wider acceptance, especially among the constituency that is objecting to your behavior; or you can make clear the economic consequences of a culture war.

Disney CEO Bob Iger’s answer to attacks on Disney as a “woke” corporation by Ron DeSantis, the governor of Florida and a presidential candidate, shows what can be done. In response to the company’s having spoken out against Florida’s 2022 Parental Rights in Education (“Don’t Say Gay”) bill, which prohibited classroom instruction on gender and sexuality for elementary school students, DeSantis pressed legislators into a special session in which they removed Disney’s autonomy over the Disney World resort as a special tax district.

Bob Chapek, Disney’s CEO when the “Don’t Say Gay” bill was introduced, angered stakeholders by first staying silent and then taking a position in the face of criticism within and outside the company. After Chapek was fired, Iger returned to Disney as CEO and took a different approach. At an April 2023 shareholder meeting, Iger refocused the narrative from LGBTQ+ issues to freedom of speech, a key value for conservatives like DeSantis. “A company has a right to freedom of speech just like individuals do,” Iger said. “The governor got very angry over the position Disney took and seems like he’s decided to retaliate against us…in effect to seek to punish a company for its exercise of a constitutional right.” Disney filed suit against the governor and other officials in response to the legislation voiding its district autonomy. Meanwhile, it stayed the course on inclusive content and recommitted to “age-appropriate” stories “that reflect the world around us and that foster a greater understanding, greater perspective, greater acceptance of all people.”

Iger coupled his accusation that DeSantis’s actions were “anti-business” and “anti-Florida” with a description of Disney’s plans to invest $17 billion in the resort, creating 13,000 new Disney jobs and thousands more indirect jobs. (The company later scrapped plans for a $900 million corporate campus that would have relocated 2,000 employees to Florida.) Not only did he double down on his commitment to Disney’s original position, but he invoked another, more widely held value to support his action while attaching a price tag to attacks on Disney’s exercise of free speech.

Band together with other like-minded corporations. This fourth strategy is designed for organizations that lack the wherewithal or the mettle to resist politicization and powerful politicians. In the United States and Western Europe, immigration has been a hot-button issue, leading to the Brexit referendum in the UK, wall building in the United States, and anti-immigrant posturing by several European leaders. Nevertheless, businesses have largely supported pro-immigration policies, arguing that structural workforce shortages, exacerbated by demographic trends, require countries to welcome (some) immigrants. One tactic they use is speaking under the banner of national business organizations, either for safety in numbers or to diffuse targeted backlash. For example, during and after the Brexit referendum, the Confederation of Business Industry consistently argued against exit and for immigration. In the United States, the Business Roundtable has consistently endorsed policies that support immigration—at least of skilled workers.

. . .

Our research clearly indicates that people across the globe are demanding that companies address the societal issues of the day. A prerequisite for success with that challenge, we find, is a stakeholder perspective—especially regarding customers and employees—along with a clear understanding of, and crystal clear communication about, how your actions relate to your mission, values, and strategy.

As we move from survey data to case studies, we see a pattern: In answering “Who is most affected by the decision?” respected organizations tend to prioritize stakeholders’ health and safety over financial considerations. Walmart’s gun policy and Target’s concern for the physical safety of its workers led both companies to a nuanced approach to politically fraught questions. When it comes to health and safety, threats to life and physical well-being are paramount; threats to mental health stemming from attacks on identity seem to be a close second.

In the end, defining and consistently defending your values, adopting an overarching multistakeholder orientation, practicing effective stakeholder management, and developing rigorous, thoughtful, and fair processes for weighing and balancing the potential impact of your business decisions across stakeholder groups (including future generations) are all necessary if you are to be the company your customers, employees, investors, and neighbors want and expect you to be.

Copyright 2024 Harvard Business School Publishing Corporation. Distributed by The New York Times Syndicate.

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