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Can 'Woke'​ Capitalism Survive Coronavirus?

The response to the COVID-19 crisis shows that social purpose is here to stay. Here’s why.

Character, as is often said, is revealed not when the sun is shining but when the rain is falling. 

Well, get your umbrellas out.

Around the world, in so many different human interactions, online and offline, stories abound of selfishness and selflessness in the face of the coronavirus. On balance, it appears, there are more heroes than hoarders.

In the corporate world too, businesses are being tested in ways not experienced for a decade, perhaps a century. In response, many brands are pitching in with herculean efforts to help the fight against the virus while those perceived as shirking their wider social responsibilities—profiteering or neglecting the welfare of their employees—have come in for heavy criticism.

How businesses continue to respond in the coming weeks and months will have a huge bearing not just on weathering the current storm, but shaping the relationship between business and society in a post-COVID world.

The COVID-19 crisis is the first test of a tentative new corporate consensus that appeared to be taking hold as the last decade gave way to the present. Challenges like climate change and social and economic inequality were daunting, sure. But this simply required a new corporate model putting purpose before—or at least alongside—profit. Investment managers like Blackrock, corporate lobby-shops like the Business Roundtable, and the global business elite at Davos were heralding a new era of stakeholder capitalism.

Critics were quick to point out that this new, cuddlier corporate model had been weaned on a decade-long economic expansion, giving socially-minded executives the flexibility to indulge pet projects. Come the inevitable downturn, they maintained, capitalism’s red teeth and claws would take hold once more. Except, in what sadly seems likely only the early phase of this pandemic, that’s not how things are playing out.

In part that’s due to the very high–and very specific–expectations of an increasingly influential set of consumers. The Purpose Pulse research of Generation Z and Millennials shows that this cohort expects companies to take a stand on social issues, have a purpose beyond profit, and work collaboratively with government and civil society to tackle the big issues of our time. Companies should see this as a mandate for bold action at this time of crisis.

We’re already seeing these expectations drive a large part of the social-media response to COVID-19. With a lot more time to spend online, people are poring over brands’ every move, generating crowdsourced lists of “good guys” and “bad guys” with the explicit aim of rewarding the former with patronage while shaming or even boycotting the latter.

Investors and regulators have taken heed too. To climate change and diversity and inclusion, investors are now adding further risks such as disaster resilience, employee treatment and benefits. And governments preparing financial relief are all too aware of the increased leverage they have to bring behavior change in the corporate world - something they failed to do after the 2008 crash.

This combination of factors is prompting businesses - even in straitened times - to account for more than just their bottom line.

First, how you treat your staff has become a litmus test for corporate reputation. It’s no good donating to a food bank if your furloughed employees are the ones using it. And this extends to contract workers too. Most business leaders will quickly say their greatest resource is their people. Few act like it. Post crisis, expect to hear more reinvigorated advocacy about living wages and sick-pay, as well as hopefully, a new respect for the supposed “unskilled” workers who prop up the economy in fair weather and foul.

Second, CEO and C-suite leadership matters now both in words and deeds. As profits are squeezed, those companies who have tightened their belts at the top have won plaudits—cutting senior management pay, suspending stock buybacks, and restricting dividends instead of laying off employees. Now is also the time for business leaders to take a stand as advocates in the public interest. In the United States, just as business leaders have stepped up to challenge the government’s complacency on climate change, they are now being asked to challenge Trump’s desire for a premature end to the lockdown.

Third, while philanthropy is needed, companies are going further by making sure their products and services can be harnessed for the collective effort. Numerous supermarkets have made donations to food banks and charities but the changes to their business hours and prioritization of vulnerable customers will arguably have a bigger impact. Likewise, tech companies have dropped charges and extended access to their products, especially in support of home-learning and maintaining social connections. Still others—like brewers and manufacturers—have switched their supply lines to producing more socially pressing commodities like hand sanitizer, ventilators, and protective equipment.

Finally, underlying all of this is the need for open, honest communication. Being transparent tops the list for building trust between brands and Generation Z and Millennials. As numerous leaked emails to employees have shown, companies who do one thing but say another will easily be found out. But this doesn’t mean companies should be afraid of taking risks and making mistakes. Our research shows that consumers will give the benefit of the doubt to brands who have made mistakes but are open and honest and learn from them.

The current moment calls for companies to stand up and be counted—and demonstrate their true character. In a variety of ways, and not without some stumbles as they go, they are rising to the challenge. If we can weather this storm, the era of woke capitalism may just be here to stay.