Support is high, yet middle market can benefit from more formalization of programs
RSM US LLP – the nation’s leading provider of audit, tax and consulting services to the middle market – recently announced, in collaboration with the U.S. Chamber of Commerce, results from its RSM US Middle Market Business Index (MMBI) Social Responsibility, Diversity & Inclusion special report.
The report finds the majority of middle market companies (nine out of ten) actively support social, community and philanthropic causes, and 88 percent are focused on diversity and inclusion, reflecting the evolution of corporate social responsibility (CSR) in the middle market. However, despite the importance of corporate social responsibility (CSR) for middle market business leaders, the survey shows the way they formally address these causes varies.
In fact, only a little over a third (38 percent) of organizations indicated they had a formal social responsibility plan in place, and just over half (55 percent) have a highly or somewhat formalized diversity and inclusion plan. While larger middle market businesses tended to have more formal programs, smaller middle market businesses – while no less engaged with the causes they support – have fewer processes and documentation around their related initiatives (50 percent versus 26 percent).
“Corporate social responsibility strategies have evolved as a vital way for businesses to connect with their communities, demonstrate commitment to core values and deliver on brand promises,” said Sara Webber Laczo, principal and corporate communications leader with RSM US LLP. “At the same time, today’s consumers and employees are demanding more transparency from the companies they engage with, compelling more businesses to ‘walk the talk’ of CSR.”
While middle market companies might have strong CSR initiatives in place, the lack of more formalized planning and ongoing communications might present a missed opportunity to fully reap the benefits of such efforts. Organizations demonstrating a vital and strategic CSR plan and diverse culture can be more appealing to employees, fostering alignment with their organizations’ core values. Moreover, the culture fortifies their own beliefs and passions, and shows how they, through their companies, can have a social impact.
“Diversity spurs creativity and innovation, which lead to business growth and success,” said Rick Wade vice president, strategic alliances and outreach at the U.S. Chamber of Commerce. “Research shows that companies with greater gender and racial diversity consistently outperform their peers on measures like profitability and value creation. The U.S. Chamber of Commerce recognizes that this is imperative for business success, and we are fully committed to promoting diversity throughout our nation’s economy.”
In today’s tight labor market – where there is currently less than one unemployed person for each job opening – CSR is critical, especially among millennials who by 2025 will make up 75 percent of the workforce. These employees hope to improve the world through compassion, innovation and sustainability, with their professional lives integrated into these efforts. In fact, 50 percent of millennials say they would take a pay decrease to find work that aligns with their values, while 90 percent indicate they want to use their skills for good.
“In a marketplace where recruiting and retaining skilled talent is challenging, particularly for middle market companies, CSR and culture, diversity and inclusion can be a differentiator,” said Tracey Walker, culture, diversity and inclusion co-leader with RSM US LLP. “New employees are increasingly drawn to companies dedicated to relevant issues, and current employees feel a sense of belonging because their values align with their organizations’. They feel respected, see themselves in the diverse co-workers they work with, and see a future with that company.”
While CSR’s impact can address a variety of factors for middle market businesses, some believe the strategy can also deliver significant business dividends. Many Fortune 500 businesses have incorporated formal environmental, social and governance (ESG) measures to demonstrate to current and would-be investors and other key constituents a commitment to ethical practices and sustainability. In turn, some investors use the ESG criteria standards to determine potential company valuation and investment-level interest by assessing a business’s environmental stewardship; employee, supplier and community relationship management; and how the company leads and governs itself. Currently only 39 percent of middle market businesses are familiar with ESG measures, with larger middle market businesses being far more familiar than smaller (52 percent vs. 28 percent). Of those familiar 83 percent are using ESG to evaluate their own or others’ performance.
Against the backdrop of heightened transparency in the corporate arena, the absence of formality represents significant opportunity for many middle market businesses to improve their public profiles and their value in the marketplace at a time when both the general public and investors are placing a premium on businesses with strong social integrity.
The survey data that informs the index reading was gathered between July 16 and August 3, 2018. To learn more about the middle market and the MMBI, visit the RSM website.
About the RSM US Middle Market Business Index
RSM US LLP and the U.S. Chamber of Commerce have partnered to present the RSM US Middle Market Business Index (MMBI). It is based on research of middle market firms conducted by Harris Poll, which began in the first quarter of 2015. The survey is conducted four times a year, in the first month of each quarter: January, April, July and October. The survey panel consists of 700 middle market executives and is designed to accurately reflect conditions in the middle market.
Built in collaboration with Moody’s Analytics, the MMBI is borne out of the subset of questions in the survey that ask respondents to report the change in a variety of indicators. Respondents are asked a total of 20 questions patterned after those in other qualitative business surveys, such as those from the Institute of Supply Management and National Federation of Independent Businesses.
The 20 questions relate to changes in various measures of their business, such as revenues, profits, capital expenditures, hiring, employee compensation, prices paid, prices received and inventories. There are also questions that pertain to the economy and outlook, as well as to credit availability and borrowing. For 10 of the questions, respondents are asked to report the change from the previous quarter; for the other 10 they are asked to state the likely direction of these same indicators six months ahead.
The responses to each question are reported as diffusion indexes. The MMBI is a composite index computed as an equal weighted sum of the diffusion indexes for 10 survey questions plus 100 to keep the MMBI from becoming negative. A reading above 100 for the MMBI indicates that the middle market is generally expanding; below 100 indicates that it is generally contracting. The distance from 100 is indicative of the strength of the expansion or contraction.
About The U.S. Chamber of Commerce
The U.S. Chamber of Commerce is the world’s largest business federation representing the interests of more than 3 million businesses of all sizes, sectors, and regions, as well as state and local chambers and industry associations. For more information, visit uschamber.com and FreeEnterprise.com, like us on Facebook and follow us on Twitter.
ABOUT RSM US LLP
RSM’s purpose is to deliver the power of being understood to our clients, colleagues and communities through world-class audit, tax and consulting services focused on middle market businesses. The clients we serve are the engine of global commerce and economic growth, and we are focused on developing leading professionals and services to meet their evolving needs in today’s ever-changing business environment.RSM US LLP is the U.S. member of RSM International, a global network of independent audit, tax and consulting firms with more than 43,000 people in over 120 countries. For more information, visit rsmus.com, like us on Facebook, follow us on Twitter and/or connect with us on LinkedIn.