RSM Survey Highlights Social Responsibility and Diversity & Inclusion in the Middle Market

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.

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.