Should companies worry about the war on woke?

If companies go woke do they go broke? The evidence would suggest that most backlashes are short-lived and new data suggests taking a stance can even be beneficial – but only if it is genuine, Ian Morris explains.

In recent years companies have certainly been more vociferous in professing their values and stances on issues such as DE&I, climate change, and racial justice – and many have suffered a backlash.

At the start of summer this was highly visible with widespread business support – particularly in the consumer sector - for the LGBTQ+ community, due to Pride month. Expressions of corporate support, blogs and articles on corporate diversity, equality and inclusion initiatives and the temporary adoption of rainbow logos are rife.

It can be a divisive topic. The US, which is highly politically polarised, has witnessed a significant backlash against companies deemed to be “woke”. Beer brand Bud Light, for example, recently faced boycotts and a dip in sales after a partnership with transgender TikTok star Dylan Mulvaney. Social media videos of conservatives shooting beer cans in protest were not uncommon.

But the “war on woke” is certainly not confined to the US. Sportswear brand Adidas recently suffered a wave of anti-trans sentiment after launching a trans-inclusive swimwear marketing campaign.

Many people still scratch their heads about why a beer or sportswear brand would even bother to take a vocal stance on contentious topics that, on the face of it, are unrelated to their core business purpose.

The head-scratching is not confined to members of the public. Last year influential fund manager Terry Smith accused Unilever’s leadership team of being “obsessed” with its sustainability credentials at the expense of running the business. He cited examples such as the decision by its ice cream brand Ben & Jerry’s to stop selling its products in Jewish settlements in the Israeli-occupied West Bank, which caused a huge furore last summer; and mocked the need for mayonnaise brand Hellmann’s to define its purpose (“fighting against food waste”).

Others have felt the backlash from activist investors who believe that some companies are focusing too heavily on responsible capitalism to the detriment of shareholder interests and financial performance.

But do so-called “woke” companies suffer financially in reality? Bud Light saw an initial dip in sales due to its perceived wokeness, but this quickly recovered.

In 2018 Nike suffered their own volatile protests in response to its support for American footballer Colin Kaepernick over racial justice issues. But, as with Bud Light, Nike saw an initial dip in sales before rapidly bouncing back.

The loss of some customers was more than cancelled out by the attraction of new ones, supportive of its committed stance and it seems the latter group is quietly growing.

A recent LSE study suggested that having LGBT-friendly corporate policies actually pays off, with greater profits and higher valuations, suggesting being more proactive could benefit a business financially.

The ability of socially-conscious companies to secure bigger profits is not just down to winning more like-minded customers, however. Such standpoints can also help companies to attract and retain a greater pool of talent and investment, each bringing numerous business benefits including a more productive workforce or a better reputation.

That is not to say the criticisms against company wokery can be ignored, whether from consumers who are tired of what some see as virtue signalling or cynical posturing, or from an influential fund manager who believes financial fundamentals are being burned at the altar of ESG.

These criticisms can have merit, especially when the “purposes” and “values” of a business or brand do not seem authentic.

If a company decides to support a particular social cause as a genuinely core value, then great. They must stand up for that.

But they need to be able to justify why they support it publicly and with staff, and they should make 100% sure that their actions – the policies, procedures and behaviours they instigate – mirror their words.

Purpose and values are laudable when they are genuine and authentic, and a socially conscious business should not necessarily suffer any negative financial impact because of their values.