Mar 26, 2021 - Economy

Companies face purpose paralysis

man's hand with fingers in shape of peace sign holding a roll of $100 bills

Illustration: Sarah Grillo/Axios

Companies may feel more pressure to speak out about controversies than in the past. But boycotts against Coca-Cola and Nike this week demonstrate why it's not always a cut and dry win if they do.

Why it matters: Two years ago, hundreds of top CEOs agreed their purpose shouldn't just be about shareholders, but all stakeholders — including their supply chains, customers and employees.

What's happening this week...

On the one hand, Coca-Cola is learning that if you speak up about something once, there is an expectation to follow through all the way:

  • Activists say they will boycott Atlanta-based Coca-Cola for not outright condemning a newly passed bill that changes voting laws in Georgia.
  • "This past summer, Coke and other corporations said they needed to speak out against racism. But they’ve been mighty quiet about this," organizer Bishop Reginald Jackson told the Atlanta Journal-Constitution.

On the other hand, retail brands like H&M, Nike and Burberry are learning that if you speak up about concerns, it can backfire if one of your top markets is notorious for evading those issues:

  • In China, all three companies are losing Chinese brand ambassadors, facing boycott calls and being wiped off state-controlled apps after speaking out against sourcing products from Xinjiang because of forced labor concerns.
  • "Companies are really in the crosshairs ... with the potential of losing access to the consumer market," Mary Lovely, a senior fellow at the Peterson Institute, a think tank, tells Axios.
  • If the subsequent stock price drops are any indication, there are fears the tension will crimp sales. Shares of Nike and Adidas fell as much as 5% on Thursday.

The bottom line: Companies have moved away from saying they care only about growth. But if standing up to issues also gets them in trouble, what should companies do?

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