Understanding the cost of inaction is vital for companies, especially when it comes to social issues. The cost of inaction means not merely the monetary losses that companies may incur but extends to the broader social implications.
Companies that fail to do the "right thing" for society may face a decline in brand reputation, deterioration in community relations, and possibly legal issues. This compromises business financial stability and has an impact on the fundamental fabric of the society in which they operate.
Conversely, companies that identify these dangers can make ethical decisions that benefit society in the long run and result in long-term, beneficial change.
In this article, we'll explore the real cost of inaction, viewing it through the lens of its social impact.
A significant opportunity exists for large companies to engage with diverse suppliers, including Indigenous-owned, minority-owned, women-owned, and LGBTQ+-owned small businesses. By actively engaging with these suppliers, companies can support economic growth within various communities and foster a more inclusive and equitable business landscape.
A study by the Hackett Group showed that long-term supplier diversity programs generated 133% more ROI than businesses that continue to use only the same suppliers they have always used. It showed a $3.6 million increase in an organisation’s bottom line for every $1 million spent on procurement and operating costs.
Failure to engage with diverse suppliers, on the other hand, may mean passing up opportunities to contribute to broader economic development and social cohesion.
Neglecting mental health in the workplace has serious consequences, both financially and in terms of employee well-being in Australia. JobAccess General Manager Daniel Valiente-Riedl emphasises that failing to address mental health challenges costs Australian businesses nearly $11 billion per year.
According to a PwC and Beyond Blue report, this staggering amount includes $4.7 billion in absenteeism, $6.1 billion in presenteeism, and $146 million in compensation claims. With one in every five Australians experiencing mental illness within a year, the cost of inaction is not only financial, but also societal, affecting productivity, profitability, and employees' overall mental well-being.
The scope of this issue reaches beyond Australia's borders. The World Health Organisation has estimated that depression and anxiety, often exacerbated by poor working conditions, cost the global economy an eye-watering USD 1 trillion per year in lost productivity.
Trust is the foundation of any business, and when it comes to social responsibility, the cost of inaction can be high. In Australia, a trend has emerged in which businesses that ignore their social responsibilities find themselves at odds with consumer expectations and societal values.
The COVID-19 pandemic brought this to light, with businesses facing public backlash for failing to support employees or community welfare.
According to the 2020 Edelman Trust Barometer, 71% of people worldwide would lose trust in a brand that prioritised profits over people during the pandemic crisis. In Australia, airlines received criticism for their handling of employee layoffs during the COVID-19 pandemic, reflecting broader concerns about corporate ethics and social responsibility.
The long-term financial consequences of a company's management team's lack of diversity can be significant. According to a Boston Consulting Group study, companies with more diverse management teams realised a 19% increase in revenue due to innovation.
This statistic highlights the tangible benefits of cultivating a diverse leadership structure, not only in fostering innovation but also in contributing to the bottom line of the company. In contrast, a lack of diversity can result in missed opportunities for growth and innovation, potentially resulting in revenue loss.
The connection between diversity and financial success highlights the strategic importance of diversity in retention strategies, making it not only an ethical imperative but also a sound business decision.
The cost of inaction on Australian Indigenous communities has real social and economic consequences. Inaction perpetuates systemic inequalities, with Indigenous Australians having a life expectancy gap of 8.6 years for men and 7.8 years for women compared to the non-Indigenous population, as well as higher unemployment rates.
These statistics represent real lives, missed opportunities, and systemic neglect of cultural heritage, as evidenced by the endangerment of many Indigenous languages. Businesses must play a significant role in addressing these issues and can do so by taking a social stance, supporting healthcare initiatives aimed at closing the life expectancy gap, funding educational programmes to increase employment opportunities for Indigenous Australians, or investing in projects that preserve and promote Indigenous languages and culture.
Measuring the cost of inaction is critical for businesses and policymakers alike. For businesses, it emphasises the financial, reputational, and ethical consequences of ignoring social issues and guiding investments in community development, sustainability, and employee welfare.
On a larger scale, this measurement helps in the development of data-driven public policies, ensuring efficient resource allocation and targeted interventions for challenges such as those faced by Indigenous communities.
Finally, understanding these costs promotes strategic decision-making that is aligned with stakeholder interests and regulatory compliance.
Examining the cost of inaction reveals a complex and urgent issue that encompasses different layers of society.
The cost of inaction is far-reaching, from areas such as diversity, employee well-being, and consumer trust, to the macro-level, where global repercussions become apparent.
Acting on these insights isn't just a matter of good business or sound policy; it's a requirement for the long-term viability of our interconnected world.