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A New Frontier for ESG: Responsible Sales

Oct. 18, 2021, 8:01 AM

Content moderation is a well-known environmental, social, and governance (ESG) issue for social media companies, who must determine how to apply their values to the actions of their users. Such sites have responded by posting public-facing acceptable use policies and details about their decision-making processes (for example, Facebook’s Oversight Board).

A broader range of companies are grappling with how their commitment to ESG is reflected by “responsible sales” issues—whether to serve certain customers at all, based on the corporation’s values.

Unlike content moderation, however, the principles and processes behind responsible sales decisions are often opaque, and sometimes ad hoc. As the prominence of responsible sales grows, some companies are considering adopting a more formal approach.

What Is ‘Responsible Sales’?

Recently, Patagonia pulled its merchandise from a popular ski resort after the resort hosted a fundraiser featuring politicians who had previously made claims of election fraud and faced criticism for their environmental records.

In another example, two booking platforms and hotels cancelled reservations during inauguration week after warnings that events could turn violent. In 2020, a number of big tech companies announced they would not sell facial recognition technology to police. And in 2021, two oil and gas companies suspended payments from a gas joint venture that would have reached Myanmar’s junta.

For every example of a responsible sales approach that a company chooses to publicize, however, there are multiple examples that stay out of the public eye. Every day, decisions are being reached about whether to provide consulting services, data analytics, or even just a seat at the bar, to customers whose values may not align with corporate ones.

As the past 18 months has increased scrutiny of those decisions, including from employees, investors, customers and partners, companies are re-considering their approaches.

How Can Companies Best Approach Responsible Sales Questions?

Many companies are considering adopting a more formal and comprehensive approach, which can have several advantages.

First, it can enable the company to reach better quality decisions than it would if it acted under time pressure, where important stakeholders may be engaged elsewhere, and individuals may have a difficult time separating personal perspectives from company ones.

Second, it can decrease internal controversy. Allowing business unit leaders and passionate employees to be heard in advance can head off the perception that decisions are being made unfairly.

Third, creating such formal policies and processes can help alleviate the concerns of other stakeholders, like customers and investors, by showing the company’s efforts to get these hard decisions right.

Key Questions

Some questions companies can ask themselves if they are considering formalizing their approach.

Would Formalizing Our Approach Minimize Trouble, or Invite it?

Companies who have not yet seen a significant impact on their brand or business results from responsible sales questions may ask whether formalizing their approach would create more difficulties—particularly by raising controversial questions—than it would solve. Given the increasing intensity of interest in corporate values, however, companies should be realistic about the chance that they will escape significant scrutiny.

How Much Knowledge About Our Customers Do We Have?

Expectations around responsible sales vary depending on the degree of knowledge a company has about who their customers are, and how they are likely to use a product and service. Policies that require a company to increase its scrutiny of customers may have the unintended consequence of making even desirable customers uncomfortable.

Should Any of the Resultant Policies and Processes Be Public?

Depending on the issues involved, companies may choose to publicize the existence of, and details about, their approach, or do so only reactively. Companies who do not publicize their approaches should be mindful that some aspects may be revealed to the press by employees.

How Detailed Should the Policy Be?

A policy that is more detailed can capture more of the benefits of addressing issues upfront, but may also unnecessarily create strife about hypothetical scenarios and decrease flexibility.

How Comprehensive Should a Policy Be?

Some companies have created specific responsible sales policies only for certain products and services (like facial recognition software), while others are broader. How comprehensive a policy should be will depend on the specific features of the company’s offerings, and any issues of internal fairness among business units.

Would Our Approach Implicate Legal, Regulatory, or Contractual Requirements?

Companies should consider any contractual commitments, along with legal issues (for instance, antitrust, trade, and privacy restrictions, or prohibitions on discrimination), that may be implicated.

Who Should Decide?

Identifying the appropriate internal stakeholders to review and approve a responsible sales policy, and make difficult decisions under it, is also important. Legal, communications, marketing, and business leaders should all have a seat at the table, but it may be important to have others involved. Given the potential impact of these decisions to a company’s brand and bottom line, it may also be appropriate to have oversight by the board of directors or one of its committees.

Given the increasing stakeholder interest in responsible sales, companies are considering whether and how to formalize their approaches, much as digital platforms have already formalized their approach to content moderation.

This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.

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Author Information

Carolyn Frantz is a senior counsel at Orrick, focusing on corporate governance and ESG issues, and the former corporate secretary of a Fortune 50 company. In her work supporting legal leaders and boards of directors, she regularly advises on corporate responsibility issues and policies.

Betsy Popken, special counsel at Orrick, is a seasoned practitioner in the area of business and human rights who advises clients on responsible innovation risks and opportunities. She focuses in particular on helping companies tackle issues raised by emerging technologies and serves on the World Economic Forum’s Responsible Use of Technology Steering Committee.