Since the financial crisis of 2007-2008, skepticism (and even downright hatred) of the financial services industry has been high -- and many would say for good reason. To that end, governments, advocacy groups and other stakeholders have focused intensely on creating a more responsible industry. But how much has really changed in the past five years? Is the industry really modifying its core business practices in the interest of corporate social responsibility (CSR), or is it just smoke and mirrors (again)?
At the 2014 BSR conference in New York City this week, a group of expert panelists assembled to discuss just that. The conversation was dynamic and drew enthusiastic participation from audience members across multiple industries. (Stay tuned for more coverage of this thought-provoking panel discussion next week on TriplePundit.)
I had the chance to sit down with Andrew Plepler, global corporate social responsibility executive for Bank of America, before the panel on Thursday. Plepler has been with B of A for more than a decade -- meaning he was the guy who bravely pitched CSR ideas in board rooms before the crisis, with members who may or may not have been receptive. Now, five years later, he's working on annual CSR reports and serving as the smiling face on videos explaining what responsibility means for the company. Since he's seen the issue come full circle, I was intrigued to hear his thoughts.
TriplePundit: What did you see as some of the gaps that existed as far as CSR in the financial services industry before the crisis, and how has that changed?
Andrew Plepler: Through every crisis, there comes something good. And I think that one of the outcomes of the financial crisis is there has been, certainly at our company, a certain amount of introspection and reflection about the role of the company in society. Philanthropy has been historically viewed as 'philanthropy and volunteerism,' and I think through the financial crisis obviously what became paramount is: What is our role in a global economy going forward?
The good news is: The result of that has been far more integration of the principles of CSR into the actual operation and governance of the company. So, we've moved from the old model of philanthropy -- "Oh, we do something over here in the philanthropy group" -- to now I'm sitting at the table with people in global wealth management about clients that want to invest in sustainability. I sit with the consumer bank talking about how to create products that meet the needs of all of our customers, including low-income customers, and what we can do to mitigate the foreclosure crisis in neighborhoods and communities.
So, [the question has moved to]: How do we deploy all of our assets and resources at the company across the enterprise to be a positive force in society? As opposed to years ago: How do we make some grants and demonstrate that we're part of the community?
3p: Can you speak to some of those steps Bank of America is taking to address the foreclosure crisis?
AP: The company certainly had a very aggressive outreach component: Do outreach events, get people in the community to work with borrowers to understand what their options were. It was both the right thing to do and in the company's interest. Contrary to what sometimes is the narrative out there: The last thing the bank wants to do is foreclose. It's expensive; it's devastating to the reputation of the company; it's complicated; it presents legal risk. A sustainable loan modification was always the first desire on the continuum. If you can keep somebody in their home making mortgage payments, that's better for everybody -- better for the homeowner, better for the neighborhood, better for the bank.
That was not possible with everybody, with the devastating nature of the financial crisis and unemployment and the drop in property values being the chief culprits. It's very hard to keep somebody in their house who didn't have any income. So, for those situations we tried all sorts of ... continuum of solutions.
And then the last resort being foreclosure, then you're dealing with properties in these neighborhoods that needed to be disposed of in ways that didn't damage the neighborhood. Because the other issue that we're seeing more of now is: Vacant properties in distressed neighborhoods are the worst thing for communities -- they're not on the property tax rolls, they don't have occupants maintaining the property. So, we're really working now on some initiatives around: How do you get those properties disposed of in a way that is the best outcome for the community?
3p: Definitely. I've seen that firsthand myself. Where I live in Philadephia, there is a massive vacant land problem, and that's a big issue there. What are some of the options you use to deal with vacant homes?
AP: It's a fairly complicated topic, but if we own it in many cases we are able to donate it to a nonprofit. We've had a fairly aggressive military donation program of over 1,000 properties to returning military veterans, [as well as] several thousand properties donated to other nonprofits, including Habitat for Humanity, who can work with the neighborhood to get a first-time homebuyer or a client that they work with into those properties.
A lot of these properties need a lot of rehab work. So, that's another piece that we can work with nonprofits to get the property back up to a condition where it's habitable. In some of these communities, the timeline to go to foreclosure is so long that a property sits vacant for three or four years. That's a horrible outcome for everyone. So, you're trying to cut those timelines by working with municipalities. Mayor [Michael] Nutter in Philadelphia has actually tried some things like a fast-track kind of disposition. But donation, rehabbing the properties and expediting the foreclosure process itself are sort of the keys.
3p: Given this mindset and how the company is looking at philanthropy and CSR now versus how you looked at it a few years ago, do you think this has been enough to ease the minds of consumers or shift public perception surrounding the financial services industry?
AP: It's going to be a long road. This is not going to be overnight. The narrative was very well entrenched that big banks are bad, big banks are greedy. That is going to be a very difficult narrative, and it's going to be a journey to change that perception.
Where I think we've seen some softening is with influencers who we're able to sit down with and have longer conversations about what we're doing, what the philosophy of the company is, what products we've introduced into the marketplace that are good for consumers, steps we've taken on things like overdraft fees that have helped millions of consumers manage their money better. When we're able to sit down with consumer advocates, civil rights groups and public officials and actually have that dialogue, there's more of a willingness to hear us out. And I think the attitudes of those folks is starting to shift.
I think the broader public is still very skeptical. It's much harder to sit down with the public -- we don't run an ad saying: "Hey, we're really good guys. Look what we just did on overdraft fees." That's a very hard conversation to have in a 30-second or 60-second ad.
So, you really need to be able to engage people in more substantive conversations about: "Okay, we get it. We've done plenty of reflection on the company and where we've been, but let me explain to you what we've done that has had a positive impact on communities." ... That's a longer conversation than a sound bite, but when you can have that conversation I think the attitudes do begin to change. But we're not naive. This is going to be a long road to restore reputation.
3p: Well, now that you have the platform, would you like to share some projects that Bank of America is working on that folks in the broader public may be surprised to learn about?
AP: The one that jumps up for me is overdraft fees. It's a little inside baseball: Our company went way beyond the new regulations around overdraft fees. So, if you went and used your debit card and you don't have money in your account, the transaction will be declined.
So, we shut down what was really a spigot of fees. Now, consumer advocates applauded us and thought it was fabulous; regulators thought it was fabulous: "Oh, you did something that really protected customers. You really put your customer above profits. That's really good."
But the public at large doesn't really know. You have to be really following the industry to know that little nuance -- and that's what's hard. There are things that are happening that are very meaningful that are still not widely known.
3p: It's interesting you say that because I know there has been a lot of regulatory pressure surrounding overdraft fees in recent years. Was that move in direct response to this regulatory pressure, or was it something the company wanted to do for its customers due to this greater integration of CSR into core business operations?
AP: It's a great question. There was regulation that was changing the way [overdrafts work], so that you would have to opt in. What we said is that we're not even going to try to get you to opt in. We're going to go beyond what the regulation calls for. We're just going to say, "You're not going to be permitted to spend money you don't have with your debit card." Period.
And that was what customers told us: "Don't let me spend money I don't have. Don't surprise me. Don't have hidden fees." So, it was in response to both customers and really proactive discussions with consumer groups and civil rights leaders to [find out] where the real pain points are and what we need to do. It was really a reaction to both the customer feedback and the advocates' feedback.
3p: So, you referred to this as a journey. What do you think still needs to be done in this space, and what do you hope the next steps will be for Bank of America and the financial services industry as a whole?
AP: I think governance is huge. Today at the company for the first time we have a CSR governance committee that my boss, Anne Finucane, who's the global strategy officer with the company and directly reports to [CEO] Brian Moynihan, chairs. And it's made up of business leaders from across the company -- first time we're doing this. So, now we have quarterly meetings with people from commercial banking, global corporate banking, wealth management -- all in a meeting with an agenda exclusively focused on CSR issues. And those issues will be constantly evolving in terms of environmental issues that come up, human rights issues that could come up, employment issues, diversity and inclusion, where this committee will weigh in with an enterprise view.
It won't just be me sitting over here saying, "Hey here's a big CSR issue." It will really be engaging the leaders of the business to say, "How are we going to run the company [in a way that's] consistent with our commitment to corporate social responsibility?"
That's a big shift, and it allows us to penetrate where the real decisions for the company are being made ... and it allows CSR to play a bigger role in a company of our size.
3p: Very interesting. So, you're starting to move away from CSR being a department on its own -- and viewed as "those guys no one really wants to listen to," who have to come into the board room and pitch their concept -- to really integrating and having those board members be a part of the process?
AP (chuckles): That's right. Everyone used to applaud [an idea to] do a volunteer project, and everybody said: "Great, great. The CSR people over there will arrange the Habitat build." That's vitally important, but it can't be a stand-alone or the totality of our CSR program. And what the business discussion allows you to do is really drive things that the company is addressing that can be very meaningful.
So, our environmental initiative is $70 billion of capital that the lines of business can deploy in investing in renewables and making investments in our corporate workplace practices that really will have impact far beyond what $100,000 grant could mean.
3p: Do you think eventually, as you continue to expand your CSR and sustainability initiatives, those programs will begin to attract more customers, gain consumer trust and actually provide long-term financial benefit for the company?
AP: That's the holy grail right there. If you talk to the people in wealth management, institutional investors and high net-worth investors are starting to think about investing their values, particularly millennials.
I believe the ultimate nirvana will be: You start to see share price reflect the companies who are receiving investment flow of socially conscious investors. And my point that I keep saying is: I can't yet prove it but if you look at the trends, the flow of institutional investors saying, "We want socially responsible portfolios." We want Bank of America in those portfolios -- and that will be a big win. When you can actually demonstrate that link, then you really will be able to show that the company will perform better the better we get at this.
3p: And how do employees play into this? Do you feel expanding your efforts around CSR and sustainability engages employees and gets them excited about the company, rather than perhaps being reluctant to even tell others they work for a big bank?
AP (laughs): That was a huge issue in the past several years, and we talk about this a lot. We use the example of people going to their kids' soccer game saying, "I don't even want to talk about the company because people are just going to yell at me." [We're making efforts to] shift that now, so people can actually talk about a lot of the positive things we do as a company and feel a little bit more confident like they're on their front foot. [So they can feel like] if they're wearing their Bank of America T-shirt, they're not a villain.
Changing the psychology of the employee base is a huge part of CSR. Top talent, particularly this generation, they don't want to go to a company that has no soul. It's driving their choice of employer. So, one of the places we work really closely with is HR to say, "People are coming in for interviews, lets tell them about our CSR commitments." Because they want to hear that; they're interested in that. And I think it's really a big part of changing the culture of what had been the old, stodgy financial institution.
If you're going to compete for that next generation of talent, you better be able to convince them that you're serious about this.
3p: Definitely. Anything else you'd like to add?
AP: The stakeholder groups that [we] hit on I think are exactly the way you have to think about this: your business partners, your employees, the investor community and then influencers who can begin to reshape the narrative of the company. If we're able to convince all those stakeholder groups that this is for real, I think the company is going to be very successful -- and you have to think in terms of the success of the company as you're positioning CSR.
You're going to be a much more credible partner within an institution like ours if you can demonstrate that if we conduct ourselves consistent with these principles, it's not a detriment to the performance of the company; it's actually an asset. That's the win-win.
Image credit: Vincent Breton
Based in Philadelphia, Mary Mazzoni is a senior editor at TriplePundit. She is also a freelance journalist who frequently writes about sustainability, corporate social responsibility and clean tech. Her work has appeared in the Philadelphia Daily News, the Huffington Post, Sustainable Brands, Earth911 and the Daily Meal. You can follow her on Twitter @mary_mazzoni.
Mary Mazzoni is the senior editor of TriplePundit and director of TriplePundit's Brand Studio. She is based in Philadelphia and loves to travel, spend time outdoors and experiment with vegetarian recipes in the kitchen. Along with TriplePundit, her recent work can be found in Conscious Company and VICE’s Motherboard.