Archive for the ‘Corporate Responsibility’ Category
Communicating Corporate Responsibility
Since public trust in the private sector has hit historic lows, demonstrating corporate responsibility has become even more important for today’s corporate leaders. Effective corporate responsibility - meeting (or exceeding) stakeholder expectations for financial, social and environmental performance -restores trust and credibility. Unfortunately, when companies attempt to talk about corporate responsibility, they often do more harm than good, causing even more damage to the company’s reputation. Common pitfalls are communicating instead of improving performance; ignoring reasonable critics; and reporting only what is required.
How can companies talk about corporate responsibility without shooting themselves in the foot? In my experience, companies that communicate corporate responsibility effectively follow seven rules.
1) Demonstrate, don’t assert.
Resist the temptation to demonstrate corporate responsibility via press release. Whenever a company talks about corporate responsibility, communication should follow action. Many skeptical audiences assume that corporate statements, if not misleading, will be self-serving and provide only a limited perspective. Assertions of corporate responsibility without the appropriate due diligence, policies, and actions backing them up will quickly prompt critics to highlight inconsistencies between word and deed. Just last week at the annual Business for Social Responsibility Conference, eBay CEO John Donahoe put it this way, “You can’t tackle your reputation until you tackle your actions.”
2) Get the facts.
Responsibility begins with accurate information. Without a clear understanding of conditions on the ground, companies cannot improve corporate responsibility performance. Accurate information, collected through due diligence tools like human rights impact assessments, not only informs smart business decisions, it minimizes the risks of communicating. Companies that provide policymakers with reliable information can reduce pressure for regulation. Companies that audit their operations can reduce the risk of legal liability. Accurate information is just as important for advocates who seek to improve corporate performance. A common set of facts provides a basis for engagement and collaboration among stakeholders.
3) Engage critics.
Most companies are exceedingly cautious and reluctant to engage critics. While a company may not agree with or ultimately adopt the recommendations of a critic, engaging critical external stakeholders in honest dialogue can earn credibility and demonstrate a corporate commitment to addressing the issues at stake. After Amnesty International released a 2003 report criticizing the human rights impact of a BP pipeline project, BP engaged Amnesty in dialogue, and sought to address the concerns by incorporating international human rights standards in the legal agreements governing the project. Engaging its main critic and taking stakeholder concerns seriously earned the company credibility. Engaging reasonable critics can also provide a company with valuable information and expertise, and set the stage for collaboration or partnership.
4) Be transparent.
Demands for greater corporate transparency are common in the wake of the financial crisis. Transparency has always been a hallmark of effective corporate responsibility. Communicating accurate information that is complete, relevant and measurable allows stakeholders to make their own assessments of corporate performance. As a rule of thumb, more information is better than less. High levels of transparency earn credibility with stakeholders and critics, create incentives for continuous improvement, and encourage the adoption of best practices. While companies that embrace full disclosure risk criticism, choosing to report as little as possible is a short-sighted strategy. For years, apparel companies resisted calls by advocates for full disclosure of factory locations. Despite its experience as a target of criticism, in 2005, Nike reversed the company’s longstanding position. By unilaterally disclosing all of its contract factory locations, Nike earned credibility while leveling the playing field among apparel brands and competitors. Nike’s principal rival, Adidas, ultimately disclosed its factory locations three years later. Companies must overcome cultural biases against public disclosure and seek levels of transparency sufficient to establish facts, demonstrate performance and earn credibility among stakeholders.
5) Define the company’s “sphere of influence.”
No company can, or should, assume responsibility for all the issues of concern to its stakeholders. Companies fall into the trap of accepting too much responsibility when other entities - governments, for example - must act to achieve lasting improvements. Conversely, companies that define their influence and responsibilities too narrowly risk a stakeholder backlash. A clear definition of a company’s sphere of influence, consistent with a company’s business, can go a long way toward meeting the expectations of stakeholders. The multi-stakeholder Global Network Initiative, for example, calls on its member companies to “prioritize circumstances where it has the greatest influence and/or where the risk to freedom of expression and privacy is at its greatest.” Leading companies evaluate and prioritize the corporate responsibility issues they face and allocate resources accordingly.
6) Earn credibility.
Third parties are the most powerful corporate responsibility communicators. The opinions of credible experts and independent stakeholders almost always carry greater weight than corporate assertions, especially in an atmosphere of mistrust of corporate motives. Independent monitoring was one of the first expectations of stakeholders when companies began to adopt voluntary codes of conduct. A single statement of support from a respected former critic can do more for a company’s reputation than years of corporate communication. But you have to earn that credibility. Ways companies have earned credibility include adopting widely accepted external standards, partnering with stakeholders, and acknowledging problems. The best corporate responsibility reports, for example, are notable for the candor with which they acknowledge failures and address performance obstacles.
7) Connect corporate responsibility to business strategy.
Stakeholders who value information on social and environmental performance look for evidence that a company’s corporate responsibility initiatives reflect an ongoing organizational commitment rather than an ad hoc response to an isolated issue. Are corporate responsibility efforts integrated, well-understood and rewarded at all levels of an organization, from the boardroom to the factory floor? Is every corporate function able to make the business case for corporate responsibility? The most effective communications demonstrate how a company’s corporate responsibility efforts advance key business objectives.
By adopting these best practices for communicating corporate responsibility, corporate leaders can avoid common pitfalls and focus on improving financial, social and environmental performance.
The Future of Corporate Human Rights Accountability
Many corporate counsel and human rights advocates will view last month’s $15.5 million settlement of Wiwa v. Shell, correctly, as further evidence that the Alien Tort Statute (ATS) is a viable tool for corporate human rights accountability. The future of corporate human rights accountability, however, is more likely to focus on human rights due diligence and reporting than human rights litigation. Companies and human rights organizations that hope to influence the business and human rights debate should devote resources to improving corporate human rights due diligence and to shaping human rights reporting requirements under national law.
Potential legal liability for corporate complicity in the worst forms of human rights abuse is now a permanent feature of doing business for most transnational companies. Some form of legal jurisdiction over the extra-territorial activities of home companies is increasingly common in OECD countries. For transnational companies doing business in the United States, the ATS provides foreign victims of the worst forms of human rights abuse a tool for holding corporations accountable for their actions abroad. (more…)
Yahoo!’s Human Rights Turnaround
Just like any other global company, Yahoo! must ensure that its local country sites . . . operate within the laws, regulations and customs of the country in which they are based.
– Yahoo! Spokesperson, September 2005
Human rights trump doing business. . . . Internet companies must learn when not to hide behind the notion that we are corporations so it is our number one obligation just to do business. It isn’t our number one obligation. Our number one obligation is to be good world citizens.
– Carol Bartz, Yahoo! CEO, Yahoo! Business & Human Rights Summit, May 2009
What a difference media attention, a lawsuit, Congressional hearings, and ousting the CEO makes. Like earlier corporate responsibility poster children under intense pressure from stakeholders (see Nike), Yahoo is transforming itself from a laggard to a leader.
Rebuilding Trust
Worth Reading: Harvard Business Review, June, 2009, special section: Rebuilding Trust
I’ve been teaching ethics in graduate business and communication programs at New York University for more than 20 years, and every semester we lament the decline of trust.
But this year seems to be worse than most. Trust in US corporations is at an all-time low, 38 percent, according to the 2009 Edelman Trust Barometer. And most other measures of trust in institutions also point to continuing declines.
The June issue of Harvard Business Review takes on the issue of trust with a 25-page special report, Rebuilding Trust. It’s worth reading. The package includes a forceful critique of business school curricula, a 100-year timeline of highlights and lowlights in the public’s trust of business, and a counter-intuitive piece on how despite recent events people may still be trusting too much.
But the real payoff is the first piece in the package, by James O’Toole and Warren Bennis. O’Toole is the Daniels Distinguished Professor of Business Ethics at the University of Denver’s Daniels College of Business, and Bennis is University Professor at the University of Southern California. The two are co-authors (with Daniel Goleman and Patricia Ward Biederman) of Transparency: How Leaders Create a Culture of Candor (Jossey-Bass, 2008).
The special report opens with O’Toole’s and Bennis’ conclusion:
“We won’t be able to rebuild trust in institutions until leaders learn how to communicate honestly — and create organizations where that’s the norm.”
Does Your Corporate Responsibility Program Have a Conscience?
A few years ago, I came across a twenty-five year old article from the Harvard Business Review, “Can a Corporation Have a Conscience?” The 1982 piece, written by HBS Professors Kenneth E. Goodpaster and John B. Mathews, Jr., applies principles of moral philosophy to what was then the relatively new field of corporate responsibility.
I was struck by the relevance of their analysis for business leaders struggling with corporate responsibility today. Since 1982, corporate responsibility programs have proliferated. Professionals seeking to design, implement and evaluate these efforts spend a good deal of time defining corporate responsibility for their organization. Is it compliance? Is it philanthropy? Or is it something more? I subscribe to the “something more” view and encourage my clients and students to go beyond compliance and philanthropy and define corporate responsibility as meeting the expectations of stakeholders.
Goodpaster and Mathews provide another definition, one that could help today’s executives trying to decide which corporate responsibility initiatives merit investment. Their definition suggests executives could measure a corporate responsibility program against two benchmarks: rationality and respect.
Maturing Multi-Stakeholder Programs
Voluntary “multi-stakeholder” programs have been a prominent feature of the corporate responsibility landscape for more than a decade. Launched by companies, industry groups, NGOs, governments and international organizations, programs like the UN Global Compact, the Voluntary Principles on Security and Human Rights, and the Fair Labor Association, bring together diverse actors to tackle common problems on the corporate responsibility agenda: human rights, labor standards, environmental standards, and transparency. Many of these pioneering efforts established best practices for subsequent multi-stakeholder collaborations.
But as the corporate responsibility field matures, many of these multi-stakeholder programs are struggling to remain relevant. Initial successes have been followed by substantial challenges. Stakeholders are questioning programs over the scope of their mandates, participation levels, and accountability and governance mechanisms. Some multi-stakeholder efforts face credibility and sustainability concerns with the potential to scuttle the programs altogether.
The Ruggie Report on Business and Human Rights: Lessons for Leading Companies
Harvard professor John G. Ruggie has submitted his third and final report to the United Nations Human Rights Council in his role as Special Representative of the UN Secretary-General on the issue of human rights and transnational corporations.
The Ruggie Report is an important benchmark that captures current mainstream thinking on key business and human rights challenges. Ruggie’s recommendations are likely to influence businesses, governments, and non-governmental organizations working to improve corporate human rights performance. Companies seeking to meet stakeholder expectations for corporate responsibility should become familiar with Ruggie’s work.
Corporate Responsibility in Global Supply Chains
Many leading corporate responsibility efforts are the result of stakeholder pressure on companies to improve labor conditions in their global supply chains. Since the 1990s, industries ranging from apparel, sporting goods and toys, to food, manufacturing and technology, have sought to demonstrate responsibility through supply chain compliance programs. Supply chain best practices – codes of conduct, independent monitoring, public reporting, and collaboration with nongovernmental organizations – have shaped stakeholder expectations of corporate responsibility initiatives generally, often setting the bar for other companies and industries.
Supply chain best practices continue to emerge. Key challenges for today’s leading companies include:
• Moving beyond monitoring to focus on supplier training and education;
• Addressing “code and monitoring fatigue” by consolidating brand, industry and multistakeholder compliance efforts; and
• Finding ways to demonstrate (and reward) improved social and environmental performance al all levels of global supply chains.
The opening panel provided a valuable survey of current trends by three experts on the challenges of responsible sourcing.
Marcela Manubens, Senior Vice President, Global Human Rights & Social Responsibility at Phillips-Van Heusen, noted that: (more…)
Mainstreaming Corporate Responsibility
Three years ago, when The Economist first published a special report on corporate responsibility, the magazine took a highly skeptical view, asking whether, to justify its activities, a company must do anything more than simply earn a profit?[i]
Not surprising, perhaps, that The Economist would echo the orthodox arguments of Milton Friedman, the economist who famously wrote in 1970 that the only “social responsibility of business is to increase its profits,” and that corporate social responsibility is a “fundamentally subversive doctrine in a free society.” [ii]
I was intrigued when the British magazine took up corporate responsibility again last month. It seems The Economist has had a change of heart.
The Economist’s 2008 Special Report acknowledges that corporate responsibility is now seen as mainstream by leading companies and concludes that it is worthwhile to single out corporate social responsibility “if it helps businesses look outwards . . . and think imaginatively about risks and opportunities.” [iii]
Why such a conversion in the space of three years? One reason may be the backlash generated by its 2005 Report, which was widely criticized by corporate responsibility practitioners and, reportedly, by members of The Economist’s own editorial staff.
It is more likely that The Economist is simply acknowledging business realities it can no longer ignore. (more…)