The Triple Bottom Line Blog

Here is a new study from IBM Global Business Services titled "Attaining sustainable growth through corporate social responsibility." Some of it simply confirms trends most of us in the "sustainability community" already recognize--for example, the fact that most companies are now beginning to look at corporate social responsibility initiatives as potential sources of business growth.

However, a couple of interesting observations from the report stuck out for me. Perhaps not surprisingly for a study from IBM, they relate to the information-management aspects of CSR.

1. Although the companies surveyed say they are pursuing CSR in large part because of demands from their customers, the great majority (76 percent) say they don't really understand what those customers expect or want. Most companies, it seems, relegate conversations about CSR to their sales, marketing, or PR people, which means that meaningful dialog about the topic doesn't generally involve line managers who have the power to make real changes in what the company does or how it does it.

It seems clear that this will have to change. After all, any company seriously interested in developing world-class customer service (for example) would make open dialog with customers about service expectations a high priority for its executives--and everyone, I think, understands this on some level. The same needs to be true when it comes to CSR.

2. When it comes to transparency, we in business tend to focus on the costs and the downsides: Can we really expose our inner workings to public scrutiny? Will transparency open us up to lawsuits or public embarrassment? Will it give our competitors a leg up? How expensive will it be to retool our IT systems to make it possible? etc. etc.

The IBM study suggests some interesting upsides for transparency--practical ways in which being open to outside scrutiny can actually reduce costs and lessen risks:

Increasingly, we believe that the degree to which a company is willing and able to open itself to stakeholder scrutiny will be a make or break factor in achieving CSR objectives. In fact, the company that invites more eyes on its operations can preempt problems that would otherwise become very expensive to solve.

To illustrate, the report discussses the challenges facing a manufacturing firm with thousands of suppliers around the world. (Hello, Nike.) How can it monitor and control the behavior of all the links in this vast supply chain? The temptation is to hunker down and go on the defensive, because the costs and complexities are simply so great. However, transparency offers a possible alternative:

But if a company clearly pledges to enforce standards, openly sets goals to improve upon its current abilities, and invites and enables stakeholders like NGOs to help monitor practices, then transparency not only relieves the business of some of the burden for monitoring, but strengthens relationships that were once adversial.

Obviously, this is easier said than done. But the greatest hurdle isn't technical--it's psychological. Companies need to develop the willingness to talk openly about what they are doing (and not doing) and to let outsiders verify the information for themselves; to give up a large degree of control over the data they generate; and to entrust their corporate message and values to people at all levels of the organization, not just a few designated spokespeople.

Let's face it, this is scary. And it will take plenty of internal conversation, self-examination, training, and re-education for many companies to get to the point of accepting this kind of openness. But those that do this sooner--and do it well--will have an edge over the competition, because they will be in a position to become "trusted partners" of their customers, not just in words but in fact.

Labels: IBM, Nike, Reporting and Transparency

One troubling question for today’s global managers is: How far out into the supply chain, and across what range of issues, do our responsibilities extend?

The answer: Further than you might think.

Nike was one of the first companies to realize, after repeated lashings by the media, that it did not hold the power to define its own responsibilities. Activists were turning public opinion against the company, and sooner or later Nike had to respond. That response was perhaps later rather than sooner, both for activists and for the company’s own reputation, but it happened in time for the company to survive – and even to turn the issue in its favor by striving for best-practices in this area.

But while the anti-Nike campaigns relied on boycotts and protests to push for corporate action beyond what was legally required, more recently human rights activists have found a legal basis for their demands. The Alien Tort Claims Act of 1789, originally intended as an anti-piracy measure (the old-fashioned kind of piracy, on the high seas), allows non-citizens to seek legal recourse in the US for violations of international law. Yes, that’s right: anyone, anywhere, can use the US court system to uphold the tenets of international law – tenets often based on norms and precedents, rather than deliberate legislation.

This Alien Tort Claims Act (ATCA) remained largely forgotten until the 1980s, but since then it has been used against Chevron, Chiquita, Coca-Cola, Exxon-Mobil, Firestone, Shell, Wal-Mart, and others.

Earlier this month, Drummond coal company won the first Alien Tort Claims case to reach a verdict; the company was ruled non-complicit in the killing of three union leaders of a Colombian mine. According to SocialFunds.com writer Bill Baue, however, the key take-away is not the verdict itself; it’s the fact that the case was taken seriously enough to reach a verdict. In other words, it was not dismissed, and the discovered facts rather than the legal basis gave Drummond its recent sigh of relief. Besides, there are appeals in progress.

And as Baue points out, tobacco legislation was defeated time and time again before it finally became a multi-billion-dollar liability for the corporations involved.

Chiquita is an interesting example, as some activists believe the company to be demonstrating best-practices in its transparency – openly admitting it paid “protection” money to different terrorist groups in Colombia. The company has since paid its fines and withdrawn from the country, but the pressure is not off. Less-friendly activists feel that the company’s actions are insufficient, and accuse it further of selling weapons to the terrorist groups involved. On the bright side, what Chiquita did was arguably to protect its workers; other companies stand accused of having their own workers killed.

One such company, Coca Cola, has been stubbornly (and foolishly) refusing to recognize the campaign against it. The company is the target of the “Killer Coke” campaign which was recently sweeping college campuses. Its alleged crime: failing to speak out when Colombian paramilitaries began killing its workers. A Coke spokeswoman says, "We were not complicit in what happened, so it wouldn't make sense for us to pay reparations. "But according to one of its accusers, Edgar Paez, Coke had another kind of complicity: "If the company had condemned the first death, there probably wouldn't have been any more." Managers take note: lawsuits and activist campaigns can be based on just on your company’s actions, but also on inaction.

An earlier example of high-profile corporate inaction is Shell Oil; a 1999 Harvard Business School case study examines whether the company should have acted to protect indigenous-rights leader and respected author Ken Saro-Wiwa, whose death sentence was eventually carried out despite international protest. Shell never took a stance on the issue, claiming it did not want to be involved in foreign politics – but at the same time, some argue that the Nigerian government suppressed activist campaigns in order to maintain a business environment attractive to Shell, and that failing to speak out made the company complicit.

In my own experience, managers dealing with supply-chain issues want to believe that they have all the answers, or can determine them pretty quickly. But these examples show otherwise. They show that:

• Your company can face not only reputational challenges and boycotts, but also legal challenges, based on human rights violations overseas.
  
• These challenges do not necessarily distinguish between your own workers and those of your suppliers – and may even extend to activists engaged in campaigns against your company.
  
• Your company can be accused not only of wrongful actions, but also of wrongful inactions – and of complicity.
  
• New campaigns spring up quickly, and what could never have been on your radar screen last year might make front-page headlines this year.

Remember: don’t learn the hard way. Keep your antennae out, and be aware of any accusations against your company. Think broadly of how blame might be interpreted, and engage early with your accusers. Listen to them, and show yourself open to finding the right solution. Statements and settlements will be less costly, and their goodwill will go further, if you make them early and proactively.

And always remember, just because you think you’re taking care of your supply chain doesn’t mean other important stakeholders agree – and doesn’t mean the press and the public will agree. Keep trying to do the right thing as you interpret it, but also keep your ears open, and be ready to react quickly even to issues you think are bunk. Human rights issues are growing in visibility and in scope, and it would be a shame to tarnish your reputation over them.

NOTE: In this post we originally misspelled the name of the country of Colombia as "Columbia," like the university. Thanks to reader Shoshana Grossman-Crist for showing us the error of our ways.

Labels: Bill Baue, Chiquita, Coca-Cola, Drummond, Human Rights and Child Labor, Nike, Shell Oil, Supply Chain

Browse the web for any Fortune 500 company followed by the word "watch," and you will find websites devoted to overseeing the company's activities. Use an expletive following the name and sites appear detailing grievances that run from reasonable to far-fetched to demented. (If you haven't already scanned the web for hostile sites aimed at your company, you should try it soon--just be sure to have the antacids within reach before you start.)

Olympic Watch is a recent addition to the watch sites. Dubbed the "Genocide Olympics" by human rights activists who have their eyes on China--for its role in Darfur, not to mention child and slave labor, capital punishment, forced evictions, political repression, and denial of free speech--the site aims to put pressure on Olympic sponsors to speak out against the host country's human rights abuses.

Putting pressure on the authorities directly may be hopeless, but associating big corporate brands with China's denial of basic human rights, might just work. Pressure on business to leave South Africa eventually worked to end apartheid, so why not oppressive practices in China?

The time is right: People in the United States are very upset with China right now, not primarily for human rights violations, but for lead paint on toy trains, poisonous toothpaste, contaminated food and a general concern that China might just grow bigger and faster than us.

So it's a good time to turn up the heat on human rights.

Sponsoring companies will maintain they can't be held responsible for the actions of the Chinese government. But that's like saying that you can’t be held responsible for poisonous toothpaste or child labor simply because you outsourced the manufacture to a third party. If your logo is on the product, it doesn't matter that the culpable party is a separate legal entity, or even a sovereign government. Just ask Nike. Or any of the companies that are under pressure on Darfur.

Corporate managers should be aware that:

1. Your company can be held responsible, and your brand held hostage, for the egregious actions or policies of the government in any country where you do business. This is why, for example, the pressure on Google to fight for free speech in China will continue.

2. You must consider that risk when making any investment in a country with suspect environmental or social policies, or one that is engaged in bad acts, even when your activities in the country have no direct connection to the activities in question.

3. You can't expect a free pass just because the specific operation you're involved in is politically blameless or even has positive connotations like those generally associated with the Olympic movement. Controversy can become attached to any activity under the right (or wrong) circumstances. Fair? Maybe not. But that's reality.

This doesn't mean you shouldn't do business abroad or attach your name to any widely-publicized event. But when you do, do your homework. Research likely areas of controversy; track the vagaries of public opinion constantly; and be prepared to respond honestly and pro-actively to attacks.

Above all, be clear in your own mind why you are choosing to associate yourself with a particular regime and how you intend to have a positive impact on the people whose lives you will be touching. Having a clear, coherent, and believable story to tell can go a long way toward defusing the hostility you may encounter.

Labels: China, Communications and Marketing, Human Rights and Child Labor, Nike, Olympics