Substance sells: accountability and sustainability

From human rights and labour practices to the environment and sustainable development, corporate policy and conduct is on the public agenda. Especially now, when trust in business remains low after the battering it has taken on both sides of the Atlantic over the last few years.

Public relations and public affairs professionals have a fine line to walk in aligning private and public interests. They can walk that line and align those interests if they recognise that real commitment and performance matter most – and that only substance sells.

I am going to make this argument in three parts: first by explaining why and how corporate responsibility and corporate reputation are converging; second, by suggesting how the corporate responsibility agenda is moving towards an even more challenging one focused on accountability and sustainability linked to corporate strategy; and finally, by putting forth a series of brief propositions as to how corporate reputation can be aligned with corporate responsibility in ways that contribute to business success and a better world at the same time.

THE CONVERGENCE OF CORPORATE RESPONSIBILITY AND CORPORATE REPUTATION

This convergence is long standing and intensifying. The connection dates back several decades – perhaps crystallised most powerfully by the way Johnson & Johnson created goodwill through its handling of the Tylenol crisis or Exxon failed to do with its response to the Exxon Valdez disaster.

Even earlier, student and citizen activists emerged in the 1970s in Europe and North America to challenge multinationals to disinvest from apartheid South Africa and to pressure Nestlé to alter its infant formula marketing practices – both ideologically and emotionally charged issues that sent reverberations across the landscape of corporate reputation for years.

But, beginning a decade ago, the contours of that landscape shifted. Corporate social responsibility began to move from the margins to the mainstream, from its established niches in the environmental and socially responsible investment movements to the centre of public and media attention, and on to the agendas of multinational corporations.

By the mid-1990s, 'CSR' became shorthand for several concurrent developments: for those new pressures and expectations facing multinationals; for a range of new codes and initiatives addressing those issues; and for an emerging cottage industry of conferences and consultants seeking the attention of companies. The phenomenon became trans-Atlantic, and indeed global, as European and North American multinationals came under scrutiny and criticism in nearly every region of the world. There are several major reasons for this growing convergence between corporate reputation and social responsibility.

Power of NGOs

First, the power and impact of NGOs cannot be overstated, emerging from almost nowhere to challenge multinational corporations. A decade ago, Shell was rocked by the execution of Ken Saro-Wiwa and the Ogoni Eight by the Nigerian military dictator Sani Abacha and by the Brent Spar oil platform debacle in the North Sea. Human rights and environmental activists mobilised, public opinion was aroused and Shell was put on the defensive.

Nike, Gap and other footwear and apparel companies were soon to follow as they stood accused by NGOs and student activists of using 'sweatshop' factories. Company after company in sector after sector has since been confronted with internet-connected and media-savvy NGO campaigns raising tough issues and posing severe challenges to their reputations and even to their fundamental social licence to operate – all at a time when the global reach of these multinationals has been widening and their economic power deepening.

These campaigns were given a further political context and narrative by the pre-9/11 anti-globalisation movement that sought to put both multinational corporations and international governance institutions on trial.

Business has gained little love but much respect for the ability of NGOs to define and drive agendas that have forced individual companies and entire industries, as well as governments and international institutions, to react. The extent to which public perceptions and company reputations have been affected are reflected in studies that continue to rate trans-Atlantic trust in the brands of Amnesty International and Oxfam ahead of that in any multinational corporate brand in the world.

Moreover, according to John Elkington of Sustainability, the international NGO sector could become 'among the most influential institutions of the 21st century' as they are 'moving beyond a culture of criticism, to one of engagement with business and other partners in search of solutions'.

I believe that NGOs are already among those 'most influential institutions' and that business should engage them – but on terms defined carefully by companies and NGOs consistent with their own interests and appropriate roles.

Pressure from Ordinary Citizens

Second, a growing proportion of stakeholders around the world think that companies share responsibility with governments across a range of social and environmental issues. Not just advocacy NGOs but rising numbers of average citizens and opinion leaders alike believe that:

• oil, gas and mining companies have a responsibility to respect human rights wherever they operate and to limit their carbon emissions and other environmental impacts
• footwear and apparel companies have a responsibility to eliminate sweatshop labour practices in their suppliers' factories; that food and beverage companies have a responsibility not only to uphold stringent guidelines on product safety and chemical use but also to curb child labour in their agricultural supply chains in the developing world
• pharmaceutical companies have a responsibility to ensure access to HIV/AIDs medicines in sub-Saharan Africa and elsewhere by cutting prices drastically and relaxing patent protections so that cheaper generics can be marketed.

Virtually every industry is being challenged to address one or more of the most important and intractable issues on the global policy agenda, in ways that are posing both problems and opportunities for nearly every major multinational corporation in the world.

Declining Levels of Trust

Third, the wave of corporate governance scandals over the last several years on both sides of the Atlantic has further diminished trust in business and put corporate accountability front and centre as never before. Corporate governance scandals have even more effectively focused public attention on corporate conduct than have social and environmental issues – even those as compelling as sweatshop labour, human rights abuses, climate change and food safety.

While 'CSR' is seen by some in North America as an elite policy agenda, the corporate governance scandals have touched the public as basic fairness issues with tangible consequences for the tens of thousands of employees and investors who have lost their jobs and savings. The scandals have also imposed, sometimes brutally, the ultimate sanction on companies – the ruin of their reputation, brand and even business altogether as with Enron, Andersen, WorldCom and others.

Business Case Breaks New Ground

Fourth, corporate responsibility is gaining traction as the business case breaks new ground on two fronts.

• One is the still more accepted defensive case for managing reputation risk, safe-guarding social licence to operate and managing stakeholder relations.
• The other is the emerging affirmative case for gaining customer and employee loyalty, building markets for innovative products and services, creating competitive advantage, and attracting socially responsible investors among individuals and public institutions controlling billions of dollars of assets alike.

Increasing Momentum of the CSR Agenda

Fifth and finally, corporate reputation and responsibility have been converging because of the momentum that the corporate responsibility agenda has achieved. Whether the full business case for corporate responsibility is accepted or not, companies are faced with implacable forces and tough issues and choices, as the following list illustrates.

• The still cluttered landscape of competing standards and initiatives, even as the UN Global Compact and the Global Reporting Initiative have emerged, respectively, as the overarching frameworks among policy and reporting models.
• The debate over voluntary versus mandatory standards, still ideologically polarised on issues such as the UN Draft Norms on business and human rights.
• The continuing exposure to legal liability and litigation in US courts that has so alarmed extractive sector companies in particular and compelled the Bush Administration to intervene on their behalf in particular cases.
• The push for greater transparency, disclosure and materiality in reporting, with expectations continuing to grow as companies such as Gap and Nike set the bar higher with their recent reports.
• The sharpening focus on supply chains as the 'acid test' for corporate responsibility as brand reputations become indivisible from the performance of far-flung suppliers.
• The dilemma of confronting or engaging NGOs' critics, and if so on what terms and with what objectives and potential mutual benefits on the table.
• The discomfort of many in the business and NGO communities with blurred corporate roles that stretch the legitimacy, if not the capacity, of companies to solve problems and provide services that should be the primary responsibility of accountable governments.

Yet every major multinational, whether publicly supportive or privately sceptical of the contemporary corporate responsibility agenda, acknowledges that it nonetheless faces every one of these trends and issues, and that each poses a tangible risk or opportunity for the company's brand and reputation.

Even The Economist, in its widely read and debated 'sceptical' survey on corporate social responsibility in January 2005, still grudgingly conceded that 'the movement for corporate social responsibility has won the battle of ideas'. It forecasts that CSR will remain front and centre on corporate agendas, above all, because of its impact on companies' most valuable asset of all: their reputations.

BEYOND CSR – TOWARDS ACCOUNTABILITY AND SUSTAINABILITY

While this apparent victory of the CSR movement – or at least its growing mainstream acceptance – seems irreversible, the agenda is evolving and sharpening in ways that are already defining and redefining corporate reputations for important stakeholders. The multinationals that have demonstrated a commitment to corporate responsibility since the movement accelerated in the mid-1990s are now moving beyond CSR to embrace two sets of intertwined challenges. These will in turn help set the terms on which corporate reputations are judged for the next generation and beyond.

• The first challenge is accountability – the extent to which companies are transparent and accountable not only to their share holders but also to their diverse and demanding global stakeholders.
• The second challenge is sustainability – the extent to which companies contribute sustainable solutions to the toughest challenges, from the environment and energy to poverty and disease, which will shape the 21st-century world.

In my view, the terms 'corporate social responsibility' and its shorthand 'CSR' or even 'CR' obscure more than they illuminate the new expectations that are emerging for multinational corporations. They do so by implying that their economic functions are not positive contributions in themselves, and thereby play into the hands of critics who dismiss the entire agenda as anti-business. I believe that accountability and sustainability are concrete and measurable concepts – both for business and society.

Implications for Business

For business, accountability and sustainability are concepts that connect to the core of management discipline and strategic vision; they can safeguard brand reputation and shareholder value and become the basis of new business opportunities, markets and customers.

Implications for Society

For society, accountability and sustainability anchor business to democratic institutions and the rule of law; they can also mobilise and measure business solutions to social, economic, environmental and health problems from a local to a global scale. For both business and society alike, the concepts of accountability and sustainability can be framed in ways that are consistent with the legitimacy and capacity of companies to act in their own interest and the world's at the same time.

Yet business is weary of being the default key that is pressed in search of a solution to virtually every problem in the world. Society should be wary of expecting unelected – even if increasingly accountable – companies to take on roles and responsibilities better left to democratically elected governments or mandated to companies through legislation or regulation.

Even as they define and assume appropriate roles and responsibilities alongside governments and international institutions, NGOs and local communities, companies are testing and finding the limits as well as the possibilities of corporate responsibility. Indeed, they should acknowledge dilemmas beyond the legitimacy or capacity of a particular company or even industry to resolve on its own – provided that they are doing their part seriously and credibly.

No one company or industry can curb climate change, end sweatshop labour, eliminate poverty, eradicate HIV/AIDS or narrow the digital divide on a global basis. But every company, especially large multinationals, can lead by example in its industry and contribute solutions to these problems in the communities and countries where they operate. Leading companies make innovative commitments and deliver measurable progress, and find ways to communicate that progress even if it is imperfect and incomplete – as it almost always will be.

IMPLICATIONS FOR CORPORATE COMMUNICATIONS

Based on this analysis and my experience, I believe that the public relations and corporate responsibility worlds should share an interest in aligning corporate reputation with a post-CSR agenda that is increasingly focused on accountability and sustainability – and increasingly integrated with corporate strategy. Let me offer a list of ten maxims to help professionals, in both the corporate and agency worlds, align the reputations of their companies and clients with their social responsibility commitments and stakeholder expectations in mutually reinforcing ways.

1. Most importantly, substance sells and 'messaging' is secondary to the substance of the message. Corporate responsibility is fundamentally about making and delivering on substantive policy and business commitments in ways that are transparent and accountable to stakeholders – and stakeholders are satisfied only by performance that is communicated substantively and credibly.
2. Sometimes a company needs to recognise that it does not have a PR problem – it just has a problem. In my experience, the problem is sometimes ill diagnosed, particularly in the face of an NGO campaign or CSR-related crisis. It takes both wit and guts for public relations professionals – whether in-house or agency-based – to offer strategic solutions to substantive problems instead of tactical solutions to what are perceived to be communications problems.
3. The perfect is the enemy of the good in this new world. Everyone believes that 'nothing succeeds like success' – except in the CSR world, which has turned the definition of success inside-out. Corporate responsibility is not about perfect performance and final results; it is about serious commitment and continuous improvement. The companies that have done most in recent years to enhance their reputations are those that talk not just about progress and success, but about problems and mistakes. Credibility is the most precious asset that a company can build and safeguard in the corporate responsibility arena.
4. A little humility goes a long way towards establishing credibility. Companies that either duck the tough issues or hype their claims will not help themselves at a time when trust in business remains in short supply. A company that follows the lead of Gap and Nike by disclosing violations in its supplier factories and emphasising the challenges it faces in eliminating their causes will be credible – and commended for its forthrightness.
5. Recognise that NGO relations are becoming almost as important as investor relations, especially from a corporate reputation and communications perspective. View mainstream NGOs as legitimate stakeholders to engage through substantive policy dialogue – not as enemy combatants to fend off through counter-insurgency operations.
6. Remember that brands are becoming indivisible from their supply chains in many industries, and that serious mistakes or abuses on the part of suppliers anywhere can risk a company's reputation everywhere. The footwear and apparel industries have learned this lesson the hard way; now other sectors, from food and beverages to jewellry, gold and diamonds, are catching up.
7. Do your job or someone else might to the company's detriment. Do not let the legal, compliance or human resource functions take the place of public relations and public affairs professionals on issues where corporate responsibility converges with corporate reputation – especially not in a crisis. Be at the table in the executive suite when decisions are made on accountability or sustainability issues that will be judged carefully and perhaps critically by stakeholders.
8. Do not turn over CSR and sustainability communications, including non-financial reporting, to accountants or former accountants. Accountability is not accounting; it is aligning categories, numbers and trends with the values, policies and practices that the data should reflect. Non-financial reporting should be natural turf for public relations and public affairs professionals.
9. Do not hide or bury the CEO. Corporate responsibility – above all accountability and sustainability issues with a significant impact on reputation as well as performance – are too important to be delegated entirely away from the executive suite and the board room.
10. Recognise the primary importance of communicating corporate responsibility to employees – the most fundamental stakeholders of all. So much focus has been rightly placed on communicating the substance of accountability and sustainability commitments to non-traditional stakeholder such as NGOs. But it is no less important to communicate core values and commitments to the employees whose understanding and involvement is essential to bringing them to life.

This article featured in Market Leader, Winter 2006.