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Viewpoint<br />
<str<strong>on</strong>g>Business</str<strong>on</strong>g> & <str<strong>on</strong>g>policy</str<strong>on</strong>g> <str<strong>on</strong>g>perspectives</str<strong>on</strong>g> <strong>on</strong> <strong>corporate</strong> resp<strong>on</strong>sibility<br />
<strong>APCO</strong> WORLDWIDE
Large PR Firm of the Year<br />
PR News, 2007<br />
European C<strong>on</strong>sultancy of the Year<br />
Public Affairs News, 2007, 2006 and 2005<br />
PR Agency of the Year<br />
PRWeek, 2006<br />
Best Internati<strong>on</strong>al Agency in China<br />
New Fortune Magazine, 2004<br />
About <strong>APCO</strong> <strong>Worldwide</strong><br />
Founded in 1984, <strong>APCO</strong> <strong>Worldwide</strong> is an independently owned global communicati<strong>on</strong> c<strong>on</strong>sultancy<br />
with offices in major cities throughout the Americas, Europe, the Middle East, Africa and Asia.<br />
Clients include corporati<strong>on</strong>s, governments, industry associati<strong>on</strong>s and n<strong>on</strong>profit organizati<strong>on</strong>s.<br />
Headquartered in Washingt<strong>on</strong>, D.C., <strong>APCO</strong> includes am<strong>on</strong>g its clients seven of the top 10<br />
companies <strong>on</strong> Fortune’s Global 500. Core services include antitrust and competiti<strong>on</strong>; business<br />
diplomacy; business-to-business communicati<strong>on</strong>; coaliti<strong>on</strong> building and grassroots advocacy;<br />
<strong>corporate</strong>, investor and internal communicati<strong>on</strong>; <strong>corporate</strong> advisory; <strong>corporate</strong> resp<strong>on</strong>sibility and<br />
strategic philanthropy; creative services; crisis management; financial communicati<strong>on</strong>; global trade;<br />
government/parliament relati<strong>on</strong>s; issue management; litigati<strong>on</strong> communicati<strong>on</strong>; media relati<strong>on</strong>s;<br />
<strong>on</strong>line communicati<strong>on</strong>; opini<strong>on</strong> research; and positi<strong>on</strong>ing. <strong>APCO</strong> is a majority women-owned<br />
business. For more informati<strong>on</strong>, please visit www.apcoworldwide.com.<br />
Margery Kraus<br />
President and CEO<br />
700 12th Street, N.W.<br />
Suite 800<br />
Washingt<strong>on</strong>, D.C. 20005<br />
USA<br />
Tel: +1.202.778.1010<br />
Fax: +1.202.466.6002<br />
Ellen Mign<strong>on</strong>i<br />
Senior Vice President<br />
700 12th Street, N.W.<br />
Suite 800<br />
Washingt<strong>on</strong>, D.C. 20005<br />
USA<br />
Tel: +1.202.778.1000<br />
Fax: +1.202.466.6002<br />
Rachel Thomps<strong>on</strong><br />
Regi<strong>on</strong>al Director, Europe,<br />
Middle East and Africa<br />
90 L<strong>on</strong>g Acre<br />
L<strong>on</strong>d<strong>on</strong> WC2E 9RA<br />
United Kingdom<br />
Tel: +44.207.526.3600<br />
Fax: +44.207.526.3699<br />
Felicia Pullam<br />
Associate Director<br />
9/F, Cambridge House<br />
TaiKoo Place<br />
979 King’s Road<br />
H<strong>on</strong>g K<strong>on</strong>g<br />
Tel: +852.2866.2313<br />
Fax: +852.2866.1917
Foreword<br />
Welcome to the fourth editi<strong>on</strong> of Viewpoint, in which <strong>APCO</strong> professi<strong>on</strong>als<br />
share their thoughts, ideas and market insights <strong>on</strong> issues of critical<br />
importance to our clients and our work. We have dedicated this editi<strong>on</strong> to<br />
<strong>corporate</strong> resp<strong>on</strong>sibility (CR), <strong>on</strong>e of <strong>APCO</strong>’s str<strong>on</strong>gest areas of expertise<br />
and <strong>on</strong>e that fundamentally has shaped how we have developed and<br />
grown our own business. I trust you will find it as interesting to read as<br />
we did in putting it together.<br />
For the past 10 years, business executives, government agencies<br />
and n<strong>on</strong>governmental organizati<strong>on</strong>s (NGOs) have debated the value,<br />
importance and impact of CR. To us, that debate is over. We believe that <strong>corporate</strong> leaders now<br />
recognize they are an essential part of the societies in which they operate – essential for what<br />
they bring to the market, for the ec<strong>on</strong>omic and social value they bring to the community and for<br />
how they can help transform the social and envir<strong>on</strong>mental challenges of our time. Whatever frame<br />
of reference you use – <strong>corporate</strong> citizenship; the triple bottom-line; envir<strong>on</strong>ment, society and<br />
governance; or simply business in society – CR has helped to create this recogniti<strong>on</strong> and set the<br />
stage for global corporati<strong>on</strong>s to think differently about the nature of their instituti<strong>on</strong>s and their<br />
relati<strong>on</strong>ships with their publics.<br />
Like all business practices, CR c<strong>on</strong>tinues to evolve, and we decided to take this opportunity to<br />
look ahead and ask: what’s next? In the following pages, <strong>APCO</strong>’s senior CR practiti<strong>on</strong>ers from our<br />
offices around the world and members of our Internati<strong>on</strong>al Advisory Council share their thoughts<br />
<strong>on</strong> how CR will c<strong>on</strong>tinue to evolve. They have taken a look at a broad range of topics, from<br />
business-model innovati<strong>on</strong> to c<strong>on</strong>sumer activism in India; from the growing role of the media<br />
and NGOs in the Middle East to investor relati<strong>on</strong>s and <strong>corporate</strong> governance.<br />
The comm<strong>on</strong> thread from all regi<strong>on</strong>s is that while CR has made the global business marketplace<br />
much more complex, it also has made it potentially much more rewarding. The competitive<br />
marketplace demands that <strong>corporate</strong> investments add value and produce tangible results, and<br />
urgent social and envir<strong>on</strong>mental challenges pose serious threats to a company’s ability to grow. To<br />
maintain a healthy growth trajectory in a global marketplace, companies need to innovate in CR<br />
as much as in every other part of the business. CR offers opportunities for companies to use their<br />
core strengths and competitive advantages to create new markets, gain new customers and allies,<br />
enhance employee satisfacti<strong>on</strong> and create greater value for themselves, their shareholders and<br />
society. It is through this new lens that businesses will develop the next generati<strong>on</strong> of CR.<br />
I hope you find this Viewpoint of interest. I invite you to learn more about <strong>APCO</strong>’s work in CR by<br />
visiting our Web site at www.apcoworldwide.com.<br />
Margery Kraus is chief executive officer of <strong>APCO</strong> <strong>Worldwide</strong> and is based in <strong>APCO</strong>’s Washingt<strong>on</strong>, D.C., global headquarters.<br />
The opini<strong>on</strong>s expressed herein bel<strong>on</strong>g to the respective authors and do not necessarily reflect those of <strong>APCO</strong> <strong>Worldwide</strong>.
C<strong>on</strong>tents<br />
4 Looking Ahead<br />
<strong>APCO</strong> experts from around the world share their views <strong>on</strong> some of the hot topics that will<br />
shape the next decade in CR.<br />
10 Bey<strong>on</strong>d Reputati<strong>on</strong>: How Corporate Resp<strong>on</strong>sibility<br />
Triggers <str<strong>on</strong>g>Business</str<strong>on</strong>g>-Critical Research<br />
Myriam Ugeux-Gerault and Phil Riggins dec<strong>on</strong>struct the evolving role of CR and how<br />
research helps determine expectati<strong>on</strong>s and how to address them.<br />
12 Rethinking Corporate Resp<strong>on</strong>sibility<br />
Trevor Neils<strong>on</strong> looks at how companies can use targeted, proactive CR to make a difference<br />
in global issues as well as their bottom lines.<br />
15 Earning the License to Grow<br />
Ellen Mign<strong>on</strong>i and Rachel Thomps<strong>on</strong> see innovati<strong>on</strong> as the key to success in a world with<br />
increasingly scarce resources.<br />
16 The Importance of “The Authentic Enterprise”<br />
Roger Bolt<strong>on</strong> describes the challenges instituti<strong>on</strong>s face in the wake of changing rules for<br />
global business.<br />
18 Sustainability and the Stock Market:<br />
A Game Changer for Company Valuati<strong>on</strong>?<br />
Jeff Zelkowitz evaluates the link between socially resp<strong>on</strong>sible investments and<br />
company valuati<strong>on</strong>.<br />
20 Strengthening Your Market Entry Through<br />
Public-Private Partnerships<br />
Richard Hatzfeld offers advice for organizati<strong>on</strong>s looking to succeed in new markets within<br />
the global ec<strong>on</strong>omy.<br />
22 New Approaches in Strategic Philanthropy<br />
Tara Greco and James Robins<strong>on</strong> discuss the past, present and future benefits<br />
of philanthropy.<br />
24 Envir<strong>on</strong>mental Sustainability and Social Media:<br />
New Technology, New Voices, New Influence<br />
David Wescott examines the impact of <strong>on</strong>line peer-to-peer communicati<strong>on</strong> <strong>on</strong> shaping<br />
sustainability debates.
26 Less<strong>on</strong>s From Latin America: New <str<strong>on</strong>g>Business</str<strong>on</strong>g><br />
Models for Fighting Poverty<br />
Jennifer Silberman makes the case that companies in Latin America can help to transform<br />
low-income communities without sacrificing profitability.<br />
28 France’s Grenelle <strong>on</strong> Sustainable Development:<br />
Another French Revoluti<strong>on</strong>?<br />
Vér<strong>on</strong>ique Ferjou and Pazanne Le Cour Grandmais<strong>on</strong> observe how this sustainable<br />
development framework is changing how business is c<strong>on</strong>ducted in France.<br />
29 Viewpoint From the Arab Regi<strong>on</strong><br />
Cleopatra van de Winkel and Tamara Saeb evaluate the rise of CR in the Arab world and<br />
how it is affected by regi<strong>on</strong>al culture.<br />
31 Viewpoint From Israel<br />
Daniela Prusky-Si<strong>on</strong> views the evolving world of CR in Israel and how it is changing based<br />
<strong>on</strong> cultural norms.<br />
32 It Is Great – But, Is It Good for Us?:<br />
Looking a Gift Horse In the Mouth<br />
Noma Faku explores what it means to be a resp<strong>on</strong>sible <strong>corporate</strong> citizen in Africa’s volatile<br />
political climate.<br />
33 C<strong>on</strong>sumer Activism in India<br />
Dev Dasgupta probes the rise in c<strong>on</strong>sumer c<strong>on</strong>sciousness in the increasingly global<br />
Indian marketplace.<br />
35 Corporate Resp<strong>on</strong>sibility in Ind<strong>on</strong>esia in the<br />
Era of Reformasi<br />
John Arnold provides insight into the historical significance of CR in Ind<strong>on</strong>esia and how it<br />
came to be widely adopted.<br />
37 Corporate Resp<strong>on</strong>sibility in Vietnam:<br />
D<strong>on</strong>’t Waste Less<strong>on</strong>s from China<br />
Felicia Pullam and Claas Schaberg shed light <strong>on</strong> the similarities between CR c<strong>on</strong>ducted in<br />
China and Vietnam.
4<br />
<strong>APCO</strong> EXPERTS<br />
What are some of the most significant<br />
changes that you have seen in CR over<br />
the last few years? What has been the<br />
catalyst for those changes?<br />
Ellen Mign<strong>on</strong>i: The greatest change has been the<br />
increasing number of public-private partnerships.<br />
Moreover, engagement between companies and<br />
NGOs has become more substantive and transparent.<br />
Companies, governments and NGOs all realize that the<br />
issues we are dealing with are too big for any <strong>on</strong>e entity<br />
to address successfully in any sustainable manner.<br />
Working in partnership is the <strong>on</strong>ly way to go.<br />
Trevor Neils<strong>on</strong>: Companies are recognizing that CR is<br />
deeply integrated into brand management – both from a<br />
proactive and a reactive perspective. Smart companies<br />
can use CR to beat the competiti<strong>on</strong> by appealing to the<br />
interests of their customers.<br />
Rachel Thomps<strong>on</strong>: The biggest change is that the best<br />
companies recognize that they can’t take access to<br />
natural resources for granted anymore and need to lead<br />
by example <strong>on</strong> global soluti<strong>on</strong>s to resource scarcity. This<br />
imposes a need to earn a license to grow, not simply a<br />
license to operate in status quo terms. Earning a license<br />
to grow is a whole new level of CR strategy and practice.<br />
Kirk Stewart: A growing number of companies are<br />
embracing CR, creating a CR functi<strong>on</strong> within the<br />
company and executing broad-based initiatives. The<br />
driving force is largely reputati<strong>on</strong>al coupled with the<br />
growing number of c<strong>on</strong>sumers who take CR issues into<br />
account in their purchasing decisi<strong>on</strong>s.<br />
Felicia Pullam: In Asia, growth in CR is an integral part<br />
of the broader Asian ec<strong>on</strong>omic growth story and the<br />
resulting pressures <strong>on</strong> sustainability. In China, CR has<br />
g<strong>on</strong>e from a minor tactic to a serious strategic factor.<br />
CR is also a hot topic in Vietnam, Ind<strong>on</strong>esia, India,<br />
Singapore, Thailand and Malaysia. Obviously these<br />
markets vary significantly, but the opportunities for<br />
companies to collaborate with government, media and<br />
civil society are diverse. The drivers include the<br />
Looking Ahead<br />
<strong>APCO</strong> experts from around the world share their views<br />
<strong>on</strong> some of the hot topics that will shape the next decade in CR.<br />
reputati<strong>on</strong>– and relati<strong>on</strong>ship-building benefits gained by<br />
early adopters and recogniti<strong>on</strong> by governments of the<br />
benefits of enlisting corporati<strong>on</strong>s voluntarily to help<br />
address social problems. The commercial media – even<br />
when state run – also are paying attenti<strong>on</strong>. People are<br />
more aware of their rights as c<strong>on</strong>sumers, laborers and<br />
general members of society – and increasingly able to<br />
rally others <strong>on</strong>line.<br />
Barie Carmichael: Two trends are driving c<strong>on</strong>tinued and<br />
widespread adopti<strong>on</strong> of CR initiatives as part of <strong>corporate</strong><br />
governance. First, there is Generati<strong>on</strong> Y’s entry into the<br />
workplace. Many companies have recognized that this<br />
generati<strong>on</strong>’s focus <strong>on</strong> social resp<strong>on</strong>sibility and civic<br />
activism makes CR initiatives a prerequisite for recruiting<br />
the next-generati<strong>on</strong> workforce. Sec<strong>on</strong>d, there is increased<br />
emphasis <strong>on</strong> anticipating emerging issues as part of CR.<br />
Investors have a history of quickly punishing companies<br />
that fail to anticipate an issue that materially affects their<br />
bottom line. This is particularly true for failing to address<br />
inherent negatives in the company’s business model that<br />
have the potential to impact stakeholders negatively. The<br />
more successful the business, the more the inherent<br />
negatives are multiplied. In other words, inherent<br />
negatives are a byproduct of an enterprise’s success,<br />
making a business particularly ripe for criticism and<br />
potentially public outrage.<br />
Roger Bolt<strong>on</strong>: The most enlightened companies have<br />
begun to realize the opportunity to build trust and brand<br />
loyalty by adopting policies that align the company’s<br />
interest with the public interest. This involves more<br />
than policies to avoid harm (e.g. polluti<strong>on</strong>, child labor);<br />
it also means looking at the core business and finding<br />
opportunities to create value for customers while earning<br />
trust through socially resp<strong>on</strong>sible acti<strong>on</strong>s. A good<br />
example is the 2004 decisi<strong>on</strong> by insurance giant<br />
Aetna that all Aetna insurance policies would allow<br />
simultaneous payments for both palliative and curative<br />
treatments rather than – as had been the government<br />
and industry standard – requiring patients to choose <strong>on</strong>e<br />
or the other.
Chris Murck: There have been two key shifts: first, to go<br />
bey<strong>on</strong>d <strong>corporate</strong> charity (giving back to the community)<br />
to add the str<strong>on</strong>g focus <strong>on</strong> HSE (health, safety and<br />
envir<strong>on</strong>mental) compliance; and sec<strong>on</strong>d, to go bey<strong>on</strong>d<br />
those two comp<strong>on</strong>ents through the serious attempt to<br />
understand sustainability and social-impact issues of<br />
each successful business model.<br />
Murray King: In China, the main changes are government<br />
support for CR; the creati<strong>on</strong> of strategic, China-tailored<br />
CR programs by foreign-invested companies; and the<br />
recogniti<strong>on</strong> by Chinese companies of the need to develop<br />
CR programs. The catalysts for these changes include<br />
the government’s moves to emphasize sustainability over<br />
<strong>APCO</strong> EXPERTS 5<br />
rampant growth and the recogniti<strong>on</strong> that CR and civil<br />
society can help in delivering <strong>on</strong> government policies.<br />
Chinese companies are facing pressure to develop<br />
world-class CR programs to compete with foreign<br />
companies at home and, more frequently, abroad. There<br />
is increasing scrutiny of company practices by both local<br />
and global stakeholders. The Chinese public is<br />
particularly interested in product quality/safety and<br />
employee health and safety issues, and it also expects<br />
dem<strong>on</strong>strated commitment by multinati<strong>on</strong>als to China’s<br />
l<strong>on</strong>g-term development. CR also plays an important role<br />
in attracting and retaining people in the midst of a war<br />
for talent in the Chinese business c<strong>on</strong>text.
6<br />
<strong>APCO</strong> EXPERTS<br />
Can we say with c<strong>on</strong>fidence that CR is<br />
securely entrenched in business?<br />
Ellen Mign<strong>on</strong>i: Yes, for several reas<strong>on</strong>s. First, society has<br />
developed a new and different set of expectati<strong>on</strong>s for<br />
global corporati<strong>on</strong>s – they must engage <strong>on</strong> critical social<br />
issues. Sec<strong>on</strong>d, the bar <strong>on</strong> this has been raised, and I<br />
d<strong>on</strong>’t think it is going to be lowered. Third, corporati<strong>on</strong>s –<br />
at least the smart <strong>on</strong>es – have realized that their CR<br />
efforts really are helping them build new markets for<br />
their products and services, adding to the bottom line.<br />
Trevor Neils<strong>on</strong>: Yes, although it may not be called CR –<br />
and it needs to be expanded. Regardless of what it is<br />
called, companies are realizing that they need to develop<br />
a strategy to address global issues and their role in them.<br />
Rachel Thomps<strong>on</strong>: The idea that you need to do more<br />
than comply with the law is fairly well entrenched now.<br />
So is the c<strong>on</strong>cept of reporting <strong>on</strong> n<strong>on</strong>-financial<br />
performance, although there is still too much windowdressing<br />
in a lot of CR reporting. But the true test of<br />
whether CR is really embedded is in what’s coming out<br />
of the product innovati<strong>on</strong> cycle. How many products<br />
have been adapted for resource scarcity or to reach a<br />
billi<strong>on</strong> poor people? Apply that test and it looks a lot less<br />
mainstream than the CR community would like it to be.<br />
Kirk Stewart: No, because the majority of businesses<br />
have not deeply integrated CR into their business<br />
processes. There simply are not enough enlightened<br />
CEOs, many of whom are faced with a myriad of other<br />
business challenges that must be addressed.<br />
Felicia Pullam: I would say that expectati<strong>on</strong>s for CR are<br />
firmly entrenched in society and therefore also in<br />
business. These undefined expectati<strong>on</strong>s change and<br />
evolve, but they are growing steadily, and this will<br />
c<strong>on</strong>tinue. Some of the trendiness of CR likely will fade,<br />
and there could be disillusi<strong>on</strong>ment – some stakeholders<br />
have unrealistically high visi<strong>on</strong>s of what companies can<br />
or will do in the short term. However, I believe the hype<br />
will cool a bit as CR becomes a permanent part of the<br />
operating envir<strong>on</strong>ment.<br />
Barie Carmichael: With growing evidence of a recessi<strong>on</strong><br />
(in the United States, if not globally), the pressure to<br />
make the business case for CR <strong>on</strong>ly will increase. CR<br />
initiatives that cannot be linked to the core of the<br />
company’s business model will be at risk.<br />
Roger Bolt<strong>on</strong>: Many companies aren’t there yet. The more<br />
global and c<strong>on</strong>sumer-oriented a company is, the more<br />
likely it is to be committed to social resp<strong>on</strong>sibility<br />
programs. The more local and business-to-business it is,<br />
the less likely. But there’s little doubt, as enlightened<br />
companies show that socially resp<strong>on</strong>sible business<br />
practices can be a differentiator with customers – as<br />
General Electric is doing with its energy initiative<br />
Ecomaginati<strong>on</strong> SM . Competitors will have little choice but<br />
to follow suit.<br />
Chris Murck: Yes. Because the pressure of civil society is<br />
greater and more targeted, making scale and growth<br />
increasingly problematic, sustaining business success<br />
requires CR to be placed at the center of the business<br />
model. That in turn supports further success.<br />
Murray King: In China, CR is rapidly becoming<br />
entrenched am<strong>on</strong>g foreign multinati<strong>on</strong>als, although<br />
the focus still remains largely <strong>on</strong> CR programs which<br />
enhance resource efficiency, human resources<br />
recruitment and retenti<strong>on</strong>, and supply-chain<br />
management. Unfortunately, CR in China is somewhat<br />
c<strong>on</strong>strained by limited public awareness and an<br />
underdeveloped “independent” civil society, though<br />
these elements are steadily improving.
How are companies thinking about and<br />
measuring success in relati<strong>on</strong> to CR?<br />
Ellen Mign<strong>on</strong>i: For the most part, I think companies are<br />
able to define success – at least short-term success – for<br />
specific projects or programs. Bey<strong>on</strong>d that, there is a<br />
l<strong>on</strong>g way to go. Quantifying the return <strong>on</strong> investment is<br />
essential to sustaining efforts. We would not expect<br />
anything different from other core business practices,<br />
so we should expect it and deliver in CR.<br />
Trevor Neils<strong>on</strong>: Few companies are doing a good job<br />
of measuring the impact of their CR strategies,<br />
and those who do measure are often measuring the<br />
wr<strong>on</strong>g things. Issue-focused strategies need to include<br />
outcome-focused systems of measurement that are<br />
recognized as the best systems in the field where a<br />
company is working. For example, an educati<strong>on</strong>-focused<br />
CR program needs to be evaluated by the best<br />
impact-measurement practices in the educati<strong>on</strong> field.<br />
Rachel Thomps<strong>on</strong>: A lot of companies still think about<br />
CR success primarily in terms of getting a boost <strong>on</strong><br />
reputati<strong>on</strong>, so that’s what they measure: what<br />
stakeholders think of them. Some also are building very<br />
detailed dashboards that measure program outputs:<br />
people reached, carb<strong>on</strong> saved, etc. The two in<br />
combinati<strong>on</strong> are effective, but I also think there is a<br />
fundamental test of CR success based <strong>on</strong> radical product<br />
innovati<strong>on</strong>, and not enough companies are doing that yet.<br />
Kirk Stewart: There is clearly a movement toward<br />
measuring impact, although the number of companies<br />
actually doing this is still small.<br />
Felicia Pullam: This varies drastically from the leaders to<br />
the beginners. In some cases, there still isn’t much<br />
measurement. Emphasis <strong>on</strong> measurement and reporting<br />
is growing quickly, however, and more of our clients are<br />
interested in h<strong>on</strong>ing their management systems<br />
accordingly. As recruiting and retenti<strong>on</strong> are top issues for<br />
companies operating in Asia, there is an increased focus<br />
<strong>on</strong> measuring the effect <strong>on</strong> employee satisfacti<strong>on</strong>.<br />
Roger Bolt<strong>on</strong>: As Jeffrey Immeldt of GE is f<strong>on</strong>d of saying,<br />
“Green is green.” The best CR programs build trust with<br />
diverse stakeholders, leading to permissi<strong>on</strong> to operate<br />
and competitive advantages in the marketplace. That<br />
translates directly into the bottom line, which is how<br />
businesses ultimately are measured.<br />
<strong>APCO</strong> EXPERTS 7<br />
Chris Murck: Measurement and reporting remain<br />
challenging areas, where I expect the greatest change in<br />
the medium term.<br />
Murray King: For most large multinati<strong>on</strong>als in China, the<br />
CR focus is <strong>on</strong> human resources and staff retenti<strong>on</strong>. As<br />
CR programs focus <strong>on</strong> enhancing <strong>corporate</strong> reputati<strong>on</strong>,<br />
employee volunteerism and community outreach have<br />
been shown to reduce staff turnover and save m<strong>on</strong>ey<br />
<strong>on</strong> labor costs. Also, ensuring str<strong>on</strong>g c<strong>on</strong>trol over<br />
supply-chain labor and quality issues reduces the risk of<br />
crises, so this has been a sec<strong>on</strong>d focus, particularly in<br />
resp<strong>on</strong>se to the scrutiny that some industries face from<br />
internati<strong>on</strong>al NGOs. Energy/envir<strong>on</strong>ment-focused CR<br />
programs that reduce energy costs also generate direct<br />
cost-savings, while directly supporting government<br />
priorities. Unsurprisingly, such initiatives have grown<br />
in popularity.<br />
What changes do you expect to<br />
see over the next five years? What<br />
do those changes mean for corporati<strong>on</strong>s,<br />
both internally – for example,<br />
management and recruitment – and<br />
externally – for example, partnerships<br />
and communicati<strong>on</strong>?<br />
Ellen Mign<strong>on</strong>i: I think we will c<strong>on</strong>tinue to see an increase<br />
in companies talking to all of their stakeholders about<br />
their roles in society – what they are doing and the<br />
impact it is having. I think we will see greater<br />
transparency and a greater focus <strong>on</strong> measurement and<br />
impact. And I think we will see a c<strong>on</strong>tinued growth of<br />
public-private partnerships.<br />
Trevor Neils<strong>on</strong>: Corporati<strong>on</strong>s are going to begin to<br />
use CR issues to distinguish themselves from the<br />
competiti<strong>on</strong>. They will differentiate their products more<br />
proactively from the competiti<strong>on</strong> based <strong>on</strong> their social<br />
impact, and they will encourage initiatives that put<br />
pressure <strong>on</strong> competitors that d<strong>on</strong>’t have a sound CR<br />
strategy in place.
8<br />
<strong>APCO</strong> EXPERTS<br />
Kirk Stewart: The CR movement has gained c<strong>on</strong>siderable<br />
momentum over the past couple of years, and it seems<br />
to be accelerating. That, coupled with the increasing<br />
level of transparency and changing c<strong>on</strong>sumer<br />
preferences, is placing increasing pressure <strong>on</strong> companies<br />
to be socially resp<strong>on</strong>sible. It also has a growing<br />
importance to current and prospective employees,<br />
particularly am<strong>on</strong>g the millennial demographic,<br />
Generati<strong>on</strong> Y. Companies also are growing increasingly<br />
sophisticated in communicating about CR.<br />
Barie Carmichael: I would anticipate tighter alignment of<br />
CR initiatives with the core operati<strong>on</strong>s of the enterprise,<br />
particularly if the ec<strong>on</strong>omic downturn is more prol<strong>on</strong>ged<br />
than anticipated. Philanthropy still will play a role in<br />
corporati<strong>on</strong>s, but I would see it as an additi<strong>on</strong> to, rather<br />
than a part of, CR.<br />
Murray King: In my view, the main changes in China<br />
will be the development of grassroots community and<br />
c<strong>on</strong>sumer pressure <strong>on</strong> companies to develop CR<br />
programs that reflect their interests and c<strong>on</strong>cerns, rather<br />
than government-led top-down pressure, although this<br />
may take more than five years. Also, employees will be<br />
increasingly vocal in demanding CR programs that<br />
leverage their resources and expertise to benefit China’s<br />
development. This change likely will happen more<br />
quickly, particularly given the catalyst of the May 2008<br />
Sichuan earthquake relief efforts and the pressure from<br />
younger Chinese to see companies leverage their<br />
resources to do more.<br />
What are your key tips <strong>on</strong> CR as a<br />
vehicle for and an opportunity to create<br />
new markets?<br />
Ellen Mign<strong>on</strong>i: It’s pretty straightforward: when a<br />
company helps to address a critical social issue, it<br />
strengthens the community and allows people the<br />
opportunity to create better lives through improved<br />
health, educati<strong>on</strong> and/or greater individual ec<strong>on</strong>omic<br />
empowerment that simply did not exist before. To<br />
paraphrase a quotati<strong>on</strong> our CEO heard at Davos <strong>on</strong>e<br />
year: “You can’t have a successful business in a failed<br />
society.” But you can have greater success in business<br />
by helping to ensure that society succeeds.<br />
Trevor Neils<strong>on</strong>: In the developing world, companies<br />
who seek to enter new markets have the opportunity to<br />
build positive reputati<strong>on</strong>s by announcing a CR strategy to<br />
help developing countries deal with their most pressing<br />
social problems.<br />
Felicia Pullam: There are significant opportunities for<br />
this in Asia. Unfortunately, some companies have tried<br />
to bring over green business models or other CR-related<br />
strategies from the West without doing the groundwork<br />
to build understanding and appreciati<strong>on</strong> am<strong>on</strong>g<br />
Asian stakeholders.<br />
Kirk Stewart: We’re definitely starting to see CR serving<br />
as the innovati<strong>on</strong> behind the development of new<br />
products and services for the middle and bottom of the<br />
ec<strong>on</strong>omic pyramid. But again, this is limited to <strong>on</strong>ly a<br />
few companies.<br />
What are your thoughts <strong>on</strong> how<br />
government views of CR may shift,<br />
and <strong>on</strong> how the investment community<br />
might shape CR?<br />
Ellen Mign<strong>on</strong>i: I think we’ll see governments accessing<br />
innovati<strong>on</strong>, research and development, management<br />
skills and results orientati<strong>on</strong> that companies bring to the<br />
table. Governments certainly will see companies as<br />
critical partners in developing soluti<strong>on</strong>s to current<br />
problems, as well as resources <strong>on</strong> how to prevent<br />
new <strong>on</strong>es.
Trevor Neils<strong>on</strong>: There is no pressing global problem that<br />
can be addressed without partnership between the<br />
private and public sectors. Governments must work in<br />
partnership with companies to address these problems<br />
in order to be successful.<br />
Rachel Thomps<strong>on</strong>: Governments increasingly will set up<br />
CR liais<strong>on</strong> functi<strong>on</strong>s and sp<strong>on</strong>sor surveys and studies,<br />
but because governments everywhere rely <strong>on</strong> business to<br />
drive the growth and job creati<strong>on</strong> that governments claim<br />
as their own achievements, they will regulate CR <strong>on</strong>ly if<br />
business’s failure to act creates public outcry. I think<br />
water will be such an issue in many regi<strong>on</strong>s in the next<br />
few years. We are also seeing renewed pressure for the<br />
inclusi<strong>on</strong> of envir<strong>on</strong>ment and labor standards in<br />
internati<strong>on</strong>al trade agreements. The best way to counter<br />
that pressure is to improve domestic governance of these<br />
issues, including through greater attenti<strong>on</strong> to voluntary<br />
CR. As for the investment community, the resource<br />
scarcity agenda will help shock the mainstream system<br />
into taking a deeper and broader look at resp<strong>on</strong>sible<br />
business strategies. Goldman Sachs’ SUSTAIN<br />
methodology – analysis of the sustainability of <strong>corporate</strong><br />
performance – is an important step. I hope they will<br />
extend and mainstream it.<br />
Kirk Stewart: There has been a lot of discussi<strong>on</strong> about<br />
increased government regulati<strong>on</strong> pertaining to CR, but I<br />
d<strong>on</strong>’t see that happening <strong>on</strong> a very fast pace except in<br />
isolated cases. I also think the investment community<br />
has been slow to take CR seriously into c<strong>on</strong>siderati<strong>on</strong> in<br />
evaluating company performance and valuati<strong>on</strong>.<br />
However, there does seem to be some recent momentum<br />
in this regard. By and large, I believe the investment<br />
community remains largely disinterested unless CR<br />
directly impacts the performance of the business.<br />
Chris Murck: Government increasingly will legislate <strong>on</strong><br />
sustainability based <strong>on</strong> best practices developed as<br />
voluntary CR programs. Climate change is <strong>on</strong>e example.<br />
Felicia Pullam: Many of the governments of developing<br />
Asian countries have recognized the potential for CR<br />
to help meet some of the substantial social and<br />
envir<strong>on</strong>mental challenges they are facing. Some<br />
governments have shown str<strong>on</strong>g interest in public-private<br />
partnerships, which unfortunately are extremely<br />
challenging due to high expectati<strong>on</strong>s and limited<br />
experience with balanced partnerships.<br />
How do you think CR will evolve in<br />
developing countries?<br />
Kirk Stewart: I think developing countries will benefit from<br />
CR initiatives undertaken by companies in the developed<br />
world, as well as a host of new products and services<br />
specifically being created to serve the bottom of the<br />
ec<strong>on</strong>omic pyramid.<br />
Rachel Thomps<strong>on</strong>: As resource scarcity increases, I<br />
suspect we will see the emergence of more CR-focused<br />
laws in resource-rich countries as a c<strong>on</strong>diti<strong>on</strong> of<br />
investment. There is also a need for a larger number of<br />
“home-grown” companies in developing countries to<br />
embrace CR in order to counter <strong>on</strong>going pressure for<br />
trade protecti<strong>on</strong>ism <strong>on</strong> labor and envir<strong>on</strong>ment issues. It<br />
would be good to see more leading companies, including<br />
those from emerging markets, coming forward so<strong>on</strong> with<br />
their own equivalents of GE’s Ecomaginati<strong>on</strong>; Microsoft’s<br />
Unlimited Potential initiative, which aims to bring<br />
technology to the next five billi<strong>on</strong> people; and Tata<br />
Motors’ Nano car, an inexpensive, envir<strong>on</strong>mentally<br />
friendly vehicle.<br />
Felicia Pullam: Although it will obviously vary across Asia,<br />
I think we’ll be seeing more issue management that’s<br />
clearly tied to CR. There is no shortage of CR issues that<br />
have plagued the reputati<strong>on</strong>s of multinati<strong>on</strong>als in the<br />
West for years, but have not yet “popped” in Asia. Yet<br />
they are there – and ripe for disgruntled c<strong>on</strong>sumers to<br />
blog about or for local journalists to dig into. There is still<br />
an opportunity to get ahead of these issues proactively,<br />
but unfortunately many managers d<strong>on</strong>’t seem to be<br />
c<strong>on</strong>sidering “pre-emptive” stakeholder engagement, and<br />
they are often not implementing relevant North American,<br />
European or even global <strong>corporate</strong> policies in Asia. It is<br />
already clear that if multinati<strong>on</strong>als are caught with double<br />
standards in terms of CR between China and the West,<br />
Chinese c<strong>on</strong>sumers might not be quick to forget. We’ll<br />
likely be seeing more of that so<strong>on</strong>. Furthermore, it’s<br />
important to recognize that many issues related to core<br />
products or operati<strong>on</strong>s take very different cultural forms.<br />
Serious research into attitudes about business challenges<br />
could improve <strong>corporate</strong> strategy to ensure companies are<br />
positi<strong>on</strong>ed <strong>on</strong> the right side of the issues in the l<strong>on</strong>g run.<br />
Biographies of <strong>APCO</strong>’s expert c<strong>on</strong>tributors are available <strong>on</strong>line at<br />
www.apcoworldwide.com.<br />
<strong>APCO</strong> EXPERTS 9
10<br />
MYRIAM UGEUX-GERAULT AND PHIL RIGGINS<br />
Bey<strong>on</strong>d Reputati<strong>on</strong>: How Corporate Resp<strong>on</strong>sibility<br />
Triggers <str<strong>on</strong>g>Business</str<strong>on</strong>g>-Critical Research<br />
Myriam Ugeux-Gerault and Phil Riggins dec<strong>on</strong>struct the evolving role of CR<br />
and how research helps determine expectati<strong>on</strong>s and how to address them.<br />
Research <strong>on</strong> stakeholder opini<strong>on</strong><br />
always seems to have been part of<br />
the DNA of CR. As CR evolves from<br />
c<strong>on</strong>cepts of reporting and “talking to<br />
critics” to expanded c<strong>on</strong>cepts of<br />
creating business and social value,<br />
it is worth asking why it is critical to<br />
understand the expanded role that<br />
research must play in CR and what<br />
are the most relevant tools for this<br />
evolving need.<br />
The immediate answer to the<br />
“why” questi<strong>on</strong> lies in the shift in<br />
behaviour that CR communicati<strong>on</strong> implies: a resp<strong>on</strong>sible<br />
organisati<strong>on</strong> first listens to its stakeholders to understand<br />
their expectati<strong>on</strong>s, then decides how best to resp<strong>on</strong>d,<br />
making changes where it can and building str<strong>on</strong>g<br />
argumentati<strong>on</strong> when it cannot. Corporati<strong>on</strong>s routinely<br />
c<strong>on</strong>duct surveys about the comparative CR expectati<strong>on</strong>s<br />
of their stakeholders. They all aim at bridging the gap<br />
between stakeholder expectati<strong>on</strong>s and <strong>corporate</strong><br />
behaviour. In this c<strong>on</strong>text, research is the initial<br />
step to any CR strategy, and communicators have<br />
a critical part to play in informing the process of<br />
designing that strategy.<br />
For some, CR c<strong>on</strong>tinues to be about the license to<br />
operate, but – for the best and most innovative<br />
companies – it is also a license to grow. Since<br />
expectati<strong>on</strong>s of resp<strong>on</strong>sible behaviour are now the norm<br />
and the bar c<strong>on</strong>tinues to rise, it is corresp<strong>on</strong>dingly<br />
harder to stand out and reap reputati<strong>on</strong> and direct<br />
business dividends by following a standard template for<br />
good c<strong>on</strong>duct without also adding an understanding of<br />
the relati<strong>on</strong>ship between innovati<strong>on</strong> and risk<br />
management. As companies innovate, it is vital that they<br />
ensure these new ideas c<strong>on</strong>form to ever-changing CR<br />
expectati<strong>on</strong>s in a proactive way. Not doing so runs the<br />
risk of innovati<strong>on</strong> failure and serious damage to<br />
<strong>corporate</strong> reputati<strong>on</strong>. This new CR reality – where<br />
traditi<strong>on</strong>al CR must align with the need for effective<br />
innovati<strong>on</strong> – means CR must enhance its place at the<br />
boardroom table with new tools designed to measure<br />
and address stakeholder expectati<strong>on</strong>s.<br />
Stakeholders have c<strong>on</strong>cerns and issues that are critical<br />
to them. These c<strong>on</strong>cerns and issues will be relevant to<br />
companies in varying ways and degrees as they<br />
innovate. The purpose of effective research is not <strong>on</strong>ly to<br />
identify these c<strong>on</strong>cerns and issues but also to assess<br />
which <strong>on</strong>es are relevant and in what ways, and to<br />
provide strategic guidance <strong>on</strong> what the company can<br />
and should do to address them given its business model<br />
and goals. Equally important, good research should<br />
provide guidance <strong>on</strong> what the company cannot or should<br />
not do. The goal is to be successful, not always to try to<br />
make every<strong>on</strong>e happy. Having good predictive research<br />
tools makes it easier to decide when acti<strong>on</strong> is required to<br />
ensure growth does not come at the cost of reputati<strong>on</strong>.<br />
How to determine that something is important?<br />
To help businesses balance innovati<strong>on</strong> and CR, <strong>APCO</strong><br />
has developed and c<strong>on</strong>tinues to expand tools for meeting<br />
this challenge. A starting point in our thinking was the<br />
belief that these new CR research tools must go bey<strong>on</strong>d<br />
reputati<strong>on</strong> management to support areas such as new<br />
product innovati<strong>on</strong>, informing the marketing functi<strong>on</strong> as<br />
products are developed and launched. Corporati<strong>on</strong>s are<br />
usually very good at understanding how customers are<br />
likely to react to a new product. However, rarely do they<br />
c<strong>on</strong>sider how key stakeholders such as regulatory<br />
bodies, NGOs, media and key opini<strong>on</strong>-formers will react.<br />
<strong>APCO</strong>’s Pathfinder model uses a tailored, comprehensive<br />
research approach to understand and help navigate the<br />
stakeholder landscape before and after a launch. By<br />
factoring in these audiences’ views, Pathfinder helps<br />
minimise business and reputati<strong>on</strong> risk and maximise the<br />
likelihood of a successful launch – and maintain a<br />
positive <strong>corporate</strong> reputati<strong>on</strong>.
The <strong>APCO</strong> Sustainability Issues M<strong>on</strong>itor (SIM) takes an<br />
outside-in view. SIM identifies the financial, societal and<br />
envir<strong>on</strong>mental performance issues that matter in relati<strong>on</strong><br />
to a specific industry and the acti<strong>on</strong>s being taken by the<br />
industry to mitigate or transform them. It measures over<br />
time the evoluti<strong>on</strong> in salience – awareness and<br />
importance – of a specific set of issues and reports <strong>on</strong><br />
how it motivates acti<strong>on</strong>s within a market sector. As such,<br />
it leads to specific CR recommendati<strong>on</strong>s, risk<br />
management informati<strong>on</strong> and a benchmark for acti<strong>on</strong>. It<br />
can then link back to business objectives and reputati<strong>on</strong><br />
measurement to assess issue management performance.<br />
MYRIAM UGEUX-GERAULT AND PHIL RIGGINS 11<br />
These predictive research tools and others dem<strong>on</strong>strate<br />
that as CR evolves, practiti<strong>on</strong>ers and researchers must –<br />
and can – go bey<strong>on</strong>d the traditi<strong>on</strong>al communicati<strong>on</strong><br />
fields of percepti<strong>on</strong>, opini<strong>on</strong> or reputati<strong>on</strong> to show how<br />
public affairs and strategic communicati<strong>on</strong> directly<br />
influence business outcomes.<br />
Myriam Ugeux-Gerault is an associate director based in <strong>APCO</strong> <strong>Worldwide</strong>’s<br />
Paris office, a counselor <strong>on</strong> crisis and sensitive communicati<strong>on</strong> services<br />
in France and EMEA and a coordinator of multi-office accounts in the<br />
EMEA regi<strong>on</strong>.<br />
Phil Riggins is a director with <strong>APCO</strong> Insight ® , the opini<strong>on</strong> research group<br />
at <strong>APCO</strong> <strong>Worldwide</strong>, and is based in L<strong>on</strong>d<strong>on</strong>.
12<br />
TREVOR NEILSON<br />
Rethinking Corporate Resp<strong>on</strong>sibility<br />
Trevor Neils<strong>on</strong> looks at how companies can use targeted, proactive CR<br />
to make a difference in global issues as well as their bottom lines.<br />
One sad fact about CR is that CR<br />
offices are often small, underfunded<br />
and somewhat powerless. They are<br />
departments that might be<br />
rewarding to work in, but which<br />
have no direct relati<strong>on</strong>ship to the<br />
company’s core business and where<br />
no ambitious career path makes a stop. It’s often <strong>on</strong>ly<br />
after a problem occurs that the average CEO might focus<br />
<strong>on</strong> CR issues and, by then, it is often too late to repair<br />
the reputati<strong>on</strong>al damage that can come with a crisis.<br />
Part of the problem is the name “<strong>corporate</strong><br />
resp<strong>on</strong>sibility” itself. For too l<strong>on</strong>g, CR has been seen as<br />
something companies “have to do” in resp<strong>on</strong>se to<br />
external pressure. The majority of companies think of<br />
issuing an annual CR report, making a token local<br />
d<strong>on</strong>ati<strong>on</strong> and generally staying out of trouble as the<br />
primary roles of their CR teams. Reporting al<strong>on</strong>e is<br />
increasingly becoming the CR focus of many companies,<br />
and efforts such as the Global Reporting Initiative<br />
(created by NGOs and the United Nati<strong>on</strong>s) have helped<br />
companies embrace the need for transparency in<br />
communicating about their envir<strong>on</strong>mental, ec<strong>on</strong>omic and<br />
social impact, but have, in some cases, given the<br />
involved companies an “out,” saying that they have d<strong>on</strong>e<br />
their part even if they have not made real changes or<br />
created real impact.<br />
It’s often <strong>on</strong>ly after a problem occurs that<br />
the average CEO might focus <strong>on</strong> CR issues<br />
and, by then, it is often too late to repair<br />
the reputati<strong>on</strong>al damage that can come<br />
with a crisis.<br />
Another underlying problem with CR is that NGOs and<br />
the United Nati<strong>on</strong>s agencies that created and have<br />
champi<strong>on</strong>ed this c<strong>on</strong>cept are not focused <strong>on</strong> sales or<br />
market share. They d<strong>on</strong>’t understand the business world,<br />
generally distrust corporati<strong>on</strong>s and think of CR as<br />
making companies “less bad.”<br />
To the c<strong>on</strong>sternati<strong>on</strong> of many activists, companies are<br />
motivated by profit and, in an era where missing<br />
earnings estimates by a few cents can send a stock<br />
plummeting, companies have little room to do anything<br />
that doesn’t directly help the bottom line.<br />
The good news is that an increasing body of evidence<br />
shows that companies that embrace strategic, proactive<br />
CR efforts can use those efforts to help address global<br />
problems – but also increase profits, build shareholder<br />
value and beat the competiti<strong>on</strong>. When used strategically,<br />
CR should help sell more products, motivate pers<strong>on</strong>nel<br />
and be applauded by shareholders. When used<br />
creatively, CR can be far more effective than traditi<strong>on</strong>al<br />
marketing techniques.<br />
There are three major reas<strong>on</strong>s why CR is becoming more<br />
important to companies: sustaining <strong>corporate</strong> growth,<br />
increasing public trust and acknowledging c<strong>on</strong>sumer<br />
c<strong>on</strong>cern about global issues.<br />
It’s good for sustained growth<br />
A company that seeks <strong>on</strong>ly short-term profitability has<br />
little c<strong>on</strong>cern with the impact it has <strong>on</strong> the world around<br />
it. Companies that want to build l<strong>on</strong>g-term shareholder<br />
value need to ensure that the processes through which<br />
they produce their goods or services do not harm the<br />
customers they seek to serve or the issues those<br />
customers care about. As the brilliant architect William<br />
McD<strong>on</strong>ough has observed, “a system that takes, makes<br />
and wastes” is not sustainable in the l<strong>on</strong>g term.<br />
A good example can be found in the toy recalls of the<br />
last two years. During those two years, the U.S.<br />
C<strong>on</strong>sumer Product Safety Commissi<strong>on</strong> issued 59 recalls<br />
of lead-tainted toys. The experience of <strong>on</strong>e of these<br />
companies helps illustrate the impact <strong>on</strong> shareholders.
RC2 Corporati<strong>on</strong> sells Thomas &<br />
Friends toys – wooden train sets<br />
and other items that are popular<br />
with young children. The<br />
company’s stock was trading<br />
above US$40 in June 2007.<br />
When its toy trains were recalled<br />
due to a lead pois<strong>on</strong>ing hazard,<br />
its stock dropped below US$30<br />
by August of 2007 – and that<br />
was just the beginning.<br />
The following February, RC2<br />
announced its annual financial<br />
results and disclosed that the<br />
overall cost of the recall was<br />
US$17.6 milli<strong>on</strong>. At that point,<br />
the stock dropped below US$20<br />
per share, where it has remained<br />
ever since – half its price from a<br />
year earlier.<br />
While this example may seem<br />
like a statistical outlier to some,<br />
today’s world of increased<br />
shareholder activism, improved<br />
supply-chain practice norms and<br />
global whistle-blowing make<br />
getting “caught” for harmful<br />
practices increasingly likely.<br />
Public trust in corporati<strong>on</strong>s<br />
has declined<br />
Never in American history have<br />
instituti<strong>on</strong>s had lower levels of<br />
trust with the public. A January 2008 Gallup poll found<br />
that 68 percent of citizens want corporati<strong>on</strong>s to have<br />
less influence, up from 52 percent in 2001. C<strong>on</strong>sumers<br />
have watched Bear Stearns, Enr<strong>on</strong>, WorldCom and<br />
assorted other scandals and bailouts and have developed<br />
a view that companies in general are not interested in<br />
doing the right thing, regardless of who gets hurt.<br />
But when a company gets involved in a pressing social<br />
issue, and works side-by-side with governments and<br />
NGOs, it is able to build a level of trust with the public<br />
that is far deeper than that which is built through any<br />
old-fashi<strong>on</strong>ed marketing or advertising effort. Through<br />
work <strong>on</strong> social issues, companies build broad networks<br />
of allies who validate them and communicate <strong>on</strong><br />
their behalf.<br />
C<strong>on</strong>sumers care more about global issues<br />
TREVOR NEILSON 13<br />
The last five years have seen a dramatic increase in the<br />
number and effectiveness of issue-centered movements<br />
involving corporati<strong>on</strong>s and large numbers of everyday<br />
c<strong>on</strong>sumers. Milli<strong>on</strong>s of people have joined the ONE<br />
campaign, which works to address African poverty.
14 TREVOR NEILSON<br />
Milli<strong>on</strong>s more have joined Save Darfur and other<br />
organizati<strong>on</strong>s working to stop the violence in Sudan.<br />
Al Gore’s “An Inc<strong>on</strong>venient Truth” and the movement that<br />
it catalyzed have milli<strong>on</strong>s of people changing their light<br />
bulbs and looking at their carb<strong>on</strong> footprints.<br />
It’s easier now for a c<strong>on</strong>sumer to Google the<br />
words “global warming” than it is to watch the<br />
evening news and, as a result, Americans have<br />
a growing interest in the world around them.<br />
C<strong>on</strong>sumers today can log <strong>on</strong> to YouTube and see video<br />
of Zimbabwe President Robert Mugabe’s security forces<br />
attacking protestors in Harare, the aftermath of the<br />
cycl<strong>on</strong>e in Myanmar and battles filmed by American<br />
soldiers and Iraqi civilians using camera ph<strong>on</strong>es in Iraq.<br />
It’s easier now for a c<strong>on</strong>sumer to Google the words<br />
“global warming” than it is to watch the evening news<br />
and, as a result, Americans have a growing interest in<br />
the world around them.<br />
The Anglo American Example<br />
The experience of the mining company Anglo American<br />
fighting AIDS in South Africa is a classic example of how<br />
companies can turn crisis into opportunity. Anglo<br />
American has more than 120,000 employees, most<br />
operating in parts of the world with a high prevalence<br />
of HIV/AIDS. In 2005, Anglo estimated that<br />
approximately 30,000 – or 25 percent – of its<br />
employees had the virus.<br />
Many companies would simply have ignored the<br />
problem – if workers became sick and didn’t show up<br />
for work, many others could be hired to do the job.<br />
But under the leadership of Anglo’s CEO Sir Mark<br />
Moody-Stuart, the company took the opposite approach,<br />
deciding to save the lives of its employees by helping<br />
them access life-saving antiretroviral treatment.<br />
Anglo’s AIDS initiative has proven extraordinarily<br />
effective, not <strong>on</strong>ly in terms of keeping HIV-infected<br />
workers healthy and AIDS-free but also in terms of<br />
reducing absenteeism and improving productivity. At the<br />
end of 2005, Anglo had more than 3,000 employees <strong>on</strong><br />
AIDS treatment. More than 90 percent of those were<br />
healthy enough to be able to c<strong>on</strong>tinue with their<br />
normal work.<br />
An ec<strong>on</strong>omic study of the program has proven that it<br />
was a wise investment. The study evaluated the overall<br />
impact of HIV/AIDS <strong>on</strong> the company, the impact of<br />
HIV and AIDS <strong>on</strong> Anglo American without its AIDS<br />
initiative and the ec<strong>on</strong>omic impact of having<br />
implemented the initiative.<br />
The results of the study show that the HIV/AIDS<br />
programs’ costs to Anglo companies would c<strong>on</strong>stitute 2<br />
percent of overall payroll costs if the initiative had not<br />
been implemented. When the initiative was<br />
implemented, absenteeism dramatically declined.<br />
Workers were healthy and able to return to being<br />
productive. Savings resulting from these absenteeism<br />
declines were 20 to 60 percent of the initiative’s cost.<br />
The cost of employee health care also dramatically<br />
decreased and produced additi<strong>on</strong>al savings of 45 to 70<br />
percent of the costs over the first 18 m<strong>on</strong>ths of the<br />
AIDS initiative.<br />
Anglo American’s AIDS program has w<strong>on</strong> numerous<br />
awards, earned the praise of heads of state, the media<br />
and United Nati<strong>on</strong>s leaders. But more important, it has<br />
saved lives – and saves m<strong>on</strong>ey in the process.<br />
It’s time to stop talking about <strong>corporate</strong> “resp<strong>on</strong>sibility.”<br />
It’s time to stop thinking in terms of being a little “less<br />
bad.” Instead, companies should set out to beat the<br />
competiti<strong>on</strong> by creating products and services that have<br />
a positive impact <strong>on</strong> their customers, employees and<br />
communities – all while increasing profits. This isn’t a<br />
resp<strong>on</strong>sibility – it’s an opportunity – and the smartest<br />
companies will find a way to use it to increase profits<br />
relentlessly. In the process, they also will do a lot<br />
of good.<br />
Trevor Neils<strong>on</strong> is a senior advisor at <strong>APCO</strong> <strong>Worldwide</strong> and a member of<br />
<strong>APCO</strong>’s Internati<strong>on</strong>al Advisory Council. He is the former executive director<br />
of the Global <str<strong>on</strong>g>Business</str<strong>on</strong>g> Coaliti<strong>on</strong> <strong>on</strong> HIV/AIDS, Tuberculosis and Malaria.
Earning the License to Grow<br />
The years ahead will be defined by<br />
competiti<strong>on</strong> for access to increasingly<br />
scarce resources – including oil,<br />
water, agricultural and mineral<br />
products, as well as highly educated<br />
young people. This “scarcity agenda”<br />
creates a new dimensi<strong>on</strong> to CR: the<br />
need to earn a “license to grow” in a<br />
resource-c<strong>on</strong>strained world – not<br />
simply a “license to operate” in<br />
status quo terms.<br />
Companies will earn the license<br />
to grow through resp<strong>on</strong>sible and<br />
strategic innovati<strong>on</strong> – using resources much more<br />
carefully and strategically, creating alternative or<br />
additi<strong>on</strong>al resources, working in partnership with others<br />
in the public and private sectors and doing so in ways<br />
that also bring material benefit to the billi<strong>on</strong>s of people<br />
who still do not have access to many basic resources,<br />
products and services.<br />
This means that, increasingly, CR will involve taking a<br />
hard look at the business innovati<strong>on</strong> cycle: how many<br />
products and services have been adapted for resource<br />
scarcity or to reach a billi<strong>on</strong> poor people – or both?<br />
Seen in these terms, resp<strong>on</strong>sible business innovati<strong>on</strong><br />
involves directing innovati<strong>on</strong> to “the point of need” – in<br />
this case defined as the need to reduce usage of scarce<br />
natural resources while at the same time reaching a<br />
much greater number of poor people with the basic<br />
products and services that improve lives and build<br />
sustainable markets. This requires a greater emphasis by<br />
businesses <strong>on</strong> identifying, targeting and m<strong>on</strong>etizing<br />
societal and c<strong>on</strong>sumer needs as well as their “wants.”<br />
It is already apparent that there are three main channels<br />
for such innovati<strong>on</strong>:<br />
• Product innovati<strong>on</strong> – developing new products and<br />
services that enable customers to reduce their<br />
resource use and/or enable billi<strong>on</strong>s more people to<br />
meet basic needs while reducing the resource impact<br />
per product unit. General Electric’s hybrid locomotive<br />
engine is an example of the former, and Tata Motors’<br />
Nano car project is an example of the latter. It also<br />
means more <strong>corporate</strong> social entrepreneurship:<br />
ELLEN MIGNONI AND RACHEL THOMPSON 15<br />
Ellen Mign<strong>on</strong>i and Rachel Thomps<strong>on</strong> see innovati<strong>on</strong> as the key to success in a world with increasingly scarce resources.<br />
working and co-investing with n<strong>on</strong>profit groups to<br />
bring soluti<strong>on</strong>s to market that will work in very<br />
difficult c<strong>on</strong>diti<strong>on</strong>s in the field – such as the<br />
incubator made of car parts developed by doctors<br />
from Massachusetts General Hospital.<br />
• Process innovati<strong>on</strong> – inspiring employees to adapt<br />
existing methods or devise new methods to be more<br />
resource efficient. Here, some of the large-scale<br />
retailers and freight companies already are adapting<br />
well-h<strong>on</strong>ed; lean operati<strong>on</strong>s tools to the challenges of<br />
resource scarcity.<br />
• <str<strong>on</strong>g>Business</str<strong>on</strong>g> model innovati<strong>on</strong> – developing new pricing<br />
models, new delivery channels and new forms of<br />
innovati<strong>on</strong> collaborati<strong>on</strong>, including with the n<strong>on</strong>profit<br />
sector. This channel is possibly the least advanced to<br />
date – having so far focused mainly <strong>on</strong> micro-sized<br />
products in the food sector, micro- or shared-access<br />
models in the technology sector and some<br />
commercial efforts in micro-finance.<br />
Earning the license to grow through business innovati<strong>on</strong><br />
presents a range of operati<strong>on</strong>al and communicati<strong>on</strong><br />
challenges: from effective stakeholder c<strong>on</strong>sultati<strong>on</strong> and<br />
partnership to inspiring the workforce, including but not<br />
limited to the research and development teams; from<br />
mobilizing resources for l<strong>on</strong>g-term investment to<br />
communicating effectively about science, technology<br />
and society – and all al<strong>on</strong>g the line, ensuring<br />
go-to-market credibility.<br />
The next decade of adjustment to resource scarcity will<br />
be highly disruptive for global business. It also will likely<br />
be characterized by increasing resource regulati<strong>on</strong> –<br />
of which the growing calls in Western Europe for<br />
compulsory <strong>corporate</strong> reporting <strong>on</strong> carb<strong>on</strong> use<br />
are but <strong>on</strong>e harbinger – making it all the more<br />
imperative to embrace the license to grow through<br />
business innovati<strong>on</strong>.<br />
Ellen Mign<strong>on</strong>i is a senior vice president in <strong>APCO</strong> <strong>Worldwide</strong>’s Washingt<strong>on</strong>,<br />
D.C., office, where she helped build <strong>APCO</strong>’s global CR practice.<br />
Rachel Thomps<strong>on</strong> is a regi<strong>on</strong>al director in <strong>APCO</strong> <strong>Worldwide</strong>’s Europe,<br />
Middle East and Africa regi<strong>on</strong> and practice manager for CR and global<br />
trade. She is based in L<strong>on</strong>d<strong>on</strong>.
16 ROGER BOLTON<br />
The Importance of “The Authentic Enterprise”<br />
Roger Bolt<strong>on</strong> describes the challenges instituti<strong>on</strong>s face in the wake of changing rules for global business.<br />
It’s abundantly clear that the global<br />
business envir<strong>on</strong>ment is changing<br />
rapidly, creating new challenges. A<br />
new report from the Arthur W. Page<br />
Society, called “The Authentic<br />
Enterprise,” provides a template for<br />
global instituti<strong>on</strong>s to thrive in the<br />
face of massive change.<br />
The Page Society interviewed 31 CEOs, who describe a<br />
seismic shift in how the public sees corporati<strong>on</strong>s and a<br />
corresp<strong>on</strong>ding rise in demands <strong>on</strong> the chief executive.<br />
The CEOs, in turn, are placing increasing demands <strong>on</strong><br />
their chief communicati<strong>on</strong>s officers (CCOs), who must be<br />
more strategic and business savvy.<br />
“The Authentic Enterprise” makes the case that three<br />
trends – globalizati<strong>on</strong> of the ec<strong>on</strong>omy, the informati<strong>on</strong><br />
technology networking revoluti<strong>on</strong> and the rise of<br />
disparate stakeholder groups – are changing the playing<br />
field for global business.<br />
The nearly universal access to virtually free means to<br />
gather and disseminate informati<strong>on</strong> has given rise to<br />
new stakeholders, who are generating demands for<br />
transparency and CR, al<strong>on</strong>g with the threat of increased<br />
regulati<strong>on</strong>. Their influence has the power to weaken trust<br />
in companies and their brands.<br />
“The Authentic Enterprise” makes<br />
the case that three trends –<br />
globalizati<strong>on</strong> of the ec<strong>on</strong>omy, the<br />
informati<strong>on</strong> technology networking<br />
revoluti<strong>on</strong> and the rise of disparate<br />
stakeholder groups – are changing<br />
the playing field for global business.<br />
At the same time, the rise of new<br />
stakeholders is opening vastly expanded<br />
opportunities for global enterprises to build<br />
new relati<strong>on</strong>ships that can strengthen<br />
brands and build trust. It is a classic<br />
disruptive moment. Enterprises that<br />
understand the threats and opportunities<br />
and resp<strong>on</strong>d effectively will thrive;<br />
those that d<strong>on</strong>’t will experience<br />
increasing resistance.
The paper issues a call to acti<strong>on</strong> for instituti<strong>on</strong>s to:<br />
1. Define and activate core values.<br />
2. Build and manage integrated, multi-stakeholder<br />
relati<strong>on</strong>ships.<br />
3. Enable their people with “new media” skills<br />
and tools.<br />
4. Build and manage trust c<strong>on</strong>sciously in all<br />
their dimensi<strong>on</strong>s.<br />
…the rise of new stakeholders is opening<br />
vastly expanded opportunities for global<br />
enterprises to build new relati<strong>on</strong>ships that<br />
can strengthen brands and build trust.<br />
The role of communicati<strong>on</strong>s<br />
“The Authentic Enterprise” c<strong>on</strong>cludes that CCOs are best<br />
positi<strong>on</strong>ed to provide leadership to global instituti<strong>on</strong>s<br />
across the full range of these acti<strong>on</strong>s. However,<br />
suggesting that CCOs assert leadership is not the same<br />
as staking out ownership. Clearly, other staff and line<br />
business leaders share resp<strong>on</strong>sibility; and if there’s an<br />
ultimate owner, it’s doubtless the CEO. But the CCO is in<br />
the best positi<strong>on</strong> to lead a companywide effort to define<br />
and activate values, build relati<strong>on</strong>ships, enable the<br />
organizati<strong>on</strong> with new media skills and build trust.<br />
Roger Bolt<strong>on</strong> is a member of <strong>APCO</strong> <strong>Worldwide</strong>’s Internati<strong>on</strong>al Advisory<br />
Council. He is the former senior vice president of communicati<strong>on</strong>s for<br />
health care benefits provider Aetna.<br />
Values<br />
ROGER BOLTON 17<br />
Global companies have extended organizati<strong>on</strong>s and<br />
outsourced functi<strong>on</strong>s. Because interested stakeholders<br />
have ready access to informati<strong>on</strong> about companies,<br />
al<strong>on</strong>g with the ability to distribute it widely and<br />
instantaneously, it’s easy for them to expose <strong>corporate</strong><br />
acti<strong>on</strong>s that are inc<strong>on</strong>sistent with stated objectives and<br />
beliefs. The antidote is not to attempt to c<strong>on</strong>trol the flow<br />
of informati<strong>on</strong>, which is impossible, but rather to<br />
strengthen value systems and operating principles so as<br />
to make an instituti<strong>on</strong> authentically c<strong>on</strong>sistent with its<br />
stated purpose.<br />
Relati<strong>on</strong>ships<br />
C<strong>on</strong>stituent relati<strong>on</strong>ships always have been important<br />
for businesses, but the proliferati<strong>on</strong> and empowerment<br />
of new kinds of stakeholders have altered the landscape<br />
profoundly. <str<strong>on</strong>g>Business</str<strong>on</strong>g>es today are in an acute,<br />
high-stakes battle for their identities and global<br />
reputati<strong>on</strong>s. Key to winning this battle is building<br />
support am<strong>on</strong>g multiple stakeholders and across civil<br />
society at large, while defending the company, its<br />
principles and its reputati<strong>on</strong> against misguided attacks.<br />
“New Media”<br />
It is in the corporati<strong>on</strong>’s best interest to empower its<br />
workforce with new collaborative tools – the same <strong>on</strong>es<br />
that are being used by external c<strong>on</strong>stituents. By using<br />
these capabilities internally, the organizati<strong>on</strong> and its<br />
people can build understanding and c<strong>on</strong>sensus <strong>on</strong> core<br />
values. Externally, they can build influence and<br />
relati<strong>on</strong>ships of trust.<br />
Trust<br />
Trust is no l<strong>on</strong>ger a functi<strong>on</strong> <strong>on</strong>ly of compliance with<br />
the law and business ethics. With the emergence of<br />
empowered, distributed and technology-enabled<br />
stakeholders, the challenge of building trust is more<br />
acute than ever. Successful enterprises must have a<br />
c<strong>on</strong>scious strategy for building trust internally and<br />
externally by operating in the public interest.
18<br />
JEFF ZELKOWITZ<br />
Sustainability and the Stock Market:<br />
A Game Changer for Company Valuati<strong>on</strong>?<br />
Jeff Zelkowitz evaluates the link between socially resp<strong>on</strong>sible investments and company valuati<strong>on</strong>.<br />
When former Vice President Al Gore<br />
teamed up with David Blood of<br />
Goldman Sachs to launch<br />
Generati<strong>on</strong> Investment Management,<br />
their intenti<strong>on</strong> was to create a new<br />
model for socially resp<strong>on</strong>sible<br />
investment (SRI). Instantly<br />
nicknamed “Blood & Gore,” the firm is part of an<br />
evolving trend of financial instituti<strong>on</strong>s seeking to<br />
in<strong>corporate</strong> envir<strong>on</strong>mental, social and governance factors<br />
into the traditi<strong>on</strong>al company valuati<strong>on</strong> framework.<br />
This is not your father’s SRI. Bringing sustainability<br />
(often referred to as n<strong>on</strong>financial or extrafinancial factors)<br />
into the mainstream of instituti<strong>on</strong>al investment is a<br />
potential game changer for company valuati<strong>on</strong>. And it<br />
has major implicati<strong>on</strong>s for <strong>corporate</strong> strategy, reporting<br />
systems and communicati<strong>on</strong>.<br />
SRI funds have grown into a US$2.7 trilli<strong>on</strong> sector that<br />
now represents 11 percent of instituti<strong>on</strong>ally managed<br />
assets in the United States. The two main types of SRI<br />
investing have been social screening and shareholder<br />
advocacy. Social screening accounts for about 75<br />
percent of SRI funds and typically relies <strong>on</strong> screening<br />
out “sin stocks,” such as alcohol, tobacco and gaming<br />
companies, or screening in stocks from an approved list<br />
of companies that meet positive criteria, such as the<br />
Dow J<strong>on</strong>es Sustainability Indexes. Advocacy attempts<br />
to encourage managements to alter company c<strong>on</strong>duct<br />
or business practices, or to adhere to standards<br />
and guidelines.<br />
Numerous studies attempt to understand whether SRI<br />
funds outperform other investment styles over time, and<br />
whether companies with a str<strong>on</strong>g reputati<strong>on</strong> for CR gain<br />
a valuati<strong>on</strong> premium in their stock prices. It is difficult to<br />
prove causati<strong>on</strong>, and this statistical approach does not<br />
c<strong>on</strong>sider the actual investment process by which<br />
financial-market participants analyze and value stocks.<br />
Ultimately, the questi<strong>on</strong> must be how they view l<strong>on</strong>gterm<br />
sustainability factors in valuing public companies.<br />
Investors and analysts have been trained to analyze<br />
financial data that is also the basis for company<br />
informati<strong>on</strong> disclosure. They have trouble valuing<br />
intangibles, and this is an accounting problem not<br />
limited to CR but also encompassing intellectual<br />
property, brands and reputati<strong>on</strong>. The level and quality<br />
of <strong>corporate</strong> reporting <strong>on</strong> sustainability issues is widely<br />
seen to have improved, and voluntary standards such as<br />
the Global Reporting Initiative are attempting to make<br />
informati<strong>on</strong> more c<strong>on</strong>sistent. Yet, we are still at an early<br />
stage of developing the systems and metrics for reporting<br />
n<strong>on</strong>financial factors, and the mainstream financial world<br />
has d<strong>on</strong>e little to process what data is available into the<br />
investment equati<strong>on</strong>.<br />
The challenges are both cultural and structural. Most<br />
equity investors and research analysts tend to look<br />
askance at social compacts as a basis for <strong>corporate</strong><br />
organizati<strong>on</strong>s, but they also have lacked the professi<strong>on</strong>al<br />
experience and training to deal with sustainability issues;<br />
the financial and managerial incentives to focus <strong>on</strong><br />
them; and the regular, timely and c<strong>on</strong>sistent reporting<br />
of informati<strong>on</strong> from company to company needed to<br />
in<strong>corporate</strong> l<strong>on</strong>g-term sustainability factors into<br />
traditi<strong>on</strong>al investment analysis. Short-termism is<br />
hardwired into the system, lessening the weighting<br />
of l<strong>on</strong>g-term issues.<br />
The level and quality of <strong>corporate</strong> reporting <strong>on</strong><br />
sustainability issues is widely seen to have<br />
improved…Yet, we are still at an early stage<br />
of developing the systems and metrics for<br />
reporting n<strong>on</strong>financial factors…<br />
Generally speaking, corporati<strong>on</strong>s are ahead of financial<br />
markets in their strategic understanding of and<br />
investments in CR. Markets do a good job of penalizing<br />
the stock prices of companies hit with major liabilities<br />
arising from a polluti<strong>on</strong> or health risk or those with<br />
governance problems – and they can also reward a<br />
company that can capitalize profitably <strong>on</strong> the “green”<br />
preferences of c<strong>on</strong>sumers. But they are much slower to<br />
recognize and c<strong>on</strong>nect the dots <strong>on</strong> l<strong>on</strong>g-term<br />
sustainability impacts.
Yet, <strong>corporate</strong> sustainability<br />
is in many respects the<br />
foundati<strong>on</strong> for earnings<br />
sustainability – and the<br />
latter means everything to<br />
pensi<strong>on</strong> funds, insurance<br />
companies and other<br />
investors seeking to cover<br />
their l<strong>on</strong>g-term liabilities.<br />
Billi<strong>on</strong>aire investor Warren<br />
Buffett is <strong>on</strong>e who is<br />
recognized as successfully<br />
valuing earnings<br />
sustainability as the basis<br />
for l<strong>on</strong>g-term investing –<br />
and for going bey<strong>on</strong>d what<br />
can be captured <strong>on</strong> income<br />
statement or balance sheet<br />
accounting for uncovering<br />
l<strong>on</strong>g-term value.<br />
That’s the informati<strong>on</strong><br />
arbitrage opportunity that<br />
the new generati<strong>on</strong> of<br />
investors is seeking to<br />
exploit. Work is being d<strong>on</strong>e<br />
to develop the use of<br />
n<strong>on</strong>financial factors in<br />
mainstream investment<br />
research, particularly in<br />
Europe. For instance, major instituti<strong>on</strong>al investors are<br />
grouping together to incentivize investment banks<br />
financially to devote resources to new kinds of analysis.<br />
Standards for materiality of n<strong>on</strong>financial informati<strong>on</strong><br />
linked to envir<strong>on</strong>mental, social and governance factors<br />
are also progressing. Several of the firms involved in<br />
these efforts often do not fit the classic SRI profile.<br />
They are looking at major ec<strong>on</strong>omic trends where<br />
sustainability is becoming a mainstream phenomen<strong>on</strong> in<br />
order to find new sources of alpha – the informati<strong>on</strong><br />
edge that drives superior investment returns.<br />
Given the vastly increasing role of sustainability in the<br />
development of <strong>corporate</strong> strategy, it is clearly in the<br />
interest of <strong>corporate</strong> leaders to educate the financial<br />
markets <strong>on</strong> how these factors are linked to business<br />
value. Chief financial officers and investor relati<strong>on</strong>s<br />
officers are rarely involved in these efforts and will need<br />
JEFF ZELKOWITZ 19<br />
to develop approaches for tracking and communicating<br />
material informati<strong>on</strong> related to sustainability, so that it<br />
can be effectively digested by financial c<strong>on</strong>stituencies<br />
and reflected in the market’s opini<strong>on</strong> of the stock.<br />
Likewise, CEOs can help by spending more time<br />
discussing l<strong>on</strong>g-term strategic issues with the financial<br />
markets. Specifically, they can set the t<strong>on</strong>e by<br />
dem<strong>on</strong>strating how their sustainability commitments<br />
factor into shareholder value creati<strong>on</strong> and protecti<strong>on</strong>.<br />
Managements that figure out how to communicate<br />
successfully <strong>on</strong> these issues will be in the best positi<strong>on</strong><br />
to secure the l<strong>on</strong>g-term buy-in of shareholders – and<br />
to achieve the maximum sustainable valuati<strong>on</strong> for<br />
their businesses.<br />
Jeff Zelkowitz is a senior vice president at <strong>APCO</strong> <strong>Worldwide</strong> and is based<br />
in New York.
20 RICHARD HATZFELD<br />
Strengthening Your Market Entry<br />
Through Public-Private Partnerships<br />
Richard Hatzfeld offers advice for organizati<strong>on</strong>s looking to succeed in new markets within the global ec<strong>on</strong>omy.<br />
We are in the midst of an historic<br />
shift in the world’s ec<strong>on</strong>omic<br />
balance of power, as traditi<strong>on</strong>ally<br />
poor or middle-income countries –<br />
nati<strong>on</strong>s whose citizens make<br />
between US$1,500 and<br />
US$20,000 per year – are<br />
gaining prominence <strong>on</strong> the global ec<strong>on</strong>omic stage.<br />
“The rise of the rest,” as author Fareed Zakaria calls<br />
this phenomen<strong>on</strong>, captures the growth of the group of<br />
low- and middle-income countries that now c<strong>on</strong>tribute<br />
nearly US$13 trilli<strong>on</strong> to the global ec<strong>on</strong>omy, more than a<br />
quarter of total worldwide output. To highlight the<br />
tremendous pace that developing countries have set over<br />
the past decade, c<strong>on</strong>sider that real gross domestic<br />
product (GDP), as reported by the Internati<strong>on</strong>al<br />
M<strong>on</strong>etary Fund, increased 69 percent between 1997<br />
and 2006 am<strong>on</strong>g developing ec<strong>on</strong>omies, compared with<br />
30 percent growth for advanced ec<strong>on</strong>omies during the<br />
same 10-year period.<br />
The emergence of lower-income c<strong>on</strong>sumers as a major<br />
market force offers tremendous opportunities for<br />
companies that are able to retool their marketing mix<br />
from a model that traditi<strong>on</strong>ally has targeted the most<br />
affluent <strong>on</strong>e billi<strong>on</strong> people <strong>on</strong> the planet to <strong>on</strong>e that<br />
efficiently reaches the next five billi<strong>on</strong> people – the<br />
so-called middle- and bottom-of-the-pyramid c<strong>on</strong>sumers.<br />
As incomes rise in more than 100 countries throughout<br />
Africa, Asia and Latin America, so too will the demand<br />
for better health care, c<strong>on</strong>venience products, electr<strong>on</strong>ics<br />
and household staples, to name a few categories. How<br />
then can organizati<strong>on</strong>s most effectively and sustainably<br />
succeed in this new landscape?<br />
In evaluating strategies for entry and sustainable<br />
management in a developing country, companies<br />
would be prudent to c<strong>on</strong>sider establishing alliances<br />
with an unlikely resource: leading NGOs operating in<br />
the local market.<br />
Building public-private partnerships between <strong>corporate</strong><br />
and n<strong>on</strong>profit organizati<strong>on</strong>s can yield excellent benefits<br />
for both groups working in the developing world. NGOs<br />
often are able to provide sharp insight into c<strong>on</strong>sumer<br />
habits and access to government influencers, as well<br />
as opportunities to build significant goodwill, brand<br />
recogniti<strong>on</strong> and loyalty am<strong>on</strong>g local communities through<br />
the effective sp<strong>on</strong>sorship of CR projects. A strategic<br />
alliance between n<strong>on</strong>profits and companies also offers a<br />
less threatening means for global firms to operate in a<br />
new country than through the development of a venture<br />
with a local company in the same industry, a potential<br />
competitor that could receive protecti<strong>on</strong> from a host<br />
government down the road.<br />
Internati<strong>on</strong>al and locally based NGOs have operated<br />
in developing countries for decades and have learned<br />
through tough less<strong>on</strong>s what works and what often<br />
will lead to failure. Working with lean budgets<br />
and staff, many of these organizati<strong>on</strong>s have<br />
succeeded in grassroots outreach, communicati<strong>on</strong>,<br />
mobilizati<strong>on</strong> and behavior change within segments of the<br />
populati<strong>on</strong> often well outside of c<strong>on</strong>venti<strong>on</strong>al marketing<br />
channels. Those segments define the middle- and<br />
bottom-of-the-pyramid c<strong>on</strong>sumers that are now sought<br />
after by multinati<strong>on</strong>al firms.<br />
Internati<strong>on</strong>al and locally based NGOs have<br />
operated in developing countries for decades<br />
and have learned through tough less<strong>on</strong>s what<br />
works and what often will lead to failure.<br />
At the same time, many n<strong>on</strong>profit organizati<strong>on</strong>s now<br />
view partnership with the private sector as an essential<br />
element to their l<strong>on</strong>g-term ability to fulfill their missi<strong>on</strong> of<br />
serving local populati<strong>on</strong>s. Highly effective CR programs<br />
have become mainstream in emerging markets, as<br />
companies work with NGOs as a way of c<strong>on</strong>tributing<br />
goodwill to needy populati<strong>on</strong>s while also meeting<br />
operati<strong>on</strong>al interests, such as improving employee and<br />
community health or safeguarding valuable natural<br />
resources that drive local ec<strong>on</strong>omies.
The power of public-private partnerships can offer three<br />
areas of strategic advantage to firms entering developing<br />
markets, particularly in Africa and South Asia:<br />
• 360 o market data: Rather than relying solely <strong>on</strong><br />
outside research firms, companies can work with<br />
NGO partners to round out their understanding of the<br />
c<strong>on</strong>sumer landscape in a new country, particularly<br />
when str<strong>on</strong>g ec<strong>on</strong>omic and cultural elements are in<br />
play. By operating in poorer communities and<br />
managing customer research and outreach operati<strong>on</strong>s<br />
over several years, NGOs often have a ready-built<br />
network of communities for private companies to<br />
engage as part of their market scoping. These<br />
communities may deliver a more representative study<br />
sample, and the methodology for any c<strong>on</strong>sumer<br />
research efforts will be more informed through the<br />
input that NGOs and local community representatives<br />
can offer. At the same time, NGOs are in need of<br />
more sophisticated marketing and outreach tools,<br />
particularly in segmenting populati<strong>on</strong>s to deliver more<br />
relevant messaging. These are areas of technical<br />
expertise that private-sector partners can share.<br />
• Access to government influencers: The emergence<br />
of mainstream c<strong>on</strong>sumerism in developing countries<br />
alters how some governments can support<br />
private-sector development and direct foreign<br />
investment. Both local and internati<strong>on</strong>al NGOs<br />
have valuable insights to share regarding which<br />
government c<strong>on</strong>tacts are most appropriate to engage<br />
and how best to work with them. M<strong>on</strong>ey may talk in<br />
emerging markets, but transparent relati<strong>on</strong>ships with<br />
key government decisi<strong>on</strong>-makers are paramount for<br />
l<strong>on</strong>g-term operati<strong>on</strong>al success and competitive<br />
advantage. NGOs are an integral resource for helping<br />
companies to forge these government relati<strong>on</strong>ships.<br />
Corresp<strong>on</strong>dingly, the changing world of internati<strong>on</strong>al<br />
aid requires NGOs to develop multilateral funding<br />
streams. Public-private partnerships offer a means for<br />
NGOs to build greater credibility and differentiati<strong>on</strong> by<br />
dem<strong>on</strong>strating that they have the project scope and<br />
capacity to appeal to a broad base of d<strong>on</strong>ors.<br />
• Brand equity development: CR programs offer a<br />
platform for companies to create brand awareness<br />
and loyalty in new markets while building goodwill in<br />
under-resourced populati<strong>on</strong>s. A partnership with an<br />
NGO operating in a developing country provides the<br />
RICHARD HATZFELD 21<br />
opportunity to identify projects that meet the social<br />
needs of a community and the interests of the<br />
sp<strong>on</strong>soring company. NGOs undertaking projects<br />
also may gain positive recogniti<strong>on</strong> through such<br />
partnerships, particularly in countries where the<br />
reputati<strong>on</strong>s of development organizati<strong>on</strong>s have<br />
suffered from aid fatigue.<br />
The risks are significant for firms venturing into<br />
developing markets. Market data, local relati<strong>on</strong>ships<br />
and flexible operating models are indispensible<br />
resources, as are the right alliances. Before relying <strong>on</strong><br />
traditi<strong>on</strong>al approaches for assessing new market<br />
opportunities, c<strong>on</strong>sider how successful engagement<br />
and communicati<strong>on</strong> with NGO partners may provide<br />
organizati<strong>on</strong>s with essential insights for understanding<br />
and reaching the poorer segments of the<br />
world’s populati<strong>on</strong>.<br />
Richard Hatzfeld is a senior associate with <strong>APCO</strong> <strong>Worldwide</strong> and is based<br />
in Washingt<strong>on</strong>, D.C. He has extensive experience working in both the<br />
private and public sectors throughout Africa and Asia.
22 TARA GRECO AND JAMES ROBINSON<br />
New Approaches in Strategic Philanthropy<br />
Tara Greco and James Robins<strong>on</strong> discuss the past, present and future benefits of philanthropy.<br />
“Venture philanthropy,” “creative<br />
capitalism,” “social entrepreneurship”<br />
and “philanthropy 2.0” are just<br />
some of the buzz words that have<br />
burst into public c<strong>on</strong>sciousness over<br />
the past few years. As these terms<br />
become more comm<strong>on</strong> am<strong>on</strong>g<br />
C-suite executives, it is important to<br />
recognize that at their core they all<br />
describe new approaches to running<br />
a socially resp<strong>on</strong>sible and socially<br />
engaged business, but they are<br />
approaches that build from<br />
philanthropic practices that have<br />
been employed by companies, both large and small,<br />
for centuries.<br />
Strategic philanthropy serves as the historical foundati<strong>on</strong><br />
for most CR programs and is itself big business. Indeed,<br />
in 2006, The C<strong>on</strong>ference Board estimated that<br />
U.S.-based corporati<strong>on</strong>s d<strong>on</strong>ated US$12.72 billi<strong>on</strong>, or a<br />
median of 1.16 percent of pretax income, to social<br />
causes. Organizati<strong>on</strong>s such as the Internati<strong>on</strong>al <str<strong>on</strong>g>Business</str<strong>on</strong>g><br />
Leaders Forum, <str<strong>on</strong>g>Business</str<strong>on</strong>g> in the Community and the<br />
Clint<strong>on</strong> Global Initiative encourage smart <strong>corporate</strong><br />
philanthropy. Others, such as <str<strong>on</strong>g>Business</str<strong>on</strong>g> Week magazine,<br />
the FTSE4Good index series and Socially Resp<strong>on</strong>sible<br />
Investment (SRI) Funds – such as Domini and Calvert –<br />
eagerly track the giving of the world’s largest and most<br />
profitable companies, hoping to spot industry trends<br />
and opportunities.<br />
<str<strong>on</strong>g>Business</str<strong>on</strong>g> resp<strong>on</strong>ding to social issues is nothing new. In<br />
the early 1800s, Robert Owen began the cooperative<br />
movement, which sought to end the exploitati<strong>on</strong> of poor<br />
Scottish millworkers by passing <strong>on</strong> the savings of bulk<br />
food purchases to employees. Later in the 19th century,<br />
John D. Rockefeller’s Standard Oil made him the world’s<br />
first billi<strong>on</strong>aire but also <strong>on</strong>e of the world’s greatest<br />
philanthropists. His generosity was closely followed by<br />
Andrew Carnegie, who invested in the educati<strong>on</strong> of his<br />
workforce and the steel communities that facilitated the<br />
success of his business.<br />
Each of these individuals made his wealth through<br />
ownership of for-profit enterprises. Yet, each realized that<br />
social resp<strong>on</strong>sibility and social opportunity helped foster<br />
their success. For these men, philanthropy was<br />
c<strong>on</strong>ducted to “do the right thing” with the understanding<br />
that a healthy community, where all citizens are thriving,<br />
reaps l<strong>on</strong>g-term benefits for every<strong>on</strong>e but without the<br />
explicit expectati<strong>on</strong> that the business would reap a<br />
direct benefit.<br />
Many successful companies today realize the benefits of<br />
strategic philanthropy as a means to ensure a healthy<br />
pool of potential workers, achieve social stability in areas<br />
of operati<strong>on</strong>, and grow new and viable c<strong>on</strong>sumer<br />
markets, am<strong>on</strong>g many other business benefits. In fact,<br />
many companies find that strategic philanthropy<br />
provides the best opportunity to innovate within the<br />
realm of <strong>corporate</strong> resp<strong>on</strong>sibility. For example, many<br />
companies now are building philanthropic programs that<br />
go bey<strong>on</strong>d m<strong>on</strong>etary d<strong>on</strong>ati<strong>on</strong>s to include investments of<br />
intellectual capital and staff time through skills-based<br />
volunteerism and pro b<strong>on</strong>o service to address human<br />
resource development goals as well as help address<br />
community needs.<br />
We also see modern-day tyco<strong>on</strong>s such as Bill Gates, Eli<br />
Broad and Warren Buffett applying billi<strong>on</strong>s of dollars – as<br />
well as the skills and less<strong>on</strong>s they learned in the private<br />
sector – to help solve some of the world’s greatest<br />
challenges through new approaches to philanthropy.<br />
These <strong>corporate</strong> visi<strong>on</strong>aries are blazing a new trail in<br />
bringing business and society together, and leaders from<br />
every sector around the world are watching closely.<br />
These new approaches are gaining tracti<strong>on</strong> and yielding<br />
exciting results. Each model is subtly different, but all<br />
resp<strong>on</strong>d to a realizati<strong>on</strong> that the relati<strong>on</strong>ship between<br />
business and society (and the envir<strong>on</strong>ment) has never<br />
been so interdependent, and the players in each offer<br />
unique value and <str<strong>on</strong>g>perspectives</str<strong>on</strong>g>. Some of the most<br />
notable strategies include:<br />
• Social entrepreneurship – Using entrepreneurial<br />
principles to organize and manage a venture focused<br />
<strong>on</strong> social changes, social entrepreneurship has<br />
engaged entities in the government, n<strong>on</strong>profit and
private sectors. This so-called “social business” is<br />
central to the visi<strong>on</strong> of 2006 Nobel Peace Prize<br />
winner Muhammad Yunus for <strong>corporate</strong> engagement<br />
in society. Dr. Yunus’s Grameen Bank, which<br />
provides loans to the poor; his Grameen Dan<strong>on</strong>e,<br />
which provides poor children with key nutrients; the<br />
numerous social and envir<strong>on</strong>mental efforts of China<br />
Mengniu Dairy; as well as popular <strong>on</strong>line vehicles<br />
such as the pers<strong>on</strong>-to-pers<strong>on</strong> microlending Web site<br />
www.kiva.org, all seek market approaches to solving<br />
social problems.<br />
• Venture philanthropy – Borrowing from the c<strong>on</strong>cepts<br />
and techniques of venture capital finance and<br />
applying them to philanthropic goals, venture<br />
philanthropy capitalizes <strong>on</strong> investors’ willingness to<br />
experiment with new approaches, focus <strong>on</strong><br />
measurable impact, devote funding to the<br />
organizati<strong>on</strong>s that are proven to be most successful<br />
and have high involvement of d<strong>on</strong>ors with their<br />
grantees. The work of the Gates Foundati<strong>on</strong>, the<br />
Acumen Fund and the Robin Hood Foundati<strong>on</strong>,<br />
funded largely by wealthy Wall Street bankers, are all<br />
good examples of venture philanthropy at work.<br />
• Creative capitalism – A term coined by Bill Gates<br />
earlier this year, creative capitalism calls for a new<br />
form of capitalism that generates l<strong>on</strong>g-term profits for<br />
investors while addressing the world’s inequalities<br />
through market forces. By using business acumen,<br />
resources and experience of business, corporati<strong>on</strong>s<br />
can discover new and innovative ways of solving<br />
the most basic challenges around water, health<br />
and educati<strong>on</strong> of the world’s poorest people.<br />
Microsoft, Coca-Cola, Pfizer and many others<br />
have thrown their weight behind this<br />
business-meets-philanthropy strategy.<br />
The opportunities offered by these philanthropic and<br />
business innovati<strong>on</strong>s are exciting for corporati<strong>on</strong>s and<br />
n<strong>on</strong>profits alike. As Melinda Gates has said, and many<br />
businesses are now realizing, “Helping people doesn’t<br />
have to be an unsound financial strategy.”<br />
Tara Greco is a vice president in <strong>APCO</strong> <strong>Worldwide</strong>’s CR practice and is<br />
based in Washingt<strong>on</strong>, D.C.<br />
James Robins<strong>on</strong> is a vice president in <strong>APCO</strong> <strong>Worldwide</strong>’s New York office.<br />
TARA GRECO AND JAMES ROBINSON 23<br />
Best practices and trends:<br />
1) Leverage core <strong>corporate</strong> assets in philanthropy – the<br />
time and talent of employees, <strong>corporate</strong> facilities, or<br />
the financial capital of the company.<br />
2) Embed philanthropy and CR within operati<strong>on</strong>s rather<br />
than treating them as an appendage.<br />
3) Involve the CEO and senior executive to gain tracti<strong>on</strong><br />
and recogniti<strong>on</strong>.<br />
4) Look for business benefits from philanthropy, such<br />
as cost savings, securing the supply chain,<br />
expanding the recruitment base or establishing a<br />
license to grow.<br />
5) Establish a global framework for philanthropy, but<br />
allow flexibility for local subsidiaries – at least 30<br />
percent of spending should be directed by those <strong>on</strong><br />
the ground.<br />
6) Link cause-related marketing to a <strong>corporate</strong><br />
philanthropic cause that c<strong>on</strong>cerns customers and<br />
employees.<br />
7) D<strong>on</strong>’t think philanthropy is <strong>on</strong>ly for premium brands;<br />
it can bring value for all types and sizes of<br />
companies.<br />
8) Match the <strong>corporate</strong> footprint; the more diffuse a<br />
company’s operati<strong>on</strong>s, the more c<strong>on</strong>tributi<strong>on</strong>s should<br />
be managed at a local level.<br />
9) Unleash employee enthusiasm to volunteer their<br />
time and skills.<br />
10) Be aspirati<strong>on</strong>al by moving bey<strong>on</strong>d that which is<br />
required or merely resp<strong>on</strong>sible.
24 DAVID WESCOTT<br />
Envir<strong>on</strong>mental Sustainability and Social Media:<br />
New Technology, New Voices, New Influence<br />
David Wescott examines the impact of <strong>on</strong>line peer-to-peer communicati<strong>on</strong> <strong>on</strong> shaping sustainability debates.<br />
Not l<strong>on</strong>g ago, a comm<strong>on</strong> complaint<br />
from envir<strong>on</strong>mentalists was the lack<br />
of attenti<strong>on</strong> paid to sustainability<br />
issues from businesses, <str<strong>on</strong>g>policy</str<strong>on</strong>g><br />
leaders and the mainstream media.<br />
Today, this community has found a<br />
powerful voice through <strong>on</strong>line social<br />
media. The leaders in the sustainability community are<br />
currently discussing what business and <str<strong>on</strong>g>policy</str<strong>on</strong>g> elites will<br />
debate six m<strong>on</strong>ths from now. They’re also transforming<br />
the way the mainstream media cover sustainability<br />
issues and how the public resp<strong>on</strong>ds. This new influence<br />
is already having an enormous impact <strong>on</strong> CR initiatives –<br />
<strong>on</strong>e I suspect <strong>on</strong>ly will c<strong>on</strong>tinue to grow.<br />
“Social media” is the term comm<strong>on</strong>ly used to describe<br />
<strong>on</strong>line, peer-to-peer communicati<strong>on</strong>. Advocates publish<br />
their ideas and voice their c<strong>on</strong>cerns <strong>on</strong> blogs – Web sites<br />
that include dated entries and provide opportunities for<br />
discussi<strong>on</strong> with readers through <strong>on</strong>line comments.<br />
Communities gather and c<strong>on</strong>verse virtually <strong>on</strong> social<br />
network utilities such as Ning, MySpace or Facebook.<br />
The names of the technology tools are often odd, but the<br />
c<strong>on</strong>versati<strong>on</strong>s they facilitate are growing in importance. It<br />
is estimated that there will be more than <strong>on</strong>e billi<strong>on</strong><br />
broadband Internet users actively participating in social<br />
media by 2012. Roughly 80 percent of journalists say<br />
they use blogs and other social media sites for story<br />
ideas and sources. Thus, any company that ignores this<br />
audience not <strong>on</strong>ly misses a significant outreach<br />
opportunity but also may lose its seat at the table to help<br />
shape envir<strong>on</strong>mental debates.<br />
Social media technology has attracted new advocates,<br />
prompted a renaissance of green ideas and advocacy,<br />
and dem<strong>on</strong>strated the diversity and richness of the<br />
sustainability and CR communities. CR and sustainable<br />
development advocates from across the globe come<br />
together <strong>on</strong> their own <strong>on</strong>line social network,<br />
Development Crossing. The School for Social<br />
Entrepreneurs tracks the latest <strong>on</strong> CR programs in the<br />
United Kingdom. Bjorn Stins<strong>on</strong>, president of the World<br />
<str<strong>on</strong>g>Business</str<strong>on</strong>g> Council for Sustainable Development, shares<br />
his thoughts <strong>on</strong> a pers<strong>on</strong>al blog. For those interested in<br />
green technology, Hank Green explains how solar cells<br />
work at EcoGeek. There’s a little bit of everything<br />
at <strong>on</strong>line portals such as the French-language<br />
site ecoloPop.<br />
Social media technology has attracted new<br />
advocates, prompted a renaissance of green<br />
ideas and advocacy, and dem<strong>on</strong>strated the<br />
diversity and richness of the sustainability<br />
and CR communities.<br />
The influx of new green leaders represents a variety of<br />
opini<strong>on</strong>s and positi<strong>on</strong>s. It’s by no means a stereotypical,<br />
angry group of rabble-rousers. This next generati<strong>on</strong> of<br />
<strong>on</strong>line advocates may call out a company for overselling<br />
a sustainability initiative, but they’re equally willing to<br />
work with companies <strong>on</strong> programs and ideas. Since the<br />
community depends <strong>on</strong> technology to communicate<br />
effectively, it understands the value of innovati<strong>on</strong> and<br />
w<strong>on</strong>’t begrudge the company its profits from new<br />
green technologies.<br />
“Greenwashing” and “polluti<strong>on</strong>” are four-letter words to<br />
this crowd, but “profit” isn’t. In fact, many of them –<br />
such as Jeff McIntire-Strasburg, a community leader and<br />
the founder of Sustainablog – go as far as offering<br />
c<strong>on</strong>sulting services to companies to help them develop<br />
sustainability policies and communicati<strong>on</strong> plans.<br />
This unprecedented access to an enormous community<br />
of educated and passi<strong>on</strong>ate advocates provides an<br />
important opportunity for businesses. The advocacy<br />
community has opened a channel for businesses to<br />
speak directly with it. And since the advocates already<br />
have taken the time to build the lines of communicati<strong>on</strong>,<br />
businesses can start these c<strong>on</strong>versati<strong>on</strong>s without making<br />
excessive investments in new technology themselves.<br />
This means CR officers and those resp<strong>on</strong>sible for a<br />
company’s envir<strong>on</strong>mental practices and policies easily<br />
can find the right partners for new initiatives. They can<br />
gain an understanding of attitudes toward their
companies and chart a course through a community,<br />
identifying the right relati<strong>on</strong>ships to build and strengthen<br />
al<strong>on</strong>g the way, to promote their work and enhance their<br />
reputati<strong>on</strong>s. While the social media space does not<br />
replace traditi<strong>on</strong>al communicati<strong>on</strong>, it offers excepti<strong>on</strong>al<br />
value as part of an integrated strategy and cannot<br />
be ignored.<br />
Of course, the “green-o-sphere” has had an impact far<br />
bey<strong>on</strong>d envir<strong>on</strong>mentalism and development – these<br />
entrepreneurial c<strong>on</strong>tent-producers and advocates are<br />
essentially building the news and informati<strong>on</strong> networks<br />
of the future.<br />
Internet technology has reduced the cost of c<strong>on</strong>tent<br />
producti<strong>on</strong> and distributi<strong>on</strong> so much that any<strong>on</strong>e has the<br />
potential to compete with the largest <strong>corporate</strong> media<br />
network. Trends in advertising revenue suggest many<br />
c<strong>on</strong>sumers are passing over newspapers and televisi<strong>on</strong><br />
for a much more customized and specialized selecti<strong>on</strong> of<br />
c<strong>on</strong>tent from <strong>on</strong>line sources. These trends are already<br />
apparent. Newspapers such as the Bost<strong>on</strong> Globe and<br />
networks such as BBC and CNN have closed costly<br />
foreign bureaus, while in August 2007 Discovery<br />
Networks purchased Treehugger, an <strong>on</strong>line green portal<br />
similar to Green Opti<strong>on</strong>s (GO). GO is a global network of<br />
DAVID WESCOTT 25<br />
blogs that examines every aspect of sustainability –<br />
technology, <str<strong>on</strong>g>policy</str<strong>on</strong>g>, lifestyle and business.<br />
This tight-knit and passi<strong>on</strong>ate sustainability community<br />
values collaborati<strong>on</strong>. It’s expected, even encouraged, for<br />
thought leaders to c<strong>on</strong>tribute c<strong>on</strong>tent under a single<br />
banner such as GO. Each c<strong>on</strong>tributor is a multimedia<br />
“beat reporter,” often with a pers<strong>on</strong>al Web site as well as<br />
an <strong>on</strong>line home at GO. Its model provides a diverse mix<br />
of credible c<strong>on</strong>tent with very little overhead. To look at<br />
the media network of tomorrow, just look at GO today.<br />
<str<strong>on</strong>g>Business</str<strong>on</strong>g>es must embrace social media and social media<br />
tools if they want the attenti<strong>on</strong> of savvy c<strong>on</strong>sumers and<br />
to attract the best and brightest to their workplaces.<br />
Since c<strong>on</strong>sumers have the power to pers<strong>on</strong>alize the<br />
informati<strong>on</strong> they receive, businesses can’t rely <strong>on</strong> people<br />
to seek out and visit their Web sites and read their press<br />
releases. Instead, businesses must make their c<strong>on</strong>tent<br />
more relevant, more accessible and more portable.<br />
More important, businesses must build str<strong>on</strong>g<br />
relati<strong>on</strong>ships with the leaders in this <strong>on</strong>line community,<br />
earning the community’s trust and respect al<strong>on</strong>g with<br />
increased attenti<strong>on</strong>.<br />
David Wescott is a vice president and directs the social media team at<br />
<strong>APCO</strong> <strong>Worldwide</strong>.
26 JENNIFER SILBERMAN<br />
Less<strong>on</strong>s From Latin America:<br />
New <str<strong>on</strong>g>Business</str<strong>on</strong>g> Models for Fighting Poverty<br />
Jennifer Silberman makes the case that companies in Latin America can help to<br />
transform low-income communities without sacrificing profitability.<br />
During the 20th century, growth<br />
from developed ec<strong>on</strong>omies<br />
generated the most wealth ever in<br />
the history of humanity; it also<br />
created the situati<strong>on</strong> of extreme<br />
inequality that we currently see<br />
around the world. According to the<br />
World Bank, Latin America is the regi<strong>on</strong> with the greatest<br />
ec<strong>on</strong>omic inequality in the world in terms of income.<br />
Vast segments of the populati<strong>on</strong> not <strong>on</strong>ly are cut off from<br />
the benefits of globalizati<strong>on</strong> and ec<strong>on</strong>omic progress but<br />
also are unable to c<strong>on</strong>tribute to the<br />
development of their societies in sustainable<br />
ways. According to the World Resources<br />
Institute, 70 percent of the populati<strong>on</strong> of Latin<br />
America – or close to 360 milli<strong>on</strong> people –<br />
has per capita income of less than US$3,260<br />
and are unable to satisfy even their most basic<br />
needs. Even more striking, <strong>on</strong>ly 0.6 percent<br />
of the regi<strong>on</strong>’s populati<strong>on</strong> is c<strong>on</strong>sidered<br />
high income.<br />
This envir<strong>on</strong>ment, al<strong>on</strong>g with lackluster<br />
ec<strong>on</strong>omic performance throughout the regi<strong>on</strong>,<br />
puts Latin America well behind North<br />
America, Europe and even emerging<br />
ec<strong>on</strong>omies in Asia. While governments are<br />
pursuing policies to help reduce income<br />
inequality, there is widespread agreement that<br />
most Latin American governments are unable<br />
to meet the most pressing social needs. With<br />
limited tax resources and growing public<br />
deficits, the most critical social programs<br />
cannot be delivered to the regi<strong>on</strong>’s<br />
most vulnerable.<br />
At the same time, democracy is now the<br />
prevalent form of government throughout the<br />
regi<strong>on</strong>. Civil society and the media are more<br />
influential than ever and are calling for<br />
increased accountability and transparency<br />
from their leaders. They also are calling <strong>on</strong> the<br />
private sector to take a more active and direct<br />
role in helping to meet the regi<strong>on</strong>’s enormous<br />
social obligati<strong>on</strong>s and promoting ec<strong>on</strong>omic<br />
and democratic stability.<br />
All of these factors have c<strong>on</strong>tributed to a growing<br />
recogniti<strong>on</strong> by the <strong>corporate</strong> sector that its involvement in<br />
addressing pressing social and envir<strong>on</strong>mental issues is<br />
critical to supporting a stable business envir<strong>on</strong>ment as<br />
well as protecting their l<strong>on</strong>g-term financial interests. Many<br />
companies throughout the regi<strong>on</strong> have undertaken new<br />
social investments to expand their customer bases by<br />
bringing the poor into the market – providing access to<br />
products and services and c<strong>on</strong>tributing to the l<strong>on</strong>g-term<br />
sustainability of their communities.
There are several examples of Latin American companies<br />
that have embraced “bottom-of-the-pyramid” strategies.<br />
These examples show just how the private sector can<br />
help transform poor and marginalized communities,<br />
generating social transformati<strong>on</strong>, while at the same time<br />
increasing profitability.<br />
Chilean-based GrupoNueva changed its business model<br />
to resp<strong>on</strong>d to the explosive populati<strong>on</strong> growth in the<br />
regi<strong>on</strong> coupled with widespread ec<strong>on</strong>omic disparity. A<br />
wood-products c<strong>on</strong>glomerate with operati<strong>on</strong>s in 15<br />
countries, the company changed its approach to<br />
revenue-growth forecasting, looking 15 years ahead to<br />
predict how to produce profitable goods and services for<br />
a larger base of poorer c<strong>on</strong>sumers. One of its companies,<br />
Masisa, already works throughout the Americas to<br />
provide basic furniture for low-cost housing am<strong>on</strong>g<br />
lower-income segments of the populati<strong>on</strong> and c<strong>on</strong>ducts<br />
furniture-making training for micro-entrepreneurs.<br />
This approach to business is driven by the most<br />
senior-level executives of the company. GrupoNueva’s<br />
founder, Swiss billi<strong>on</strong>aire Stephan Schmidheiny, is<br />
regarded as <strong>on</strong>e of the leading social entrepreneurs<br />
known for applying business approaches to address<br />
social and envir<strong>on</strong>mental development challenges.<br />
Mexican building-materials giant CEMEX is <strong>on</strong>e of the<br />
early pi<strong>on</strong>eers of creating innovative business models to<br />
meet social needs. In 1998, the company developed a<br />
micro-credit program offering fixed-priced materials and<br />
technical assistance lending for low-income earners. Over<br />
the past nine years, more than 180,000 families have<br />
received more than US$67 milli<strong>on</strong> in loans, and since<br />
2004 the program has turned a profit thanks to its<br />
innovative business model and loan repayment rate of 99<br />
percent. In additi<strong>on</strong> to profitability, the program’s success<br />
has created a sustainable new market for the company,<br />
with many of its customers using the credit programs to<br />
expand their homes and businesses.<br />
Brazilian companies have l<strong>on</strong>g been regarded as the<br />
most sophisticated practiti<strong>on</strong>ers of resp<strong>on</strong>sible business in<br />
the regi<strong>on</strong>. The social, ec<strong>on</strong>omic, ethnic and cultural<br />
diversity of the country has provided Brazilian businesses<br />
with unique opportunities to test new approaches<br />
and soluti<strong>on</strong>s.<br />
JENNIFER SILBERMAN 27<br />
However, with almost <strong>on</strong>e-third of the populati<strong>on</strong> living<br />
below the poverty line, Brazil has the sec<strong>on</strong>d-worst<br />
income distributi<strong>on</strong> of wealth in the world. It is a country<br />
of great c<strong>on</strong>tradicti<strong>on</strong>s – <strong>on</strong> the <strong>on</strong>e hand, Brazil occupies<br />
a place <strong>on</strong> the world stage as <strong>on</strong>e of the most dominant<br />
emerging ec<strong>on</strong>omies, yet, at the same time, the<br />
Internati<strong>on</strong>al Labor Organizati<strong>on</strong> estimates that more<br />
than 25,000 Brazilians work under slave-like c<strong>on</strong>diti<strong>on</strong>s.<br />
This reality presents tremendous opportunities and<br />
challenges for Brazilian enterprises to reduce the<br />
country’s disparities.<br />
Working with government and civil society,<br />
businesses can accelerate development in the<br />
regi<strong>on</strong> and inspire new models for addressing<br />
social inequities, while at the same time creating<br />
new markets and value for shareholders.<br />
Natura, the Brazilian cosmetics company, shows how<br />
enabling social development can create good business<br />
opportunities. The company sources many of its<br />
ingredients from poor indigenous communities in the<br />
rainforests and supports an entrepreneurial workforce of<br />
independent resellers of its products. Natura’s business<br />
model has earned the company a place as <strong>on</strong>e of the<br />
most admired companies and valuable brands in Brazil.<br />
The Latin American private sector plays an important role<br />
in addressing the regi<strong>on</strong>’s social and envir<strong>on</strong>mental<br />
challenges. Working with government and civil society,<br />
businesses can accelerate development in the regi<strong>on</strong> and<br />
inspire new models for addressing social inequities,<br />
while at the same time creating new markets and value<br />
for shareholders.<br />
As global multinati<strong>on</strong>als look for examples of business<br />
approaches that address key societal challenges, perhaps<br />
Latin American companies offer creative examples of how<br />
companies that bring impoverished communities into the<br />
marketplace can create a new form of social capital. And<br />
maybe that’s just smart business.<br />
Jennifer Silberman is a vice president in <strong>APCO</strong> <strong>Worldwide</strong>’s CR practice and<br />
is based in Washingt<strong>on</strong>, D.C. She has more than 12 years of experience<br />
working throughout Latin America.
28 VÉRONIQUE FERJOU AND PAZANNE LE COUR GRANDMAISON<br />
France’s Grenelle <strong>on</strong> Sustainable Development:<br />
Another French Revoluti<strong>on</strong>?<br />
Vér<strong>on</strong>ique Ferjou and Pazanne Le Cour Grandmais<strong>on</strong> observe how this sustainable<br />
development framework is changing how business is c<strong>on</strong>ducted in France.<br />
In the early 2000s, a push by civil<br />
society and NGOs began to bring<br />
sustainable development issues to<br />
the forefr<strong>on</strong>t of the French political<br />
and ec<strong>on</strong>omic agenda. In 2005,<br />
under President Jacques Chirac,<br />
France became the first country to<br />
include an envir<strong>on</strong>mental charter in<br />
its c<strong>on</strong>stituti<strong>on</strong>. During the 2007<br />
French presidential campaign,<br />
Nicolas Hulot, a leading French<br />
envir<strong>on</strong>mental activist, published<br />
the Ecological Pact, a call for acti<strong>on</strong><br />
for sustainable development to<br />
become a nati<strong>on</strong>al priority, which was signed by all the<br />
leading presidential candidates.<br />
Following the electi<strong>on</strong>, President Nicolas Sarkozy –<br />
having signed the Ecological Pact and following up <strong>on</strong><br />
his promise of “rupture” (break with the past) –<br />
announced the creati<strong>on</strong> of an overarching minister for<br />
ecology and sustainable development, symbolically<br />
holding the number two positi<strong>on</strong> in the government,<br />
sec<strong>on</strong>d <strong>on</strong>ly to the prime minister. He also called for a<br />
nati<strong>on</strong>al c<strong>on</strong>venti<strong>on</strong> <strong>on</strong> the envir<strong>on</strong>ment called the<br />
“Grenelle de l’Envir<strong>on</strong>nement.”<br />
This c<strong>on</strong>venti<strong>on</strong> and its first output already are<br />
transforming the way business is d<strong>on</strong>e in France. The<br />
Grenelle de l’Envir<strong>on</strong>nement took its organizing<br />
principles from the Grenelle agreements that were<br />
negotiated am<strong>on</strong>g the government, trade uni<strong>on</strong>s and<br />
employers to end the May 1968 riots. Accordingly, the<br />
Grenelle de l’Envir<strong>on</strong>nement brought together<br />
stakeholders who had not previously engaged in<br />
systematic dialogue <strong>on</strong> sustainable development: the<br />
administrati<strong>on</strong>, locally elected officials, business, trade<br />
uni<strong>on</strong>s and NGO representatives. Six working groups<br />
focused <strong>on</strong> climate change and energy demand,<br />
biodiversity and preservati<strong>on</strong> of natural resources, health<br />
and the envir<strong>on</strong>ment, sustainable producti<strong>on</strong> and<br />
c<strong>on</strong>sumpti<strong>on</strong>, democracy and governance, and<br />
competitiveness and employment vis-à-vis ecological<br />
development. Furthermore, the c<strong>on</strong>venti<strong>on</strong> was brought<br />
to the general public through a series of debates<br />
organized both across France and <strong>on</strong>line (with more than<br />
200,000 <strong>on</strong>line c<strong>on</strong>tributi<strong>on</strong>s by French citizens).<br />
After four m<strong>on</strong>ths, the c<strong>on</strong>venti<strong>on</strong> reached a first set of<br />
c<strong>on</strong>clusi<strong>on</strong>s, to provide a general framework for future<br />
French legislati<strong>on</strong> <strong>on</strong> sustainable development-related<br />
issues. In October 2007, President Sarkozy made these<br />
c<strong>on</strong>clusi<strong>on</strong>s public in the presence of European<br />
Commissi<strong>on</strong> President José Manuel Barosso and climate<br />
activist and Nobel Peace Prize winner Al Gore. President<br />
Sarkozy called for an “ecological New Deal” and a “green<br />
revoluti<strong>on</strong>” to be supported jointly with the European<br />
Uni<strong>on</strong>. He added that envir<strong>on</strong>mental <str<strong>on</strong>g>policy</str<strong>on</strong>g> was not a<br />
cost, but an investment, and invited all stakeholders to<br />
move away from “the deadlock that permanently c<strong>on</strong>sists<br />
in opposing ec<strong>on</strong>omic growth to the preservati<strong>on</strong> of<br />
the envir<strong>on</strong>ment.”<br />
Over the last six m<strong>on</strong>ths, a new governance of the<br />
French political and ec<strong>on</strong>omic decisi<strong>on</strong>-making process<br />
has emerged, “le dialogue à cinq” (five-way dialogue),<br />
adding civil society/NGOs to the four traditi<strong>on</strong>al<br />
stakeholders: administrati<strong>on</strong>, locally elected officials,<br />
business and trade uni<strong>on</strong>s. This is the Grenelle<br />
revoluti<strong>on</strong>, as President Sarkozy restated in a speech <strong>on</strong><br />
May 28, 2008, when he said he “wanted this five-way<br />
dialogue to become <strong>on</strong>e of the principles of public<br />
decisi<strong>on</strong>-making in France.”<br />
Criticism has emerged <strong>on</strong> the c<strong>on</strong>sultati<strong>on</strong> process itself<br />
(in terms of representativeness, expertise and objectives),<br />
and difficulties already have arisen as talks of<br />
implementing these recommendati<strong>on</strong>s move forth. It is<br />
too early to tell how the Grenelle c<strong>on</strong>clusi<strong>on</strong>s will be<br />
translated in the draft bills that will be presented before<br />
Parliament in the autumn, but there already is a “before”<br />
and an “after” Grenelle in terms of what is expected of<br />
businesses. With the official recogniti<strong>on</strong> of NGOs as new<br />
and critical stakeholders in the public decisi<strong>on</strong>-making<br />
process, businesses will need to revisit their CR activities<br />
and rely <strong>on</strong> expert advice to address these new<br />
stakeholders and engage in this new dialogue.<br />
Vér<strong>on</strong>ique Ferjou and Pazanne Le Cour Grandmais<strong>on</strong> are both associate<br />
managers at <strong>APCO</strong> <strong>Worldwide</strong> and are based in Paris.
In the Arab regi<strong>on</strong>, CR awareness is<br />
growing due to ec<strong>on</strong>omic reform<br />
and the emphasis <strong>on</strong><br />
competitiveness and future<br />
ec<strong>on</strong>omic sustainability. For<br />
example, in countries such as Egypt<br />
and the Gulf Cooperati<strong>on</strong> Council<br />
members (Saudi Arabia, United<br />
Arab Emirates, Qatar, Bahrain,<br />
Oman and Kuwait), leading local<br />
businesses see CR as increasingly<br />
important to internal operati<strong>on</strong>s,<br />
business expansi<strong>on</strong> and the need<br />
to align with<br />
internati<strong>on</strong>al best practices to access<br />
new markets, particularly c<strong>on</strong>sidering<br />
the existing percepti<strong>on</strong>s about Arab<br />
businesses.<br />
While local awareness and<br />
commitment are growing, CR<br />
engagement is still at an early stage,<br />
practiced mainly by multinati<strong>on</strong>als<br />
and large local businesses. It remains<br />
str<strong>on</strong>gly rooted in <strong>corporate</strong><br />
philanthropy and community<br />
initiatives mainly due to the regi<strong>on</strong>’s<br />
cultural traditi<strong>on</strong>s. This aspect of CR<br />
is also important for multinati<strong>on</strong>als<br />
operating in the regi<strong>on</strong>, many of<br />
which have made it their main CR<br />
focus here. It has become the<br />
business imperative for introducing<br />
internati<strong>on</strong>al brands to domestic Arab<br />
markets, which requires building<br />
understanding, engagement and<br />
grassroots support into brand values.<br />
In additi<strong>on</strong>, we are seeing increased<br />
regi<strong>on</strong>al focus <strong>on</strong> gaining knowledge<br />
and expertise in business ethics,<br />
<strong>corporate</strong> governance, reporting and<br />
transparency, and envir<strong>on</strong>mental<br />
sustainability.<br />
CLEOPATRA VAN DE WINKEL AND TAMARA SAEB 29<br />
Viewpoint From the Arab Regi<strong>on</strong><br />
Cleopatra van de Winkel and Tamara Saeb evaluate the rise of CR<br />
in the Arab world and how it is affected by regi<strong>on</strong>al culture.<br />
<str<strong>on</strong>g>Business</str<strong>on</strong>g> philanthropy and social duty are deeply rooted<br />
in the regi<strong>on</strong>’s culture; for example in Sharia – Islamic<br />
law – and Islamic finance principles. There is growing<br />
awareness that those principles need to be aligned and<br />
applied with <strong>corporate</strong> governance in the c<strong>on</strong>text of<br />
operati<strong>on</strong>al excellence. Hawkamah – the Dubai<br />
Internati<strong>on</strong>al Financial Centre’s <strong>corporate</strong> governance<br />
institute – and the World Bank are launching an<br />
initiative to assist Arab business growth through<br />
operati<strong>on</strong>al excellence and <strong>corporate</strong> governance, which<br />
includes a CR dimensi<strong>on</strong>. This will be an interesting<br />
space to watch in the next few years.
30 CLEOPATRA VAN DE WINKEL AND TAMARA SAEB<br />
In the Arab regi<strong>on</strong>, the motivati<strong>on</strong> arises from<br />
the need to adopt internati<strong>on</strong>al best practices<br />
as a key differentiator in an increasingly<br />
competitive envir<strong>on</strong>ment.<br />
In the United Arab Emirates, large local developers such<br />
as Masdar, Nakheel and Emaar are adopting green<br />
targets to reduce carb<strong>on</strong> footprints in their high-profile<br />
projects. In 2006, the Dubai Centre for Corporate<br />
Values, in cooperati<strong>on</strong> with the Dubai Internati<strong>on</strong>al<br />
Financial Centre, TECOM Investments and the Dubai<br />
Airport Free Z<strong>on</strong>e Authority, issued its first CR report<br />
using Global Reporting Initiative (GRI) guidelines.<br />
Looking ahead, a c<strong>on</strong>ducive <str<strong>on</strong>g>policy</str<strong>on</strong>g> and regulatory<br />
envir<strong>on</strong>ment, further investment, guidance and building<br />
local capacity to implement CR initiatives will be the<br />
necessary ingredients.<br />
Drivers of CR – internati<strong>on</strong>al best practice and<br />
instituti<strong>on</strong>-building<br />
In the Arab regi<strong>on</strong>, the motivati<strong>on</strong> arises from the<br />
need to adopt internati<strong>on</strong>al best practices as a key<br />
differentiator in an increasingly competitive envir<strong>on</strong>ment.<br />
The Department of Planning and Ec<strong>on</strong>omy in Abu Dhabi<br />
recently made a str<strong>on</strong>g statement about the private<br />
sector’s lack of “tangible c<strong>on</strong>tributi<strong>on</strong>” in its “social duty”<br />
to the United Arab Emirates. Several instituti<strong>on</strong>s have<br />
been established to provide services or create dialogue<br />
platforms <strong>on</strong> CR; for example, Hawkamah, Mudara and<br />
the Centre for Resp<strong>on</strong>sible <str<strong>on</strong>g>Business</str<strong>on</strong>g> linked to the Dubai<br />
Chambers of Commerce and Industry.<br />
NGOs and media have not played major roles so far, but<br />
the development of private media, increased openness<br />
and more investigative journalism are leading to more<br />
scrutiny of businesses and government activities. The<br />
issues tackled primarily relate to <strong>corporate</strong> financial<br />
performance (particularly listed companies) and to<br />
c<strong>on</strong>sumer protecti<strong>on</strong> and product-related quality c<strong>on</strong>trol.<br />
The NGO community is still developing, with existing<br />
NGOs mainly focused in the charity sector and <strong>on</strong><br />
specific issues such as health and envir<strong>on</strong>ment. There is<br />
still a tendency to view NGOs as beneficiaries or partners<br />
for <strong>corporate</strong> philanthropy rather than as proactive<br />
advisers. A few examples are emerging, such as the<br />
Emirates Envir<strong>on</strong>mental Group in Dubai, which is<br />
playing a more active advocacy role in defining<br />
regulatory and <str<strong>on</strong>g>policy</str<strong>on</strong>g> frameworks or calling for<br />
implementati<strong>on</strong> of standards.<br />
…the development of private media, increased<br />
openness and more investigative journalism are<br />
leading to more scrutiny of businesses and<br />
government activities.<br />
The role of government is also important – there is<br />
genuine commitment and keenness to learn about and<br />
adopt globally recognised guidelines and best practices.<br />
These include certificati<strong>on</strong> from the Internati<strong>on</strong>al<br />
Organizati<strong>on</strong> for Standardizati<strong>on</strong> ISO and GRI guidelines,<br />
and leading businesses have started to use them. In<br />
some countries (particularly the Gulf Cooperati<strong>on</strong> Council<br />
members), it is actually government officials who have<br />
taken the lead in placing these standards <strong>on</strong> the agenda<br />
and engaging the private sector <strong>on</strong> them.<br />
Cleopatra van de Winkel is a regi<strong>on</strong>al director in <strong>APCO</strong> <strong>Worldwide</strong>'s Europe,<br />
Middle East and Africa regi<strong>on</strong> and is based in Brussels.<br />
Tamara Saeb is an associate manager in <strong>APCO</strong> <strong>Worldwide</strong>’s Arab regi<strong>on</strong> and<br />
is based in Dubai.
Key global macro trends recently<br />
highlighted at the World Ec<strong>on</strong>omic<br />
Forum in Egypt are shaping the<br />
regi<strong>on</strong> and its approach to CR and<br />
are also applicable in Israel:<br />
• Rising awareness by public<br />
and private sectors regarding the<br />
need to collaborate and pool resources targeted at<br />
social problems.<br />
• Growing investments in social enterprises and<br />
creati<strong>on</strong> of social venture networks by corporati<strong>on</strong>s.<br />
• Increasing investment in renewable energy and<br />
sustainable soluti<strong>on</strong>s by all sectors.<br />
In Israel, which draws its knowledge and expertise<br />
mainly from the United States and Europe for<br />
geopolitical reas<strong>on</strong>s, the CR learning curve is c<strong>on</strong>stantly<br />
evolving, becoming more sophisticated and adapted to<br />
local culture. This stems from the increased flow of<br />
knowledge into the <strong>corporate</strong> sector, a visible rise in<br />
media attenti<strong>on</strong>, high-profile c<strong>on</strong>venti<strong>on</strong>s, setup of CR<br />
think tanks and promoti<strong>on</strong> of resp<strong>on</strong>sible business<br />
practices by various NGOs. In the past few years,<br />
companies across many sectors have devoted more<br />
interest and resources to issues that transcend traditi<strong>on</strong>al<br />
CR activity, such as community projects and<br />
philanthropy, and they are now taking into account<br />
<strong>corporate</strong> governance; ethical supply chain; ethical<br />
producti<strong>on</strong> and trade; diversified workplace; and – above<br />
all – sustainability and green issues. These moves reflect<br />
a str<strong>on</strong>g statement of Israeli <strong>corporate</strong> intenti<strong>on</strong>s to put<br />
themselves <strong>on</strong> par with the world’s largest corporati<strong>on</strong>s,<br />
which already have taken significant steps toward more<br />
resp<strong>on</strong>sible c<strong>on</strong>duct.<br />
Drivers of CR – stakeholders and internati<strong>on</strong>al<br />
best practice<br />
Recent Israeli studies show that publicly traded<br />
companies have a growing understanding of the need to<br />
answer increasing demand by stakeholders to be socially<br />
involved. For example, 90 percent of companies in a<br />
2007 McKinsey Quarterly survey believe that<br />
resp<strong>on</strong>sible business c<strong>on</strong>duct and <strong>corporate</strong> philanthropy<br />
will promote business by enhancing <strong>corporate</strong> reputati<strong>on</strong><br />
while solving social issues. Government <strong>on</strong>ly recently<br />
joined this trend and is currently facilitating a<br />
Viewpoint From Israel<br />
DANIELA PRUSKY-SION 31<br />
Daniela Prusky-Si<strong>on</strong> views the evolving world of CR in Israel and how it is changing based <strong>on</strong> cultural norms.<br />
stakeholder dialogue am<strong>on</strong>g the <strong>corporate</strong> sector, civil<br />
society and governmental instituti<strong>on</strong>s, producing <str<strong>on</strong>g>policy</str<strong>on</strong>g><br />
papers and outlining the desirable cooperative framework<br />
am<strong>on</strong>g the sectors.<br />
Although <strong>corporate</strong> acti<strong>on</strong> <strong>on</strong> these issues is still<br />
comm<strong>on</strong>ly viewed as voluntary, the need to create<br />
comm<strong>on</strong> standards for CR practices, adapted to Israeli<br />
culture, is widely accepted. For example, issues such as<br />
workplace diversity have str<strong>on</strong>g meaning in an Israeli<br />
society comprised of multi-ethnic groups struggling to<br />
ascend from the margins and achieve deserved<br />
recogniti<strong>on</strong>. Unique sociocultural attributes such as<br />
mandatory military service, Jewish-Arab coexistence,<br />
center-periphery gaps and geopolitical implicati<strong>on</strong>s<br />
typically underlie the CR decisi<strong>on</strong>-making process of<br />
Israeli firms. As in many other countries, Israeli<br />
companies are slow to adopt voluntary practices, unless<br />
there is regulatory demand. Fortunately, public scrutiny,<br />
media attenti<strong>on</strong> and stockholder demands are all<br />
changing this rapidly.<br />
The role of media and NGOs<br />
A few Israeli NGOs have started scrutinizing <strong>corporate</strong><br />
behavior, attempting to ensure companies implement<br />
equal opportunity policies and uphold ethical work<br />
standards. But this trend is far from comm<strong>on</strong>; since<br />
many organizati<strong>on</strong>s depend <strong>on</strong> private-sector funding,<br />
there can be an inherent c<strong>on</strong>flict.<br />
Israeli NGOs and media in many instances have joined<br />
forces to address their similar c<strong>on</strong>cerns. Unsurprisingly,<br />
the majority of Israeli media outlets have a more hands<strong>on</strong><br />
approach in their missi<strong>on</strong> to shed light <strong>on</strong> issues<br />
such as fair trade, carb<strong>on</strong> footprint and social marketing.<br />
An example of effective cooperati<strong>on</strong> between media and<br />
NGO sectors is the alliance between Ma’ala, Israel’s<br />
main CR advocacy NGO, and Globes, a leading financial<br />
newspaper. Their joint annual CR c<strong>on</strong>venti<strong>on</strong>, which<br />
draws top decisi<strong>on</strong>-makers from all sectors, allows for<br />
public debate and heavy media attenti<strong>on</strong>. Nevertheless,<br />
Israel has much to learn from countries such as the<br />
United Kingdom and United States, where watchdog and<br />
ombudsman organizati<strong>on</strong>s take a more proactive role in<br />
m<strong>on</strong>itoring <strong>corporate</strong> behavior.<br />
Daniela Prusky-Si<strong>on</strong> is a senior associate at <strong>APCO</strong> <strong>Worldwide</strong> and is based<br />
in Tel Aviv.
32 NOMA FAKU<br />
It Is Great – But, Is It Good for Us?:<br />
Looking a Gift Horse In the Mouth<br />
Noma Faku explores what it means to be a resp<strong>on</strong>sible <strong>corporate</strong> citizen in Africa’s volatile political climate.<br />
The diversity of ec<strong>on</strong>omies, markets<br />
and c<strong>on</strong>sumers in Africa challenges<br />
accepted noti<strong>on</strong>s of CR. Any claim<br />
of good deeds by a corporati<strong>on</strong><br />
operating in the African c<strong>on</strong>tinent –<br />
with its myriad of needs and<br />
associated images of poverty, war<br />
and famine etched in our minds – has tended to be met<br />
favourably. However, Africa itself is beginning to look at<br />
these with some disdain and raise questi<strong>on</strong>s about<br />
whose interests these good deeds serve.<br />
For example, a tire company in Liberia, a country with<br />
an 85 percent unemployment rate, provides 15,000<br />
jobs. The company is known for harsh working<br />
c<strong>on</strong>diti<strong>on</strong>s and the squalid living c<strong>on</strong>diti<strong>on</strong>s of its<br />
workers. When Liberian President Ellen Johns<strong>on</strong> Sirleaf<br />
made an unannounced visit to the company’s premises<br />
during filming of a Public Broadcasting Service<br />
documentary, she pointedly and publicly criticised a line<br />
manager about the workers’ housing c<strong>on</strong>diti<strong>on</strong>s.<br />
This raises the questi<strong>on</strong>: would providing decent housing<br />
qualify this tire manufacture as being resp<strong>on</strong>sible,<br />
notwithstanding its 50 years of operati<strong>on</strong> in Liberia? In<br />
most mature democracies, the state plays a role in<br />
financing public housing for the poor, but housing is not<br />
generally c<strong>on</strong>sidered part of CR. In Africa, where local<br />
governments, especially, lack such resources and where<br />
foreign investors often invest in workers’ housing,<br />
how should the boundaries of expectati<strong>on</strong> and practice<br />
be drawn?<br />
For decades, corporati<strong>on</strong>s’ social resp<strong>on</strong>sibilities have<br />
been c<strong>on</strong>diti<strong>on</strong>ed largely by sympathy for the difficulties<br />
involved in operating in volatile political envir<strong>on</strong>ments.<br />
As a result, we have not raised – or perhaps fully<br />
understood – the essential questi<strong>on</strong> of what it means to<br />
be a resp<strong>on</strong>sible <strong>corporate</strong> citizen in these situati<strong>on</strong>s.<br />
Does operating during a civil war or dictatorship<br />
c<strong>on</strong>stitute a reas<strong>on</strong> to ignore CR in that country – or<br />
does it instead require locati<strong>on</strong>-specific CR that diverges<br />
from a global template originating in stable markets?<br />
Some organisati<strong>on</strong>s have developed a competitive<br />
advantage from the ability to run successful businesses<br />
in politically volatile envir<strong>on</strong>ments. This is not unique to<br />
Africa, although it is particularly pertinent to it. For<br />
example, amid the increased calls for sancti<strong>on</strong>s <strong>on</strong> the<br />
government of Zimbabwe, there are some companies<br />
which see a resp<strong>on</strong>sibility to c<strong>on</strong>tinue operating in that<br />
country in order to sustain livelihoods for their workers<br />
and suppliers. At the same time, expertise in operating<br />
in volatile political envir<strong>on</strong>ments that has been<br />
developed in African operati<strong>on</strong>s is being exported to<br />
other parts of the world such as the Middle East.<br />
South Africa provides an example of how business<br />
c<strong>on</strong>duct during difficult political times affects <strong>corporate</strong><br />
reputati<strong>on</strong> l<strong>on</strong>g afterward. South African corporati<strong>on</strong>s<br />
who operated during apartheid, for instance, can<br />
testify that their c<strong>on</strong>duct during apartheid is inseparable<br />
from their <strong>corporate</strong> reputati<strong>on</strong> in a post-apartheid<br />
South Africa.<br />
The South African example shows the need to be<br />
resp<strong>on</strong>sible at all times in all areas of operati<strong>on</strong>. These<br />
include the lifecycle of the product from source to shelf<br />
and the corporati<strong>on</strong>’s treatment of its employees in line<br />
with – and sometimes exceeding – globally accepted<br />
standards. It also includes resp<strong>on</strong>sible interacti<strong>on</strong> with<br />
c<strong>on</strong>sumers and citizens, because the quest for freedom<br />
in South Africa involved a level of activism that remains<br />
in the public and instituti<strong>on</strong>al memory. This means that<br />
even when needs are dire, the intent of a gift will be<br />
scrutinised and even questi<strong>on</strong>ed. This is particularly true<br />
in other new democracies across Africa that have<br />
accepted “gifts” – whether tied to aid, <strong>corporate</strong><br />
investment or philanthropy – and later came to<br />
understand that such gifts may not be structured to the<br />
needs and interests of their citizens. The transiti<strong>on</strong> that<br />
is sought is from beneficiary to partner – with the<br />
recogniti<strong>on</strong> of mutual respect and mutual benefits that<br />
this entails.<br />
Given the vast needs of the African c<strong>on</strong>tinent and the<br />
daily manoeuvres <strong>on</strong>e must make to produce profit in<br />
politically volatile envir<strong>on</strong>ments, being a resp<strong>on</strong>sible<br />
<strong>corporate</strong> citizen requires local relevance – using local<br />
insights to resp<strong>on</strong>d to the needs of the local<br />
communities, ec<strong>on</strong>omies and markets – within the<br />
parameters of globally accepted norms.<br />
Noma Faku is the managing director of <strong>APCO</strong> <strong>Worldwide</strong>’s<br />
Johannesburg office.
Over the past few decades, with the<br />
advent of liberalizati<strong>on</strong> and the<br />
entry of global brands in the<br />
marketplace, the adage that the<br />
c<strong>on</strong>sumer is king has taken hold.<br />
There are more goods, more choices<br />
and more competiti<strong>on</strong>, but<br />
c<strong>on</strong>sumer protecti<strong>on</strong> often has been weak. N<strong>on</strong>etheless,<br />
Indian c<strong>on</strong>sumers are increasingly c<strong>on</strong>scious of their<br />
rights and of the vulnerability of companies to public<br />
pressure. The media now highlight lapses by<br />
multinati<strong>on</strong>al corporati<strong>on</strong>s in particular, so that<br />
corporati<strong>on</strong>s need not <strong>on</strong>ly to be c<strong>on</strong>fident of their<br />
product quality, but also to be prepared to communicate<br />
effectively about it.<br />
Because no organizati<strong>on</strong> is infallible and quality flukes<br />
and supply-chain lapses have happened to even the<br />
most well-managed corporati<strong>on</strong>s, managers need to take<br />
steps to mitigate the tremors of public censure in India<br />
before it’s too late.<br />
India’s legacy of activism<br />
Historically speaking, it’s generally recognized that Indian<br />
activism has inspired activists globally. It should<br />
therefore not be surprising that proactive c<strong>on</strong>sumer<br />
activism has been around in India – albeit in a limited<br />
way – since the 1960s. Over the years, it has grown<br />
with the quiet but sustained initiatives of individuals,<br />
organizati<strong>on</strong>s and public-spirited groups.<br />
C<strong>on</strong>sumer Activism in India<br />
Dev Dasgupta probes the rise in c<strong>on</strong>sumer c<strong>on</strong>sciousness in the increasingly global Indian marketplace.<br />
Certain names come immediately to mind:<br />
DEV DASGUPTA 33<br />
A customer is the most important visitor <strong>on</strong> our premises. He is not dependent <strong>on</strong> us. We are<br />
dependent <strong>on</strong> him. He is not an interrupti<strong>on</strong> in our work. He is the purpose of it. He is not an<br />
outsider in our business. He is part of it. We are not doing him a favour by serving him. He is<br />
doing us a favour by giving us an opportunity to do so.<br />
– Mahatma Gandhi<br />
• H.D. Shourie of the public-interest group Comm<strong>on</strong><br />
Cause was a relentless crusader for the rights of the<br />
comm<strong>on</strong> man, using public-interest litigati<strong>on</strong> to<br />
aid pensi<strong>on</strong>ers and widows, fight corrupti<strong>on</strong>,<br />
campaign for proper blood banks and advocate for<br />
c<strong>on</strong>sumer courts.<br />
• M.C. Mehta took <strong>on</strong> the government and forced the<br />
closure of polluters whose emissi<strong>on</strong>s were turning the<br />
Taj Mahal yellow or whose effluents were pois<strong>on</strong>ing<br />
the Ganges. Mehta almost single-handedly has<br />
obtained around 40 landmark judgments and<br />
numerous orders from the Supreme Court against<br />
polluters, a record that may be unrivaled.<br />
• CUTS Internati<strong>on</strong>al (C<strong>on</strong>sumer Unity & Trust Society)<br />
is recognized for its research, advocacy and<br />
networking in relati<strong>on</strong> to several areas of public<br />
interest, c<strong>on</strong>sumer protecti<strong>on</strong>, internati<strong>on</strong>al trade<br />
and development, competiti<strong>on</strong>, investment and<br />
ec<strong>on</strong>omic regulati<strong>on</strong>, human development, and<br />
c<strong>on</strong>sumer safety.<br />
As has often been the case internati<strong>on</strong>ally, c<strong>on</strong>sumer<br />
activism has been led by educated elites, while the<br />
general public has not been widely aware of rights or<br />
avenues for redress. However, this is now changing, as<br />
civil society and the government have been working to<br />
build public awareness.<br />
For example, the government of India has passed<br />
legislati<strong>on</strong> and increased educati<strong>on</strong> to help c<strong>on</strong>sumers<br />
avoid schemes and understand how to approach the<br />
c<strong>on</strong>sumer courts. The formalities and “legalese” at these<br />
courts have been minimized to prevent c<strong>on</strong>fusi<strong>on</strong>. The
34 DEV DASGUPTA<br />
Department of C<strong>on</strong>sumer Affairs has been assigned the<br />
task of developing a “Nati<strong>on</strong>al Acti<strong>on</strong> Plan for C<strong>on</strong>sumer<br />
Awareness and Redressal and Enforcement of C<strong>on</strong>sumer<br />
Protecti<strong>on</strong> Act, 1986” using audio, video and print<br />
media with the campaign slogan “Jaago Grahak Jaago”<br />
(Wake Up C<strong>on</strong>sumers).<br />
Taking <strong>on</strong> the <strong>corporate</strong> sector<br />
In the past, the government and public-sector<br />
organizati<strong>on</strong>s were the main targets for activists, but<br />
multinati<strong>on</strong>als are now recognized as more symbolic<br />
and potentially vulnerable. The increasing availability of<br />
internati<strong>on</strong>ally branded products in the<br />
c<strong>on</strong>sumer goods sector, as well as greater<br />
democratizati<strong>on</strong> of communicati<strong>on</strong> channels,<br />
have c<strong>on</strong>tributed to the rise in attacks <strong>on</strong><br />
multinati<strong>on</strong>al corporati<strong>on</strong>s.<br />
In October 2003, the c<strong>on</strong>fecti<strong>on</strong>ery company<br />
Cadbury was c<strong>on</strong>fr<strong>on</strong>ted with worms in its<br />
chocolate bars. The media and public outcry<br />
forced the company to dem<strong>on</strong>strate efforts to<br />
improve packaging and pack sizes while also<br />
launching a massive advertising campaign.<br />
C<strong>on</strong>troversies related to industrial water use<br />
and pesticide residues affected the<br />
reputati<strong>on</strong>s of Coca-Cola and Pepsi bey<strong>on</strong>d<br />
India. Sunita Narain, director of the advocacy<br />
group Centre for Science and Envir<strong>on</strong>ment,<br />
took the battle to the streets and the<br />
internati<strong>on</strong>al media with laboratory data<br />
alleging that the appropriate quality standards<br />
had not been met. Although these companies<br />
appear to have recovered from the<br />
allegati<strong>on</strong>s, it wasn’t easy.<br />
These landmark cases indicate that the<br />
products of multinati<strong>on</strong>al corporati<strong>on</strong>s are no<br />
l<strong>on</strong>ger given a free pass due to presumed<br />
safety and internati<strong>on</strong>al-level quality.<br />
Furthermore, although most activism to date<br />
has focused <strong>on</strong> issues related to food, the<br />
envir<strong>on</strong>ment and water, other industries<br />
should not be complacent.<br />
Firms operating in India need to c<strong>on</strong>sider<br />
crisis management and civil society<br />
engagement in the same manner as in the<br />
West. Proactive CR programs that build<br />
credibility and understanding of operati<strong>on</strong>al best<br />
practices can go far to strengthen trust and create<br />
third-party advocates before an alleged or actual incident<br />
occurs. Finally, multinati<strong>on</strong>al corporati<strong>on</strong>s should<br />
examine their policies and implementati<strong>on</strong> to ensure that<br />
there are no double standards between the West and<br />
Asia in the way they operate. A scandal that implies that<br />
Indian c<strong>on</strong>sumers have not been treated as fairly as<br />
Westerners could be particularly devastating.<br />
Dev Dasgupta is the managing director of <strong>APCO</strong> <strong>Worldwide</strong>’s India<br />
operati<strong>on</strong>s and is based in New Delhi.
Corporate Resp<strong>on</strong>sibility in Ind<strong>on</strong>esia<br />
in the Era of Reformasi<br />
It has been just 10 years since<br />
Ind<strong>on</strong>esia experienced profound<br />
political change with the end of the<br />
authoritarian Suharto regime after<br />
32 years of unchallenged rule.<br />
Ind<strong>on</strong>esia has emerged from that<br />
period of turmoil to become <strong>on</strong>e of<br />
the world’s largest democracies. But it is not <strong>on</strong>ly the<br />
political landscape of Ind<strong>on</strong>esia that has altered radically.<br />
<str<strong>on</strong>g>Business</str<strong>on</strong>g> also has had to resp<strong>on</strong>d to change, as<br />
Ind<strong>on</strong>esia’s citizens have developed a much more critical<br />
stance toward the wider resp<strong>on</strong>sibility of business to the<br />
general populati<strong>on</strong>.<br />
After all, it was the Asian ec<strong>on</strong>omic/financial crisis of<br />
1997 that was the precursor to the political crisis that<br />
enveloped Ind<strong>on</strong>esia a year later. Many would assert that<br />
during the previous era of str<strong>on</strong>g government, business<br />
enjoyed a high degree of political protecti<strong>on</strong>. Cynics<br />
would argue further that <strong>on</strong>ce a business venture had<br />
achieved political protecti<strong>on</strong>, it had little to worry about<br />
should it ravage the envir<strong>on</strong>ment or ride roughshod over<br />
local community issues. Poor <strong>corporate</strong> governance was<br />
attributed as being at the root of the multitude of<br />
business failures that occurred al<strong>on</strong>g with the collapse of<br />
the currency. The c<strong>on</strong>cepts of CR or sustainability were<br />
little understood and much less practiced. It is not<br />
surprising that business, especially the private sector,<br />
found itself in its time of greatest crisis, unloved and<br />
viewed with intense suspici<strong>on</strong>.<br />
Ind<strong>on</strong>esia has yet to develop and implement fully the<br />
soft infrastructure required to establish an optimally<br />
efficient and competitive market ec<strong>on</strong>omy. Nevertheless,<br />
the ec<strong>on</strong>omy has been growing c<strong>on</strong>sistently at more than<br />
6 percent per annum in recent years. Foreign investors<br />
are returning, and the Ind<strong>on</strong>esian Stock Exchange has<br />
been am<strong>on</strong>g the most buoyant of emerging markets.<br />
After years of restructuring, many <strong>corporate</strong> assets<br />
have changed ownership and returned to profitability,<br />
while new businesses have developed to seize the<br />
opportunities provided by a fast-changing<br />
global ec<strong>on</strong>omy.<br />
JOHN ARNOLD 35<br />
John Arnold provides insight into the historical significance of CR in Ind<strong>on</strong>esia and how it came to be widely adopted.<br />
In parallel, there have been fundamental shifts in<br />
opini<strong>on</strong> regarding how business should operate together<br />
with the development of political instituti<strong>on</strong>s, with the<br />
will and the teeth to enforce change. <str<strong>on</strong>g>Business</str<strong>on</strong>g> ignores<br />
this new paradigm at its peril. Even privately owned<br />
businesses find they have to resp<strong>on</strong>d to the community’s<br />
heightened expectati<strong>on</strong>s of transparency and<br />
accountability. Financial profitability al<strong>on</strong>e can no l<strong>on</strong>ger<br />
be a guarantee of l<strong>on</strong>g-term sustainability. Reputati<strong>on</strong><br />
management has become critical, but for many it will<br />
mean little without the existence of a strategically<br />
c<strong>on</strong>ceived CR program.<br />
Prior to 1998, CR – to the extent it was adopted at all –<br />
was implemented primarily by multinati<strong>on</strong>als and by<br />
state-owned enterprises, which are statutorily obligated<br />
to spend a percentage of their annual revenues <strong>on</strong> CRrelated<br />
activities. Expenditures were typically directed at<br />
religious, educati<strong>on</strong>al and community health activities.<br />
Financial profitability al<strong>on</strong>e can no l<strong>on</strong>ger be a<br />
guarantee of l<strong>on</strong>g-term sustainability. Reputati<strong>on</strong><br />
management has become critical, but for many<br />
it will mean little without the existence of a<br />
strategically c<strong>on</strong>ceived CR program.<br />
<str<strong>on</strong>g>Business</str<strong>on</strong>g>es operating in remote areas, especially mining<br />
companies, were early leaders in recognizing the<br />
importance of appropriately focused CR. Envir<strong>on</strong>mental<br />
issues that were previously ignored also grabbed<br />
headlines. Managing the expectati<strong>on</strong>s of local<br />
communities generated by the sudden arrival of new<br />
industrial enterprises was now a critical success factor.<br />
This was even more the case when basic law and order<br />
and security began to break down during the early years<br />
of Reformasi, as the era of reform emboldened by<br />
Suharto’s downfall has been coined. Increasingly,<br />
anecdotal examples began to circulate that dem<strong>on</strong>strated<br />
the c<strong>on</strong>tributi<strong>on</strong> of good CR programs to a company’s<br />
ability to manage local community issues. During the<br />
height of the mayhem that infected Ind<strong>on</strong>esia’s major
36 JOHN ARNOLD<br />
cities during May 1998, many business premises were<br />
want<strong>on</strong>ly looted and destroyed. Even during that terrible<br />
period, it was possible to observe that the destructi<strong>on</strong><br />
was not as indiscriminate as is often assumed.<br />
Regardless of the ethnic origin or religious devoti<strong>on</strong><br />
of business owners, those who had established<br />
good relati<strong>on</strong>s with local communities often were<br />
left unscathed.<br />
Other events that accelerated the adopti<strong>on</strong> of CR as a<br />
core business activity have been natural disasters. The<br />
tsunami that struck Aceh and other coastal areas al<strong>on</strong>g<br />
the eastern Indian Ocean at the end of 2004, and the<br />
earthquake that devastated the city of Yogyakarta in<br />
central Java in 2006, galvanized the creati<strong>on</strong> of<br />
<strong>corporate</strong> disaster-relief programs. Those businesses that<br />
had operati<strong>on</strong>s at or near the stricken areas were in the<br />
forefr<strong>on</strong>t, but numerous others followed. Sometimes the<br />
offering simply may have been charitable giving, but<br />
there were also many examples of businesses providing<br />
logistical support by mobilizing core competencies and<br />
skills inherent to their business models. Support of<br />
employee volunteerism is becoming an increasingly<br />
comm<strong>on</strong> manifestati<strong>on</strong> of CR.<br />
Today the CR bar is being raised ever higher by<br />
stakeholder expectati<strong>on</strong>s, whether it is the government,<br />
media, academia, or community and c<strong>on</strong>sumer groups.<br />
More and more organizati<strong>on</strong>s are being established for<br />
the promoti<strong>on</strong> of best practice, which also is entering the<br />
curriculum of business study courses. Sustainability<br />
reporting is now being adopted by <strong>corporate</strong> CR leaders.<br />
<str<strong>on</strong>g>Business</str<strong>on</strong>g> awards that specifically recognize CR<br />
achievements also have become the vogue. Related<br />
c<strong>on</strong>ferences and seminars are now established features<br />
of the business calendar. The Ind<strong>on</strong>esian parliament<br />
enacted the Law <strong>on</strong> Companies 2007 to revise and<br />
update the previous 1995 legislati<strong>on</strong>. Albeit<br />
c<strong>on</strong>troversially, an article of the new legislati<strong>on</strong><br />
seemingly mandates virtually all companies to put aside<br />
a certain percentage of their annual profits for CR<br />
activities. Companies additi<strong>on</strong>ally are required to report<br />
their CR activities <strong>on</strong> an annual basis.<br />
No doubt many businesses still view CR as no more<br />
than public relati<strong>on</strong>s. However, those that take CR a step<br />
further and have embedded it as a core value within<br />
their organizati<strong>on</strong>s will be those that are better able to<br />
manage the reputati<strong>on</strong>al challenges of the sec<strong>on</strong>d<br />
decade of Reformasi.<br />
John Arnold is the managing director of <strong>APCO</strong> <strong>Worldwide</strong>’s Jakarta office.<br />
He was previously a senior partner at Ernst & Young in Ind<strong>on</strong>esia and<br />
chairman of the British Chamber of Commerce.
It may be clichéd to compare the<br />
business envir<strong>on</strong>ment in Vietnam<br />
with the rise of China, but there are<br />
instructive parallels in the<br />
development of CR movements<br />
between the two countries.<br />
Managers could apply less<strong>on</strong>s from<br />
China to gain a strategic head start<br />
in developing a str<strong>on</strong>g reputati<strong>on</strong> for<br />
sustainability in Vietnam, potentially<br />
earning tangible returns and<br />
strengthening relati<strong>on</strong>ships with<br />
key stakeholders.<br />
Attitudes about CR am<strong>on</strong>g the diverse stakeholders in<br />
China and Vietnam vary greatly and c<strong>on</strong>tinue to evolve<br />
bey<strong>on</strong>d simple generalizati<strong>on</strong>s; however, there are many<br />
areas where practices can be shared. In particular, there<br />
are four signs that now may be the most auspicious time<br />
to start “doing good” in Vietnam: the early trickle of<br />
<strong>corporate</strong> leaders, support and openness of government<br />
officials, development of civil society and urgency to<br />
improve sustainable business practices.<br />
The pack leaders<br />
From 2002 to 2004, a handful of multinati<strong>on</strong>als were<br />
“the” CR leaders in Beijing. Initially, programs often<br />
involved simple d<strong>on</strong>ati<strong>on</strong>s to government agencies or<br />
“government-organized NGOs,” but the leading<br />
companies began to develop higher-profile signature<br />
programs, some of which also highlighted sustainable<br />
business practices. When academics, officials or other<br />
business leaders wanted to know about CR in China,<br />
managers from these companies were usually at the<br />
table. Their programs were praised and leveraged by<br />
government, NGOs and the United Nati<strong>on</strong>s to encourage<br />
other companies to follow suit.<br />
The opportunities for reputati<strong>on</strong> and relati<strong>on</strong>ship building<br />
were unique during that window of time – a company<br />
could get widespread credit as a <strong>corporate</strong> leader simply<br />
by having a decent program and actively participating in<br />
dialogue. One good case study would be shared far and<br />
wide. In China, this window now has closed.<br />
Competiti<strong>on</strong> for positi<strong>on</strong>ing as a <strong>corporate</strong> citizen is<br />
fierce, although there are still ample opportunities for<br />
leadership and differentiati<strong>on</strong> in specific subject areas.<br />
FELICIA PULLAM AND CLAAS SCHABERG 37<br />
Corporate Resp<strong>on</strong>sibility in Vietnam:<br />
D<strong>on</strong>’t Waste Less<strong>on</strong>s from China<br />
Felicia Pullam and Claas Schaberg shed light <strong>on</strong> the similarities between CR c<strong>on</strong>ducted in China and Vietnam.<br />
In Vietnam, there is still time to be an early mover. The<br />
global spotlight has been focused <strong>on</strong> China for the past<br />
few years, but eventually audiences may tire and more<br />
attenti<strong>on</strong> will focus <strong>on</strong> Asia’s last rising tiger. By then, CR<br />
programs will be overdue. Although many managers of<br />
multinati<strong>on</strong>al corporati<strong>on</strong>s in Vietnam c<strong>on</strong>sider CR as “a<br />
nice thing to do <strong>on</strong>ce we are settled,” this is the right<br />
time to get involved in the dialogue that will define and<br />
set the benchmarks for <strong>corporate</strong> citizenship.<br />
Government support<br />
In China, it took the government a while to warm up<br />
to the idea of CR. In part this was due to a lack of<br />
understanding and awareness of the c<strong>on</strong>cept, as well<br />
as a pervasive distrust of anything that involved civil<br />
society. Many officials also saw the term “<strong>corporate</strong><br />
resp<strong>on</strong>sibility” as basically syn<strong>on</strong>ymous with “trade<br />
barrier,” because it was often associated with attacks<br />
<strong>on</strong> multinati<strong>on</strong>al corporati<strong>on</strong>s for sourcing in China.<br />
By 2005, some officials had begun to recognize the<br />
potential benefits in enlisting companies to help meet<br />
urgent social needs and voluntarily improve<br />
envir<strong>on</strong>mental performance. The Ministry of Health, the<br />
State Envir<strong>on</strong>mental Protecti<strong>on</strong> Administrati<strong>on</strong> (now<br />
Ministry of Envir<strong>on</strong>mental Protecti<strong>on</strong>), and even the<br />
Nati<strong>on</strong>al Development and Reform Commissi<strong>on</strong> were<br />
asking companies to step up and take <strong>on</strong> additi<strong>on</strong>al<br />
resp<strong>on</strong>sibility. President Hu Jintao called <strong>on</strong> the people<br />
to build a “Harm<strong>on</strong>ious Society,” and CR was the natural<br />
<strong>corporate</strong> correlate. Western and Chinese companies<br />
happily adopted the slogan to dem<strong>on</strong>strate their<br />
alignment with government priorities.<br />
N<strong>on</strong>etheless, the Chinese political envir<strong>on</strong>ment for CR<br />
remains far from perfect. Expectati<strong>on</strong>s for multinati<strong>on</strong>als<br />
are unrealistically high, especially when compared with<br />
domestic companies. Officials are still uncomfortable<br />
with NGOs, and some social issues still must be handled<br />
gingerly. A handful of companies announced l<strong>on</strong>g-term<br />
initiatives with government agencies, skipping the pilot<br />
program stage, <strong>on</strong>ly to discover that – regardless of what<br />
may be said in the negotiati<strong>on</strong> phase – few officials<br />
anticipate or want genuine partnerships.
38 FELICIA PULLAM AND CLAAS SCHABERG<br />
The Vietnamese government has thus far been more<br />
open and accessible than its Chinese counterpart. In a<br />
climate of limited financial resources, the Vietnamese<br />
government recognizes the social and ec<strong>on</strong>omic benefits<br />
of private-sector involvement. Now is an opportune time<br />
to initiate dialogue and partnerships with agencies that<br />
are important to business. However, proper due diligence<br />
and pilot projects will be critical to avoiding the risk of a<br />
l<strong>on</strong>ger-term commitment that backfires.<br />
The development of civil society<br />
The political c<strong>on</strong>trol of civil society in both countries<br />
has been similar in many ways; domestic NGOs tend to<br />
keep their heads down, avoiding c<strong>on</strong>fr<strong>on</strong>tati<strong>on</strong>al or<br />
c<strong>on</strong>troversial positi<strong>on</strong>s. Official and public trust of<br />
independent organizati<strong>on</strong>s remains much lower than in<br />
the West. Project, organizati<strong>on</strong>al and financial<br />
management skills are relatively weak.<br />
Although the lack of capacity and limited public trust<br />
complicate partnerships with NGOs, there is significant<br />
opportunity for managers who are willing to put in the<br />
extra effort. Programs that leverage <strong>corporate</strong> skills to<br />
support NGOs with informati<strong>on</strong> technology, financial or<br />
communicati<strong>on</strong> functi<strong>on</strong>s could have a greater impact<br />
than a simple m<strong>on</strong>etary d<strong>on</strong>ati<strong>on</strong>. Furthermore, the<br />
current n<strong>on</strong>c<strong>on</strong>fr<strong>on</strong>tati<strong>on</strong>al nature of Vietnamese and<br />
Chinese NGOs means that frank dialogue may be easier<br />
to initiate.<br />
<str<strong>on</strong>g>Business</str<strong>on</strong>g>es also can assist by playing a c<strong>on</strong>vening role<br />
that is often underestimated. In China, where interacti<strong>on</strong><br />
between genuinely independent NGOs and government<br />
is rare, a few companies have created programs that<br />
bring them into the same room in a n<strong>on</strong>threatening<br />
manner. These uncomm<strong>on</strong> interacti<strong>on</strong>s have helped<br />
improve the comfort levels of both officials and NGO<br />
representatives in dealing with each other. Companies<br />
benefit by creating str<strong>on</strong>ger, positive associati<strong>on</strong>s am<strong>on</strong>g<br />
their stakeholders, while also eliminating any unease<br />
their government partners may feel regarding <strong>corporate</strong><br />
support for NGOs.<br />
The importance of higher standards<br />
<strong>Worldwide</strong>, CR is often looked up<strong>on</strong> as something<br />
peripheral to the core business. This is no different in<br />
China or Vietnam, where many stakeholders view it as<br />
an opportunity to be <strong>on</strong> the receiving end of<br />
philanthropy. However, businesses that operate<br />
resp<strong>on</strong>sibly and innovate to improve envir<strong>on</strong>mental<br />
impact should be actively communicating these efforts<br />
as part of their c<strong>on</strong>tributi<strong>on</strong>s to society.<br />
Both countries face the mammoth challenge of building<br />
a system based <strong>on</strong> the Rule of Law, and neither<br />
government is capable of fully enforcing regulati<strong>on</strong>s at<br />
the local level. The needs of society and the envir<strong>on</strong>ment<br />
are thus often sacrificed by companies operating well<br />
below nati<strong>on</strong>al standards. Resp<strong>on</strong>sible operati<strong>on</strong>s are<br />
therefore more important to most Chinese and<br />
Vietnamese stakeholders than any external<br />
partnership, because meeting basic standards<br />
is not an automatic expectati<strong>on</strong>.<br />
Through a variety of percepti<strong>on</strong> audits that <strong>APCO</strong> has<br />
c<strong>on</strong>ducted, NGOs and government officials alike have<br />
expressed a str<strong>on</strong>g desire to learn best practices from<br />
multinati<strong>on</strong>al corporati<strong>on</strong>s. There is an eager audience<br />
am<strong>on</strong>g key stakeholders for informati<strong>on</strong> about<br />
operati<strong>on</strong>al resp<strong>on</strong>sibility, and there are ample<br />
opportunities for communicati<strong>on</strong>.<br />
C<strong>on</strong>clusi<strong>on</strong><br />
The envir<strong>on</strong>ment in Vietnam is by no means a carb<strong>on</strong><br />
copy of China, but the challenges and opportunities are<br />
similar enough that the Chinese experience can be<br />
instructive. Some companies have learned hard less<strong>on</strong>s<br />
in China. Others missed the chance to become “early<br />
movers.” The development of the Chinese CR movement<br />
provides clear evidence that <strong>corporate</strong> leaders can reap<br />
reputati<strong>on</strong>al rewards and strengthen critical stakeholder<br />
relati<strong>on</strong>ships. The unique period of time during which<br />
stakeholders are most receptive and supportive already<br />
has passed in China, but in Vietnam it is happening<br />
right now.<br />
Felicia Pullam is an associate director in <strong>APCO</strong> <strong>Worldwide</strong>’s CR practice<br />
and is based in H<strong>on</strong>g K<strong>on</strong>g.<br />
Claas Schaberg is an associate director and chief representative of <strong>APCO</strong><br />
<strong>Worldwide</strong>’s Hanoi and Ho Chi Minh City offices.
<strong>APCO</strong> <strong>Worldwide</strong>’s Corporate Resp<strong>on</strong>sibility Practice<br />
We Make a Difference in How You Make a Difference<br />
New research shows that CR has surpassed all other factors to become the most important<br />
criteri<strong>on</strong> c<strong>on</strong>sumers and opini<strong>on</strong>-leaders use to form views about a company, according to <strong>APCO</strong><br />
Insight ® , in-house opini<strong>on</strong> research and message development team of <strong>APCO</strong> <strong>Worldwide</strong>.<br />
CR today goes well bey<strong>on</strong>d philanthropy, community investment and earning the “license to<br />
operate.” Now, the “third generati<strong>on</strong>” of <strong>corporate</strong> resp<strong>on</strong>sibility – CR 3G – means determining how<br />
to earn the “license to grow,” especially in a world facing increasing natural resources c<strong>on</strong>straints,<br />
and major ec<strong>on</strong>omic and societal challenges.<br />
Triple bottom-line accountability is now the standard. Investors, customers and employees<br />
evaluate companies not <strong>on</strong>ly <strong>on</strong> profitability but also <strong>on</strong> envir<strong>on</strong>mental and social impact.<br />
Informati<strong>on</strong> technology and interc<strong>on</strong>nectivity make it possible for local problems to escalate<br />
quickly to become global stakeholder issues. Advocacy groups and NGOs m<strong>on</strong>itor every acti<strong>on</strong><br />
and demand increasingly greater transparency.<br />
CR has made business more complex, yet potentially more rewarding. To maintain a healthy<br />
growth trajectory in a global marketplace, companies need to innovate in CR as much as in every<br />
other aspect. In communities around the world, corporati<strong>on</strong>s are increasingly expected to play a<br />
leadership role in addressing social issues and creating transformati<strong>on</strong>al change.<br />
CR offers opportunities for companies to use their core strengths and competitive advantages to<br />
create new markets; gain new customers and allies; enhance employee satisfacti<strong>on</strong>; and create<br />
greater value for themselves, their shareholders and society. Ultimately, CR can help corporati<strong>on</strong>s<br />
stay ahead of the competiti<strong>on</strong>. Corporate leaders are being challenged to think differently about<br />
the nature of their instituti<strong>on</strong>s and their relati<strong>on</strong>ships with their stakeholders. This is the lens<br />
through which CR 3G is being shaped, implemented and judged.<br />
Since its incepti<strong>on</strong> in 1984, <strong>APCO</strong> has worked in the field of CR. We integrate decades of<br />
experience in the worlds of business, government and civil society to help clients:<br />
• Align CR activities with business goals<br />
• Engage and inspire employees <strong>on</strong> behalf of the company and the community<br />
• Develop results-oriented partnerships with public sector and n<strong>on</strong>profit organizati<strong>on</strong>s<br />
• Increase investor and stakeholder c<strong>on</strong>fidence<br />
• Understand stakeholder expectati<strong>on</strong>s and build effective relati<strong>on</strong>ship models<br />
• Address issues strategically and resp<strong>on</strong>sibly<br />
• Communicate effectively and credibly to gain recogniti<strong>on</strong> and competitive advantage<br />
• Evaluate impact and design next-generati<strong>on</strong> strategies across the triple bottom-line<br />
For more informati<strong>on</strong>, visit www.apcoworldwide.com.<br />
39
OCTOBER 2008<br />
Corporate Resp<strong>on</strong>sibility<br />
Calendar 2008-2009<br />
October 1-2: SustainCommWorld The<br />
Green Media Show<br />
Bost<strong>on</strong>, Mass., United States<br />
October 2: 5th Annual <str<strong>on</strong>g>Business</str<strong>on</strong>g>women’s<br />
Sustainability Leadership Summit<br />
New York, N.Y., United States<br />
October 2: Intertek 4th Annual Ethical<br />
Sourcing Forum Europe<br />
Paris, France<br />
October 5-14: Internati<strong>on</strong>al Uni<strong>on</strong> for<br />
C<strong>on</strong>servati<strong>on</strong> of Nature World<br />
C<strong>on</strong>servati<strong>on</strong> C<strong>on</strong>gress<br />
Barcel<strong>on</strong>a, Spain<br />
October 6-8: Ethical Corporati<strong>on</strong> 2nd<br />
Annual European Anti-Corrupti<strong>on</strong> Summit<br />
The Hague, Netherlands<br />
October 8-10: Institute for Management,<br />
Humboldt University 3rd Internati<strong>on</strong>al<br />
CSR C<strong>on</strong>ference Corporate Resp<strong>on</strong>sibility<br />
and Governance<br />
Berlin, Germany<br />
October 9-11: World Forum Lille How to<br />
Feed and Protect the Earth<br />
Lille, France<br />
October 13-14: Ethical Corporati<strong>on</strong><br />
Central and Eastern Europe Corporate<br />
Resp<strong>on</strong>sibility Summit<br />
Angelo Hotel, Prague<br />
October 13-14: Ethical Corporati<strong>on</strong><br />
Stakeholder Engagement Summit 2008<br />
Barcel<strong>on</strong>a, Spain<br />
October 14: Haymarket Green Marketing<br />
L<strong>on</strong>d<strong>on</strong>, United Kingdom<br />
October 15-19: Society of Envir<strong>on</strong>mental<br />
Journalists 18th Annual C<strong>on</strong>ference<br />
Roanoke, Va., United States<br />
October 16-17: Ethical Corporati<strong>on</strong><br />
Ethical Supply Chain Summit 2008<br />
Berlin, Germany<br />
October 20-21: United Nati<strong>on</strong>s 1st<br />
General Meeting of Caring for Climate<br />
Signatories<br />
Geneva, Switzerland<br />
October 20: Canadian <str<strong>on</strong>g>Business</str<strong>on</strong>g> for Social<br />
Resp<strong>on</strong>sibility 6th Annual Summit<br />
Tor<strong>on</strong>to, Canada<br />
October 21-22: C<strong>on</strong>ference Board<br />
Corporate Reputati<strong>on</strong> and Communicati<strong>on</strong><br />
C<strong>on</strong>ference<br />
Chicago, Ill., United States<br />
NOVEMBER<br />
DECEMBER<br />
October 22-23: Executive Reach Solar,<br />
Bio-Fuel, Hydro Technologies and<br />
Financing; Carb<strong>on</strong> Trade Summit<br />
Abuja, Nigeria<br />
October 23: Ethical Trading Initiative<br />
10th Annual C<strong>on</strong>ference<br />
L<strong>on</strong>d<strong>on</strong>, United Kingdom<br />
October 26-29: Social Investment Forum<br />
and First Affirmative Financial Network<br />
19th Annual SRI in the Rockies<br />
Whistler, Canada<br />
October 28: Maala – <str<strong>on</strong>g>Business</str<strong>on</strong>g> for Social<br />
Resp<strong>on</strong>sibility C<strong>on</strong>ference<br />
Tel Aviv, Israel<br />
November 2-4: 2nd Annual Middle East<br />
Corporate Social Resp<strong>on</strong>sibility C<strong>on</strong>ference<br />
Dubai, United Arab Emirates<br />
November 3-4: CSR Asia Summit 2008<br />
Bangkok, Thailand<br />
November 4-7: <str<strong>on</strong>g>Business</str<strong>on</strong>g> for Social<br />
Resp<strong>on</strong>sibility C<strong>on</strong>ference “Sustainability:<br />
Leadership Requred”<br />
New York, N.Y., United States<br />
November 5-7: University of Madras and<br />
Cultural Dynamics & Emoti<strong>on</strong>s Network<br />
Internati<strong>on</strong>al C<strong>on</strong>ference <strong>on</strong> CSR<br />
“Development with Equity”<br />
Chennai, India<br />
November 12: Satellite – The Green<br />
Agency 2008 Green Awards for Creativity<br />
in Sustainability<br />
L<strong>on</strong>d<strong>on</strong>, United Kingdom<br />
November 18-19: Ec<strong>on</strong>omist Intelligence<br />
Unit Corporate Citizenship C<strong>on</strong>ference:<br />
Building a Sustainable <str<strong>on</strong>g>Business</str<strong>on</strong>g><br />
San Francisco, Calif., United States<br />
November 20-21: Asian Institute of<br />
Management Asian Forum <strong>on</strong> Corporate<br />
Social Resp<strong>on</strong>sibility<br />
Singapore<br />
November 27-28: Future of Europe<br />
Summit - Ec<strong>on</strong>omic Sustainability: New<br />
Opportunities for Europe<br />
Andorra<br />
December 4: CSR Europe Equipped for<br />
CSR – European Alliance 2008:<br />
Launching CSR Europe’s Toolbox for a<br />
Competitive and Resp<strong>on</strong>sible Europe<br />
Brussels, Belgium<br />
December 4-5: The Multilateral<br />
Investment Fund VI Inter-American<br />
C<strong>on</strong>ference <strong>on</strong> CSR: The <str<strong>on</strong>g>Business</str<strong>on</strong>g> of<br />
Inclusi<strong>on</strong><br />
Cartagena de Indias, Colombia<br />
JANUARY 2009<br />
MARCH<br />
APRIL<br />
MAY<br />
JUNE<br />
December 4-5: Internati<strong>on</strong>al<br />
Seminar <strong>on</strong> <str<strong>on</strong>g>Business</str<strong>on</strong>g> and<br />
Human Rights<br />
Paris, France<br />
December 8: The Corporate<br />
Resp<strong>on</strong>sibility Officer C<strong>on</strong>ference –<br />
Winter 2008<br />
Washingt<strong>on</strong>, D.C.<br />
December 8-10: The Nati<strong>on</strong>al<br />
Government Technical Skills<br />
for Africa<br />
Johannesburg, South Africa<br />
December 11-12: C<strong>on</strong>federati<strong>on</strong> of<br />
Indian Industry’s 3rd Annual<br />
Sustainability Summit: Asia 2008<br />
“Competitiveness Redefined“<br />
Delhi, India<br />
December: Maala – <str<strong>on</strong>g>Business</str<strong>on</strong>g><br />
for Social Resp<strong>on</strong>sibility Workshop<br />
<strong>on</strong> Managing CR Efforts in<br />
Multinati<strong>on</strong>als<br />
Tel Aviv, Israel<br />
January 19-21: Masdar World<br />
Future Energy Summit 2009<br />
Abu Dhabi, United Arab Emirates<br />
January 28–February 1: World<br />
Ec<strong>on</strong>omic Forum Annual<br />
Meeting 2009<br />
Davos, Switzerland<br />
March 15-22: World Water Council<br />
World Water Forum<br />
Istanbul, Turkey<br />
April 15-16: Ceres C<strong>on</strong>ference 2009<br />
San Francisco, Calif., United States<br />
April 22-24: Global Philanthropy<br />
Forum 8th Annual C<strong>on</strong>ference<br />
Washingt<strong>on</strong>, D.C., United States<br />
May 3-5: <str<strong>on</strong>g>Business</str<strong>on</strong>g> Civic Leadership<br />
Center Nati<strong>on</strong>al C<strong>on</strong>ference <strong>on</strong><br />
Corporate Community Investment<br />
Chicago, Ill., United States<br />
June 2: Leadership Foundati<strong>on</strong> for<br />
Higher Educati<strong>on</strong> Ensuring Corporate<br />
Social Resp<strong>on</strong>sibility: The Role of the<br />
Governing Body<br />
L<strong>on</strong>d<strong>on</strong>, United Kingdom<br />
June 15-16: CORE - The potential of<br />
Corporate Social Resp<strong>on</strong>sibility to<br />
C<strong>on</strong>tribute to the Implementati<strong>on</strong><br />
and Integrati<strong>on</strong> of EU Strategies<br />
Darmstadt, Germany
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