Moon of Alabama Brecht quote
April 21, 2005

Nike, Wal-Mart, Corporate Responsibility and Activism

An article yesterday in the Financial had an interesting take on the recent evolution of corporate responsibility  (Nike ushers in a new age of corporate responsibility), following Nike's publication of a detailed report on all of its subcontractors:

Scepticism is usually in order when companies boast how socially responsible they are, but Nike's decision to publish its entire list of contract manufacturers on the internet is harder to dismiss. Nike's move opens a new front in companies' efforts to engage with their critics.

See below for more details and some comments.

The article goes on to describe what is published, what kind of impact it will have, and what's Nike policy in publishing this. It then proposes that Nike is bring in a "third stage of corporate responsibility" as follows:

- the first stage is corporate philanthropy - companies donating money to various community projects. That's the stage where Wal-Mart is, and the article nicely blasts them to pieces.

- the second stage is reputation management and risk avoidance. Second-age corporate responsibility advocates say knowing what is on campaigners' minds is as important to a company's health as protecting it from fraud. This means that the company accepts some form of accountability towards critics and tries to avoid behaviors or policies which are seen as controversial.

- the third stage is corporate responsibility as a way of improving performance rather than just protecting reputation.

Factories that ensure workers are registered for social security benefits often become more productive as a result. Attention to one aspect of staff management often leads to improvement in others.

If other companies publish supplier lists, they can together devise common standards that help contract manufacturers cut costs, Nike says.
(...)
All this points to a strong element of self-interest in Nike's new openness - but practitioners of third age corporate responsibility see nothing wrong with that.

The logic is that, if you're going to make efforts to protect your reputation, it might as well be "positive" efforts (i.e. changing your practices altogether in order to anticipate issues and gain a competitive or marketing advantage out of it) instead of "negative" efforts (scrambling to react to outside criticism).

My question to you: how can companies be encouraged to move to that "positive" approach instead of the "negative"? Shaming companies is necessary if, like Walmart, they have aggressive practices and little reactivity to criticism, but it becomes counter-productive in the next phase, where a mixture of verification and encouragement is needed.

Activists need to be able to make the difference between corporations that make an effort only when forced (these should be shamed for their inappropriate practices) and those that are genuinely trying to behave differently (these will also require some positive feedback). Corporations per se should not be seen as evil, only their actual behavior. If the behavior shows improvements or actually brings about genuine goods, it should not be lambasted because they "do it for profit". Profit is not bad in itself. Profit generated by cutting corners is bad.

Also, remember that activists often only represent themselves or very small constituencies. As activism against corporates grows, the legitimacy of such actions will be assessed more carefully by bystanders and NGOs and activists will need to choose their targets with more care.

Nothing is worse than activists going on dead-end fights which obviously not supported by the majority, and allow all activists to be labelled "extremist". Also, corporates are slick and if the criticism directed against them is not obviously fair, they will fight back and they will win and discredit their opponents easily.

With some companies genuinely improving their acts, I think it is important to acknoweldge such efforts and to monitor them, rather than dismissing them, and to shift the focus of action on laggards.

To provide some background on my position:
As you know, I work in a bank, in relation with the oil sector, where the relationship with NGOs is a big issue. Oil companies and banks have made efforts to make sure that big projects have a less damaging impact on the environment and the local populations. Some NGOs have acknowledged these efforts and prod us in good faith to make more, and we do try to acomodate them; others are simply interested in blocking oil projects in any way they can, and after some point, you simply ignore what they are saying; in which case, it is quite possible that less care will be taken because no effort can satisfy them, so why bother making any?

If you want to compare versions on recent projects, go see the following websites:

Sakhalin Energy, the official site of a big oil&gas project in Russia led by Shell;
Equator Principles the site of the banks that have committed themselves to certain guidelines in the financing of big projects (such a Sakhalin energy);
Banktrack the site for the umbrella organisation of NGOs which acts as watchdog of the banks with respect to the Equator Principles.

As you can see, some common ground can be found through dialogue (in this case, on the definition of imporved standards), but some elements remain contentious (on the valuation of whether the standards are properly applied).

As I imagine that there are a number of activists on the site, I imagine that my position is less aggressive than many of you with respect to corporates, so I'd be interested on your feedback on the above...

Posted by Jérôme à Paris on April 21, 2005 at 15:05 UTC | Permalink

Comments

...some common ground can be found...
always seems to come back to the land, doesn't it?

re Sakhalin - Indigenous Russians Unite Against Oil and Gas Development,

project underground - supporting the human rights of communities resisting mining and oil exploitation

Posted by: b real | Apr 21 2005 17:28 utc | 1

Jerome

If I may make some comparisons to my field, Employee Asssistance Programs [EAPs]. A company that moves from providing no such social services to starting an EAP has usually just been through a crisis requiring damage control, and brings in consultants specializing in that, and in prevention, and in enhancing performance to improve the profit margins/market shares. The EAP consultant had to be fluent in business language to convince CEO's to let them in to do therapy/social service work among their employees.

I suspect it was the same process for NIKE. They must have hired a socially responsible business consultant who could speak "bottom line" language and convince them that it was in their best financial interest to go 'socially-responsible'.

Posted by: gylangirl | Apr 21 2005 21:50 utc | 2

thats a stupid argument, i mean how can nike get away with that and still sell so many high quality footwear devices? it boggles the mind i cant even imagine what to think about or where to start believing.. im like.. wow!

Posted by: jon | Aug 29 2006 0:38 utc | 3

The comments to this entry are closed.