Collaboration between international business, government and civil society requires accountable leadership.
By Dr. Roger Hayes
Teaching “Corporate Diplomacy” part of the year in Singapore and consulting with business and government in London and elsewhere the remainder, I have the best of both worlds—a mix of practice and academic rigor on the one hand and a political, economic and cultural perspective of the world from The West and Asia. But there is one common denominator in a networked, less hierarchical world, with power more diffuse and distributed among a much wider eco-system of stakeholders. There is increasing pressure on international corporations not simply to extol values and purpose, but to actually ‘walk the talk’.
Shell espouses ‘PEOPLE, PROFIT AND PLANET’ and Pepsi Cola’s mantra is ‘Profit with a Purpose’. Indeed, the company’s chief Indra Nooyi gradually moved her company towards healthier products, both good for society and the bottom-line. Unilever has always tried to get the balance right with its CEO Paul Polman arguing that the culture should be about “what we put in rather than what we take out.”
Harvard Business School’s Michael Porter has said that companies have exacerbated environmental problems and caused conflict, particularly in the emerging world, yet are key to fixing these problems as part of governance and sustainability programs, both requiring leadership accountability.
As environmental, social and governance issues have become ever more important influences of customer and employee expectations, some organizations have tightened their embrace of the sustainability programs. Several global voluntary efforts have been underway since the early 2000s to develop standards and guidelines for measuring and reporting on corporate social and environmental performance. The UN Global Compact comprises many corporations and business networks working alongside UN agencies, trade unions and NGOs to advance responsible corporate citizenship employing collaborative solutions at the levels of business operations, community investment and advocacy. In 2015, Nestle commissioned an audit of its own Thai seafood supply chain outsourced to an NGO, Verite, using blockchain technology to prevent forced labor and slavery.
Indeed, a McKinsey Global Survey (Dec 2017) reported that companies are beginning to formalize the way they govern sustainability programs, as well as elevating the importance of diversity and inclusion, to better align practices with mission and values, often using latest technologies. McKinsey has long argued that CEOs should think longer-term and apply integrated external engagement (IEE). Research shows that improving performance in these dimensions helps companies outperform their peers.
Just as companies and employees increasingly expect it (authentic brands and whistle-blowers respectively), so too are some investors pressuring companies to add economic and social value (shared value) via leadership along their whole supply chain. Even the arch capitalist wealth fund Blackrock recently wrote to each of its investing companies to both produce financial performance and contribute to society.
Even though as a rule companies are still more trusted than governments in many countries and certainly the media and its platforms these days (Edelman Trust Barometer, 2018), underlying inequalities and the whirlwind forces of technological change globally means that a deep social and political crisis continues to seek the collaboration of governments, business and civil society. At the recent Davos annual meeting, (Jan 2018), WEF’s chairman Klaus Schwab talked of a new social contract that provides “qualitative easing” for societies struggling with the realities of a disruptive world. Under its auspices a Business and Sustainable Development Commission is a group of 37 business leaders who act as change makers and activists to quantify the business benefits of, for instance, alleviating poverty and reducing the impacts of climate change—from Merck to Unilever, Safaricom to Alibaba. However, while most companies support the SDGs, but it is recognized that only a few do something about these and other pressing issues.
Schwab said that societies around the world are struggling to define how government, business and citizens should respond to these global forces. So as national governments sometimes have neither the political will nor sufficient funds, business must work with government and civil society organizations to reshape their operating environments, balance local community and employment contributions with global business imperatives, such as the gender gap. In most cases business leaders are at fault for failing to properly communicate the longer-term benefits of good intentions, failing to move from charity to social impact investing. In countries of ASEAN and India this is part of the social contract.
Business must take the lead and is accountable to an ever-widening group of stakeholders, but it cannot act alone. It does need to collaborate with government and civil society to get things done in global, notably emerging markets. Even former family-run companies and SOEs in Asia, which are increasingly moving into emerging markets are learning that this should form part of their role and are learning from their American and European multi-national competitors.
This will require on the part of CEOs and their top teams at corporate HQ and on the ground a culture of life-long learning, a multi-dimensional mindset with its implications for new structures, systems and skills inside and outside companies.
All this is done under the umbrella of corporate diplomacy, embracing elements of international relations, public diplomacy, PR and public affairs, strategy, governance and not least leadership.
Dr. Roger Hayes is a senior counsellor with APCOWORLDWIDE, an associate professor at the LKY School of Public Policy in Singapore, and a visiting fellow at the Henley Business School in the UK., author of “Reframing the Leadership Landscape” (2015), and advisor to the Consortium for Street Children.