News•Business• 19.01.2018 • Michael John Bloomfield/University of Bath
Tiffany & Co.’s boutique in Tokyo is seen on 9 September 2013. The firm has taken a lead in responsible mining, according to a recent book. Photo credit: Stephen Kelly (CC BY 2.0)
Comment: Have you ever wondered why some companies seem more politically engaged than others? When activists shine a spotlight on an industry for alleged links to social or environmental exploitation, most companies seek to remain in the shadows, fearful of unwanted publicity. But there are often one or two that respond proactively, working with activists to hammer out a solution.
Take the global fashion industry, whose largest brands have been linked to garments produced in “sweatshops”, or jewellery made with “blood diamonds” and “dirty gold”. Sportswear giant Nike eventually responded positively to accusers who associated its products with worker exploitation, albeit with mixed results.
Likewise, there were varied responses from jewellery retailers to the issue of “dirty gold”, when the metal is mined in unethical and environmentally damaging conditions. Tiffany & Co. is probably the best example of leadership. The company was involved in the movement in the late 1990s to eradicate blood diamonds from global supply chains, and subsequently worked to ensure that the gold it uses is responsibly sourced (even before the campaign to tackle dirty gold was launched in 2004).
Compare this to the slow and sometimes belligerent response from many of Tiffany’s competitors, who faced similar reputational risk. After a sluggish start, other major jewellery companies eventually followed Tiffany’s lead – and the mining industry has begun to take notice. The leadership of firms like Tiffany proved to be an important catalyst – and demonstrated how they got in front of activism.
Publicity shot of the 2006 film “Blood Diamond”. Photo credit: Warner Bros. Entertainment Inc. & Virtual Studios/Jaap Buitendijk
Managers cannot simply spend their firm’s resources on political issues – they are constrained by market forces and a fiduciary responsibility to shareholders. They need a business case to back such expenditure.
When activists target these companies, they offer just such a business case. Corporate executives do not always need to respond, as activists are rarely powerful enough to force companies to do their bidding. But activists can at least create an opportunity for these executives to act politically.
So why do some companies lead while others simply follow (or do nothing at all)? By studying the responses of gold jewellery retailers to the No Dirty Gold campaign, I found that a history of interaction with activists (even on different issues) best explains why some firms come to lead the private sector’s response.
When campaigns demand that a company change its practices, corporate executives tend to weigh up the costs and benefits of complying. They may estimate the risk they face to their brand image against the benefits of mitigating this risk and improving this image. Costs include shifting and monitoring their supply chains. Benefits may include accessing new markets and enhancing the marketability of their brand.
The ways in which they engage with activists will also be influenced by the corporate culture of the company. Is it a company that engages with political issues? A company that prides itself on its attitude to sustainability?
Finally, when the activists bring issues to the company, on whose desk do they land? Is there a department of Corporate Social Responsibility (CSR)? If there is, does it wield much influence?
The answers to these questions will vary. But we can intuitively see why companies which have engaged with activists in the past are more likely to do so again in the future.
For one, companies are more at risk of activist “attacks” if they have previously responded, even in other issue areas. They are on the activists’ radar. This happened with Nike, which has been experiencing renewed pressure from activists who suspect the company is slipping back towards poor practices.
The same goes for Tiffany. The company’s proactive response to blood diamonds made it a prime candidate for leading the charge against dirty gold – and a prime target for the activists planning the campaign (though, in this case, Tiffany beat them to it).
Companies that have also responded to past issues probably go on to boast about their sustainability credentials, making them susceptible to accusations of hypocrisy if caught backsliding. They will already have analysed sourcing strategies and supply chains, so they have the systems in place when new issues pop up. They are also more likely to have a CSR department – or consider it important enough to be handled directly by the CEO. And their corporate culture is more likely to include sustainability concerns, as they have now become part of the company’s practices.
Perhaps most significantly, their leadership is more likely to reflect this corporate culture, as culture and leadership enjoy a mutually constitutive relationship of sorts. People are important, and having these people within the firm becomes more likely.
While the details will differ among individual companies, past engagement with activists can make future engagement more likely. The role of activists in driving the expanding role of business in global environmental politics becomes clear.
Business and activism
Corporations and activists are collaborating through these battles, building institutions – from CSR to certifications – within firms and across industries to tackle environmental problems. They are finding solutions to some problems and, in doing so, shifting expectations about the role and responsibility of the private sector and those who work within it. This is a good thing.
But corporations are also largely dictating the terms of their response. Activists are rarely able to force companies to do their bidding. Business is simply too powerful and consumers too complacent. This means that sustainability is made to fit within the parameters of their business models, and not the other way around.
In the hierarchy of priorities, the needs of markets are too often placed above those of people and the planet. And this can be a very bad thing indeed.
So while there is a case for cautious optimism here, there is an even stronger case for continued vigilance when evaluating this expanding role of business in global environmental politics. And that means a strong case for continued activism.