In other words, CEOs and their boards need a “true north” — a clear sense of who they are, what their company stands for, and what obligations the company has, not only to shareholders but also to stakeholders around the world. These views should be articulated clearly to all constituencies — not as rhetorical mush, but as guidelines for operations. The purpose is to set realistic expectations for all concerned.
An excellent way to do this is to issue global corporate citizenship reports setting out a company’s social philosophy, goals, efforts, and achievements. Among the companies that have pioneered these public statements are Ford, Royal Dutch/Shell, BP, and 3M. These documents compel a company to come to grips with difficult policies that they otherwise may put off dealing with, or deal with haphazardly.
Most multinational companies understand that once they are accused of being less-than-stellar citizens, they could be on the defensive for many years. The imperative, therefore, is to be ahead of the curve, to be positively engaged in key issues that arise for almost all companies — environmental protection, employee safety, and the like. A savvy company will appoint senior executives to monitor political and social pressures on the company, both on the local scene and internationally. These people will make it their job to learn about pressures on other global companies within and outside their own industries. They will be highly sensitive to political and social trends that could turn into anticorporate crusades. Had Monsanto been more alert, it might have avoided its setbacks in Europe over bioengineered foods. Had Nike recognized the significance of the anti-sweatshop movement, it might have avoided the huge shock to its brand that it experienced.
It’s not enough to be actively engaged; companies need to be transparent about their goals, policies, and implementation strategies. In April 2001, for example, two American business associations, the Manufacturers Alliance and the National Association of Manufacturers, conducted a survey of 44 companies to assess their policies on ethical, labor, and environmental standards in developing countries. It was filled with specific examples: All over the world, Polaroid installs the same pollution abatement equipment as it does on U.S. process lines; American Home Products requires its code of ethics to be signed by all its salaried employees, whatever the country in which they live and work. The report concluded that “American manufacturers take their high standards with them, and are likely to raise, not lower, standards in developing countries.”
No doubt this is generally true, but companies will have to do much more than develop the right policies, devise codes, and write reports. The next stage in corporate citizenship — indeed, it has already arrived — is for companies to allow their community and social policies to be audited by represented third parties. This will require the development of a common framework for measuring different kinds of progress, in place of the wide variety of measurement techniques that companies use now.
The importance of such social audits is rising quickly. They will ensure that how a company defines its citizenship responsibilities is debated at its highest levels and is understood by all constituencies. Social audits will also demonstrate that CEOs are engaged in the communities in which their companies operate. And they will create widespread discussion about a company’s social endeavors, giving that firm valuable feedback from a range of external constituencies. This in itself ought to help avert surprise political attacks on a company, because to the extent that explosive issues are looming, they will likely have been identified in advance.
Among the most important developments in the arena of social audits is the emergence of the Global Reporting Initiative (GRI), an international undertaking by a number of institutions and companies to develop voluntary guidelines for reporting on the economic, environmental, and social dimensions of their activities, products, and services. The effort began in 1997, and by April 2002, the GRI had established an independent international body to promote the guidelines and to continue to refine them. The GRI’s reporting procedures are substantial. They relate to wages and benefits; labor productivity; job creation; environmental impacts of processes, products, and services; and social policies including workplace health and safety, labor rights, human rights, and working conditions at outsourced operations. The initiative “seeks to reduce confusion [and] harmonize rules of disclosure as much as possible.” The GRI sees itself as inaugurating a reporting system that parallels traditional financial accounting and eventually will achieve a similar level of comprehensiveness and precision. This serious effort will compel the attention of companies everywhere.