July 14, 2009
I've just returned from a few days in Washington, D.C., and with that fresh in mind, the link between public policy and corporate responsibility seems a perfect topic for this inaugural edition of the BSR Insight.
Much has changed since Lehman Brothers imploded last September, and those transformations have been centered in Washington as much as any other city. Although the economic and political changes that have erupted since last fall may seem sudden, many of them have been nothing more than an acceleration of underlying trends, and this is true of the increased importance of public policy for companies' sustainability efforts.
We have seen signs for at least the past five years that "government is back." But since last fall, government has roared back—particularly in the West. The signs are everywhere: the U.S. government’s ownership stake in the (former?) jewels in the American business crown, the rising reliance on government (which seems to correlate directly with the decline in the public’s trust in business), and the increased importance of intergovernmental efforts such as the G-20. Last week’s G8 meeting in Italy, where climate change was center stage, shows that the sustainability and policy agendas are closely linked.
From my past few days in Washington, it is clear that one of the emerging features of the Obama administration is its big ambition for public-private partnerships. At the U.S. State Department, Hillary Clinton has established the Global Partnership Initiative and nominated Maria Otero of microfinance leader Accion International as undersecretary of state for democracy and global affairs, with Michael Posner, a veteran of several multistakeholder initiatives, to run the Bureau of Democracy, Human Rights, and Labor. The International Labor Affairs Bureau at the Department of Labor appears poised to exert more influence than it did during the Bush administration. At the White House, the new office of Social Innovation is focused on partnerships, and the National Security Council is working hand in hand with the Office of Energy and Climate Change Policy in advance of Copenhagen.
The upshot is that Washington is paying greater attention to multiple aspects of core corporate social responsibility (CSR) issues, and it’s investing the resources to back it up. The sustainability agenda is being influenced by Washington—and indeed other governments—in ways not seen for more than a decade.
In this context, companies concerned about sustainability will need to redefine many aspects of their strategies to meet the challenge of these changing times, and understand how government is shaping the agenda.
As we pointed out in the recent BSR Report 2008, now is the time to "think big," and develop systemic answers to complex questions that present the best chance for lasting solutions to sustainability challenges. But without government involvement, systems-based answers are much more difficult to come by. What follows are some trends to watch and suggestions to consider as your company prepares for a game of sustainability in which government is a bigger player.
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Get ready for more transparency.
In the wake of this past year’s economic difficulties, it’s increasingly evident that more governments will mandate reporting and transparency. Already, reformers have begun waving the banner of transparency as a means of avoiding a repeat of past problems. Governments such as China and France have developed sustainability reporting requirements. For business, the task now is to shape such reporting requirements in a way that improves performance, and avoids a “tick the box” approach that is more about compliance than results.
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Redefine your stakeholders and build new kinds of partnerships.
In many cases, it is easier to develop lasting solutions to sustainability challenges through partnerships with governments. An example of this comes from the Better Work initiative of the International Labour Organization (ILO) and the International Finance Corporation (IFC), which aims to ensure fair working conditions through unique country-level collaborations among exporters, buyers, local governments, workers and their representatives, and the ILO and IFC. Looking for other opportunities to pursue such models will pay dividends.
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Align CSR and lobbying efforts.
Many of the companies we work with speak about the challenge of aligning their sustainability initiatives, lobbying efforts, and business strategies. The imperative to do this well, in a world where government is more assertive, is growing fast. Climate change provides the ultimate test of this question, and it is promising to see multiple companies build complementary climate strategies that embrace operational changes and policy initiatives. In May, the World Business Summit on Climate Change in Copenhagen presented a clear call for action from businesses in China, Europe, and the United States. Many global companies have been working to influence national policy as well. These are encouraging signs that can be extended to other subjects.
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Map your public policy ecosystem.
Every company exists within a complex policy ecosystem, and businesses need to think differently about which governments matter. Just as companies began to map their stakeholders in civil society a decade ago, now is the time to do the same with respect to the public sector. In 2009, it is not only the governments at headquarters, or those where owned operating facilities exist, that matter. Governments with jurisdiction over supply chain operations, or those critical to global frameworks on water, climate, and human rights are also essential.
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Partner with government to overcome fundamental barriers to sustainability.
Too often, business and government talk past each other. In fact, the private and public sectors have a common interest in finding ways to knock down two fundamental barriers to a more sustainable economy: consumer inertia and market rules that promote short-term thinking. Creative thinking by business and government could help unlock greater progress in engaging consumers to make different choices. By changing economic incentives, and also reshaping public awareness, government can help increase the demand for sustainable products and services. Similarly, the current displeasure with market rules could be used to inject more long-term thinking into global financial markets. Neither business nor government can make these changes alone—though together it might be possible.
It’s now clear that 20th century models, in which big government regulates big business, and big business resists regulation, won’t work. The social contract in today’s "reset world" means upgrading the relationship between business and government. We must pay more attention to policy developments that shape the future of sustainable business through smart regulation, the facilitation of partnerships, and the creation of creative incentives.
By finding more ways to communicate and partner effectively, the potential of public-private partnerships could be translated into a reality—just when they are needed most.
Let’s talk about how BSR can help you to transform your business and achieve your sustainability goals.