Getting There

Six steps to NGO engagement

There is a growing worldwide movement afoot with no name, leader or headquarters. Found in every city, town and culture, it organizes from the bottom up, is extraordinarily creative, flies under the radar and includes Nongovernment Organizations (NGOs), village-based organizations, foundations, churches, institutes, citizen-based groups and more. This movement directly addresses social justice and environmental issues and is estimated to comprise more than 1 million organizations, populated by more than 100 million people. Collectively it constitutes the single biggest citizens’ movement.

Activist NGOs are the “trained militia” serving this global civil society, yet businesses often turn a blind eye, or take note too late, learning the hard way that external engagement – particularly with opinion-forming NGOs – can devastate their corporate reputation. But by welcoming their advocacy they can actually enhance and protect corporate interests. This is especially true in the digital age of activist blogs, e-mails, and video that goes viral around the world in mere seconds. The result? Consumer boycotts of your products, damaging public media campaigns and sometimes protests at your facilities. However this happens, corporate executives must face the issue head-on, accept that a campaigning NGO with public credibility has the means to bring much harm to a company’s brand and reputation and educate themselves on how to respond should they elect to target your company’s operations.

So how can companies work more effectively with NGOs and how can NGOs recognize the ways that business can help them accomplish their goals?

1. Open up dialogue early — Face-to-face interaction and the ability to develop individual relationships with NGOs is the most effective approach to rebuilding the trust and credibility of a company. This important first step will get a dispute out of the public domain, out of earshot of customers, employees and policy makers who will be paying attention and could misinterpret the situation. Don’t be blinded by the company’s closely held ideas. Invite and involve those with differing perspectives. It doesn’t take much if you’re in a listening mode, intent to fully hear the concerns of all stakeholders.
2. Accept that NGOs are savvy. Don’t underestimate the information and expertise an NGO has about the company’s business and product sector. Know that they have done their homework about the company, are knowledgeable about the industry and are prepared to go the distance.
3. Consider and integrate crucial national differences such as how the roles of business, government, religion, culture and other important institutions are viewed in different countries.
4. Include all issues in the dialogue – nothing is off the table. Affirm and acknowledge stakeholders’ legitimate and heart-felt demands, even if later they are limited by what the company can and cannot undertake.
5. Get help from experts or organizations. Once you make the commitment to engage, it can be difficult operationally to find the internal resources with which to follow through. It’s wise to seek out experts or organizations experienced in facilitating such dialogue.
6. Finally, a word of caution: Before engaging with an activist group, do your homework. Find out more about the organization, its programs, its mandates and what it regards as its “bottom line.” This will help determine whether potential exists for a long-term, mutually beneficial relationship. Likewise, NGOs should learn your business: where it operates, what risks and opportunities there are in the supply chain and how, by working together, they can be part of creating great change. The key is, start talking (and listening); learn about each other, and build trust. With any luck, groundbreaking strategic partnerships will emerge.

Leadership companies no longer see stakeholder engagement as an option, but as a critical part of their business strategy. In many cases, companies are using the opportunity to enter challenging markets, resolve or head off confrontations with activists, and understand where business and CSR strategies ought to be headed. This interaction often requires significant amounts of time, money, and other resources, and may require a level of openness, disclosure and collaboration, which your company may be unaccustomed to or find uncomfortable. However, if you are operating in the global market, you’ll find that whether you like it or not you must engage with activists, be it in conflict or consensus.

Materiality and Corporate Responsibility

Materiality is a concept within the auditing and accounting fields where information, taken on the basis of financial statements could influence decisions of investors, regulators and suppliers. According to international accounting standards, information is “material” if its omission or misstatement in financial statements could influence the economic decision of these users. Materiality depends on the size of the item or error judged in the particular circumstances and whether a reasonable person, relying on this information, would have been influenced by the omission or misstatement. Thus, materiality provides a threshold or cut-off point to guide companies in making decisions about what information to disclose.

The main driver for discussing materiality in the context of corporate social responsibility (CSR) is the increasing importance of sustainability reports. Studies indicate that publicly reporting social and environmental performance issues keeps a business on its toes: the process of building a public report is the single most important driver of change in how these issues are managed, because it increases organizational knowledge, facilitates reflection and transforms policies and practices. Under the annual deadline for submitting metrics and numbers for a CSR report, the business manager focuses on the commitments made the year before and the pending public disclosure of how things have improved — or not.

However, transparency and the communication of material information are not confined to an annual CSR report. A materiality assessment is equally critical in setting a company’s CSR strategic direction. As such, here are some important tips:

• An essential first step in CSR strategic planning is to identify the material issues that senior management must consider in order to minimize CSR risks and maximize opportunities. A first-rate CSR strategy provides a structure for managing all sustainability challenges and impacts, and puts responsible practices at the core of business planning. This includes supply chain accountability, environmental impact assessment, governance, stakeholder engagement, social community commitments and transparency.
• This strategy should be rooted in your company’s supply chain:
  • – what the company buys
  • – whom it buys from
  • – what it manufactures
  • – who makes the product(s) and
  • – social and environmental practices throughout the chain.
• To assist in determining materiality, the formation of a CSR report review committee is crucial. Committee members should have expertise in: labor, human rights, environmental, social, economic and diversity issues.
• A materiality assessment for what should be included in your annual CSR report means identifying issues that reflect your company’s significant economic, environmental and social impacts, or substantively influence the assessments and decisions of stakeholders. In this process, consult a variety of resources — both internal and external. They should include:
  • – papers on company objectives, strategies, policies, programs and risk factors
  • – employee surveys and input gathered through various other feedback mechanisms
  • – customer-contact feedback
  • – shareholder resolutions and anecdotal feedback
  • – input gathered through stakeholder dialogues
  • – informal input from suppliers
  • – media coverage and blog discussions of company issues
  • – stakeholder feedback about the company’s past CSR reports
  • – Global Reporting Initiative’s G-4 Guidelines, the fourth generation
• Reporting is not an end in itself. It is only useful if it discloses publicly and formally how your CSR strategy includes corporate action and facilitates change.

Making globalization work for your company:

Companies once held accountable only for the direct, contractually specified or regulated consequences of their actions now find themselves responsible for alleviating hunger, disease and more: issues as disparate as environmental sustainability, community economic development and child labor in sub-Sahara Africa. Thus it is easy to see that our increasingly interconnected world demands strong corporate leadership to strengthen governance, harness economic potential, alleviate global poverty and improve human conditions.

So what should be the role of business? As engines of growth and sustainable development, corporations have a responsibility to address poverty and underdevelopment, to help disadvantaged communities where they conduct their business, manufacture their products and employ workers? Here are some guidelines:

• Innovate, create decent jobs and develop affordable products and services — especially those that meet basic needs such as water, energy, nutrition, healthcare, housing and education while leveraging your core business expertise and realizing commercial success.
• Invest in improving society and addressing global challenges beyond traditional philanthropy. Too often philanthropy is used as a form of public relations: “writing the check” to promote a company’s image through high-profile sponsorships. To respond to competing pressure from investors, governments and activists, companies should approach their corporate giving strategically to improve the business climate and infrastructure where they operate.
• Leverage other resources as well, devoting not only money, but management capabilities and relationships, to solving development problems such as in-kind donation of employee expertise for training; also utilize “cause marketing”: engaging customers in both awareness of and funding for some of these development needs.
• Use your natural strengths — create products and markets that stimulate development in emerging economies where future business growth opportunities are the greatest. You can and should provide access to economic opportunity through jobs, property ownership and access to credit and access to new technologies and training.

Responsible conduct must increasingly become the guiding principle in for  overall business strategy. For private enterprise, international development is increasingly regarded as the “quid pro quo” for globalization and market expansion. Companies that heed the call for alignment of their social and philanthropic missions with their core business strategies will succeed far into the future. Those that don’t won’t survive.