The perverse power of corporate responsibility rhetoric, why ethical behaviour boosts your brand’s emotional appeal, and more work to do for Ruggie

Symbols and social programmes

In the early 1990s, US agribusiness giant Monsanto made all manner of environmental pledges. By most accounts, its intentions were genuine. As with best-intended promises, though, the company struggled to deliver. What did Monsanto do? It “attempted to change its approach by simply using the rhetoric of sustainability and not committing to specific operational changes”, this paper claims. The company duly lost credibility with stakeholders and was accused of greenwashing.

Hess and Warren use the example to highlight how tricky it can be to make corporate social initiatives truly meaningful. Drawing on institutional theory and resource dependence theory, the authors stress the difference between “significant” and “symbolic” sustainability projects. Measurable social outcomes constitute the obvious differentiator. To fall into the first camp requires long-term commitment and investment of strategic resources. The authors’ well-chosen examples help communicate that important, though not entirely novel, point.

What makes this paper really stand out is its second question: how do corporate social programmes impact the meaning of corporate responsibility?

The authors’ starting point is clear: companies invariably adopt social initiatives as a way to reduce institutional pressure for them to become more responsible. How a company responds depends on how it interprets those pressures. That response, in turn, helps define what it means to be socially responsible.

As the company makes that interpretation, the meaning of social responsibility shifts away from conflict with stakeholders towards voluntary corporate activities. This cause-and-effect sequence becomes especially problematic, the paper argues, when the company’s subsequent activities provide little true value to society. It is then that corporate social programmes act as a smokescreen, distracting attention from the real responsibility issues at stake.

There is a sting in this paper’s tail. Symbolic initiatives can have a positive impact too, even if not for society. How? By changing “power relations” between the company and its stakeholders. As in the Monsanto case, the company’s critics gain power by pointing out the inconsistency between corporate rhetoric and actions. A bad social programme, therefore, can lead to increased pressure for a better one.

“The Meaning and Meaningfulness of Corporate Social Initiatives” by David Hess and Danielle Warren, Ross School of Business, Business and Society Review, Summer 2008.

Perceptions and praise

Companies understandably enjoy being patted on the back for their responsibility programmes. Hence, the panoply of annual business awards and rankings. Company executives argue that such accolades go beyond ego-massaging. Better corporate reputations lead to better stakeholder relations, which lead to better baseline profits.

This paper puts that theory to the test. To that end, Puncheva-Michelotti examines the link between stakeholders’ reputational perceptions and stakeholders’ actions. Using institutional theory, the paper identifies four key areas where stakeholders affect firms’ operational performance: whether such stakeholders buy a company’s products or services; whether they opt to work for a company; whether they invest in a company; and whether they support a company’s operations in their community.

Many of the findings are guessable. For job-hunters, workplace environment and ethics most affect a company’s reputation. Purchasers, on the other hand, are most influenced by customer value and social responsibility. Economic performance and market competitiveness, meanwhile, are what bump a company up an investor’s buy sheet.

One unanticipated finding is the importance of a company’s “emotional appeal”. Defined as admiration for, trust in and a good feeling about a company, a company’s emotional appeal is considered in every stakeholder’s decision-making. Equally present, though less influential, is a company’s “patriotic appeal”. For a thumbs-up from stakeholders, companies should consider touching a heartstring and flying the flag.

“An Analysis of the Determinants of Corporate Reputation and Stakeholders’ Decisions to Purchase, Work, Invest and Support Community Operations” by Petya Puncheva-Michelotti, working paper, Swinburne University of Technology, June 2008.

Ruggie and rights

Professor John Ruggie’s seminal report on business and human rights is frank from the start. The international community, the first line reads, is “still in the early stages” when it comes to corporate-related human rights issues. Despite the high profile of Ruggie’s 2008 final report, presented to the UN Human Rights Council in June, the question needs to be asked: what does it add to this embryonic field?

Jernej Letnar Cernic’s verdict is mixed. Ruggie, a special representative to the UN secretary-general, is strong on business’s need to “protect” and “respect” human rights. Less convincing, however, is the third pillar of the report’s framework; namely, how to “remedy” the problem. Ruggie’s conclusions are “rather general [and] superficial”, this short summary paper concludes. Victim-orientated measures are sorely lacking, it continues.

The Human Rights Council wants Ruggie to look into what can be done for victims as part of his next mandate. The council has asked for recommendations on ways to offer effective remedies for those whose human rights are affected by the activities of companies.

Ruggie’s first report might not provide all the answers, but it confirms that companies can no longer claim that protecting human rights is not their problem. Those rights, Jernej Letnar Cernic concludes, must be enforced primarily at a national level and only secondarily within an international legal framework.

“Corporate Responsibility for Human Rights” by Jernej Letnar Cernic, Institute for European, Constitutional, International Law and Law of Economics, Libertas working paper, Summer 2008.