As globalization trends increase, so does the ability of non-governmental organizations such as Greenpeace, Oxfam International, and the World Wildlife Fund to shape public and corporate policy on everything from human rights to labor conditions. The result, say HBS professor Debora Spar and Lane LaMure (HBS MBA '02), is that targeted corporate executives who decide to ignore NGO protests do so at their own peril.
Spar and LaMure recently detailed the rising power of NGOs and corporate responses in "The Power of Activism: Assessing the Impact of NGOs on Global Business," published in the Spring 2003 issue of California Management Review. In the piece, the authors offer case studies of Unocal, Nike, and Novartis.
Spar and LaMure were struck by "how smart NGOs can be in their own strategic thinking, and how firms have assumed such a growing role in the global economy, making them a more influential lever in many cases than states." Also intriguing is the "passion and tenacity with which NGO members and activists pursue their interests. They dedicate (and, in certain cases, risk) their lives to alter some aspect of state or firm behavior, and they do so with increasing focus and intensity. In many cases, they are well-informed, well-organized and extremely passionate about advancing their cause."
HBS Working Knowledge asked Spar and LaMure to elaborate on their research.
Churchwell: What does it mean to be "targeted" by an NGO? And what is a productive way for a company to respond?
Spar: To be targeted is to be chosen by an NGO (or group of NGOs) for specific attack. When this occurs, NGOs use a range of tactics, from pickets to boycotts to "cut up your credit card" campaigns. How firms respond depends a lot on what the attack is about, and what business the firm is engaged in. We discuss these different strategies in the article. In general, though, it's risky for the firm to ignore the activists' protests entirely. At a minimum, they need to understand the charges and the groups that are making them.
LaMure: As Debora points out, it is certainly important for firms to take the time to understand all of the issues involved. In doing so, it may be useful for firms to develop an ongoing dialogue with the NGO (or NGOs) and take a proactive approach to understanding the associated allegations and complaints. Firms might meet face-to-face with NGO leaders or create an outlet to field NGO inquiries. Anecdotal and case study evidence suggests that stonewalling NGOs may only serve to fuel the fires of activism.
Q: What strategies would you recommend that companies use to collaborate with NGOs in order to address social and environmental issues?
NGOs have become an important element of the global economy and firms should expect to interact with them.
Spar: Again, it really depends on the firm, the business, and the activist groups involved. Firms need to understand who "their" activists are, and often to differentiate among different groups—examining, for example, which are more reasonable, which might want to work with the firm, and so on. Then, it's useful to plot out lines of complete disagreement and possible compromise.
Q: You cite transaction cost, brand impact, and competitive position as important factors in determining how management might respond to NGOs. Do have you any recommendations for managers in determining the relative value of each factor?
Spar: Firms need to understand their own vulnerabilities. For brand-name firms, the brand is the most important factor. For industrial firms, other elements will come into play.
LaMure: It varies by firm and industry. For most firms, however, it is probably helpful to consider how their response may help or hinder their competitive position in a market or industry. For some firms, capitulating to activist demands may serve as a clever way to differentiate a brand or product and capture market share.
Q: What can managers learn from past experiences of targeted companies?
Spar: I think the broadest lesson is not to underestimate the power of NGOs. Firms may not like them; they may not have great respect for them, but NGOs have become an important element of the global economy and firms should expect to interact with them. Also, firms need to realize their vulnerabilities before they become the subject of attack. Reacting—under pressure and at the last minute—is almost always a less-than-ideal situation.
LaMure: At least three lessons come to mind. First, as Debora notes, do not underestimate the power, influence, and tenacity of NGOs. In many cases, they are just as well organized and adamant about an issue as a firm is about maximizing shareholder value. Second, firms might consider areas of overlap between NGO issues and firm behavior. Where can a firm maximize shareholder value and appease (or even advance the cause of) an NGO? Finally, firms might consider how they can preempt, or proactively engage, NGOs and activists before an issue enters the public spotlight.
Q: In reference to the title of your article, have you discovered other types or forms of activism—in addition to NGOs—that have an impact on global business?
LaMure: No. We have, however, noted variation in types of NGO activism. It ranges from lobbying politicians/leaders behind the scenes to demonstrating publicly at shareholder meetings to attacking (through Web sites, posters, postcards, etc.) company leaders.
Q: You suggest that analyzing non-financial costs of capitulation versus compliance could expand research on the impact of NGOs. Where will your future research take you?
LaMure: Several additional interesting questions remain unanswered: What is the quantifiable impact of NGO activism on firms? How do shareholders and important stakeholders evaluate the impacts of activism? How do NGOs select issues, firms and strategies? Which tactics prove most effective for firms and NGOs? How does the bargaining process work between activists and companies?