Mapping Global Corporate Citizenship (Issue 39; April 1998) described the massive international scope of business, with some private firms becoming larger than many small and medium sized nation states. As such, they become a critical factor in shaping the global economy and the culture of the ‘global village’.
Potential market
Of course, it is not just large and international businesses which can be good corporate citizens; every company irrespective of size and country of origin has that potential. According to the United Nations, there are around 45,000 transnational companies, with 280,000 direct subsidiaries and affiliates. They lead the global economy and trade with millions of other companies as their suppliers, customers and franchisees. These business-to-business transactions are the basis of the global economy and together are the real ‘market’ for corporate citizenship. Table One portrays this graphically.
The vast majority companies remain almost totally anonymous to end consumers. Only a few thousand branded businesses are the visible face of this trade. Their names are well known: Coca Cola, IBM, Levi’s, The Gap, Microsoft, Shell, BP, Glaxo, Marks & Spencer, Novartis, Philips, Heiniken, Olivetti, Sony, Hitachi and Toyota, to quote just a few. Some are significant in their regions; companies like San Miguel, Cathay Pacific and Tata Steel in Asia, Anglo American in Southern Africa and Sousa Cruz in Latin America.
These companies have the best reputations for good citizenship. Whether founded by ethical individuals or not, they all have reputations to uphold. Of the 45,000 transnational, no more than one percent (say around 450) come under close scrutiny. Until now, the media, pressure groups and non-profit organisations have targeted high profile brand name businesses, trading with the public, not their anonymous business partners.
Product life cycle
All this is beginning to change. It started in the environment, with scrutiny of a company’s whole product life cycle. Concern about the manufacturing process alone is not enough; sustainability also includes how the raw materials were obtained and where the product ends up, once the consumer has finished with it.
Likewise, companies are being asked to assume responsibility for the social values and behaviour of the firms which they trade. Good corporate citizenship of the ‘brand name’ company is not enough if their anonymous business partners do not follow the same principles and practices.
Examples of scrutiny of backward linkages include:
McDonald’s accused of buying beef from ranchers that cleared virgin forest and native peoples from the land in Latin America (vigorously denied);
Levi’s, Marks & Spencer and The Gap are expected to ensure that there is no child labour used in the growing and manufacture of their cotton goods;
Nike has recently told sub-contractors they cannot employ anyone under eighteen.
Companies like Shell, BP and Rio Tinto are developing human rights policies and practices to apply to subsidiaries in countries with variable past practices.
Examples of forward linkages include oil and drinks companies are being asked to use their resources to help inform their customers about the dangers of spreading HIV/AIDS and pharmaceutical companies to help make expensive drugs available to poor people in the developing world.
Table Two summarises examples of key concerns in this emerging pattern of responsibility, corresponding closely to that now well established for environmental management. The trend to expanding the scope of corporate responsibility to include the behaviours of distant subsidiaries and other business partners along the product life cycle will certainly grow in this increasingly integrated and electronically linked global economy.
Implications
This trend has profound implications for action by community affairs mangers. Initial tasks include:
map your community affairs spending against your company’s worldwide business profile in terms of its revenues, profits, assets and people; this will reveal the balance of community activity worldwide and identify which subsidiaries are active and which are not;
map your company’s forward and backward linkages; identify your primary business partners; check their social responsibility policies and their actual community practices;
know what social responsibility and community involvement is expected of your licensees and franchisees and what they do;
track regularly developments in key social issues like child labour and human rights abuses that might typically be found in your forward and backward linkages.
This knowledge not only helps keep you up to speed with potential threats to the company’s reputation; it sets the scene for creating new partnerships in the social arena with your business partners. If good corporate citizenship is to spread out along the value-added chain, it will be in partnership with those companies with strong economic links to your own. It is time to get to know them better, studying what they say and what they do.
David Logan has written and lectured extensively on global corporate citizenship and is a director of The Corporate Citizenship Company, publisher of Community Affairs Briefing.
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