Embracing the Enemy is Good Business

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A few years ago, Dr. Daniel Vasella, the Swiss CEO of pharmaceutical giant Novartis, told an American interviewer that his firm was going to have to spend a lot more time talking to NGOs. The journalist's response: "What's an NGO?"

Let's hope he knows now. NGOs — nongovernmental organizations — have won significant influence over global companies. The demonstrations against global capitalism at the G-8 summit in Genoa were the latest manifestation of a trend that — mostly quietly and behind the scenes — is defining our age. From companies like the coffee shop giant Starbucks (attacked for the treatment of workers on plantations and the price it pays for coffee), to Big Oil (a perennial target for environmentalists), to tuna canners (think dolphins), companies are increasingly changing their business practices when pressured by activists.

Some NGOs, like Greenpeace and Friends of the Earth, have hundreds of thousands of supporters around the world. Others are no more than a handful of true believers with a nifty website. But whoever the activists are, confrontation between them and businesses isn't inevitable. Indeed, in the past few years, companies from oil giant Shell to U.S. papermaker Westvaco have found common ground with environmental groups. In one of the most complex examples of the trend, Exxon, the World Bank and a group of NGOs signed a compact last year on the management of new oil pipeline running from Chad to Cameroon.

How can such relationships be made to work? In the wake of the riots in Genoa, I asked some smart observers of the scene for their advice. Their replies:

First, accept that there's no going back. Manny Amadi, CEO of Cause & Effect Marketing in London, says companies can no longer expect to escape scrutiny from activists. Shell provides the cautionary tale: a few years ago, it suffered worldwide damage to its reputation following allegations that it had wantonly polluted the Niger delta, of all unlikely places. Companies now realize, says Amadi, that "nobody can hide." Richard Edelman, president and CEO of Edelman Public Relations Worldwide in New York, says companies can't consider the work of activists to be a passing fad. But Kathy Bloomgarden, co-CEO of New York City-based public relations consultancy Ruder-Finn, says few firms have yet acknowledged this "profound change in our society."

Second, good works are not enough. "You can't buy corporate social responsibility," says Edelman. "You have to do it." Amadi argues that many American companies confuse social responsibility with philanthropy. Nike long prided itself on writing checks to charities in the Pacific Northwest. But for a global brand, that wasn't enough. When activists attacked the company because of working conditions in its Asian factories, says Amadi, a company that had seen itself as a "good guy" had to rethink its game.

Third, know who you are talking to. Vasella divides organizations into those that genuinely want a dialogue with his drug company — he mentions the famine-relief group Oxfam — and those, like many animal-rights activists, that don't. "Don't try to convert the inconvertible," he counsels. Talk to the "decent people" who respect different points of view. From the other side, Charles Secrett, executive director of Friends of the Earth U.K., concedes that some activists believe just talking to corporations is a sellout, and that only violent revolution will change the world.

Next: think globally. After all, activists do. Bloomgarden says the Internet makes it possible to "organize a global community around a certain issue in a split second." In particular, if you're an American firm, listen to what your European divisions and partners say. Many of tomorrow's issues, particularly in the fields of environmentalism and international human rights, get an airing in Europe before they do in the U.S. John Elkington, co-founder of the London-based consultancy SustainAbility, says Europe is becoming an "incubator" of social issues for American firms. Amadi observes that most European companies have a broader view of who their stakeholders are; American firms often concentrate solely on their stockholders. Secrett fingers Monsanto, once a world leader in biotechnology, as a classic example of a company that thought it could adopt American tactics and "resist and fight" those Europeans who opposed genetically modified crops. (It lost.)

It's easy to dismiss those who throw petrol bombs, but when millions of young people feel that the opportunities and costs of globalization are not being fairly distributed, companies that appear sympathetic may gain a competitive edge. Elkington says that the real driver behind the growth of corporate social responsibility programs in Europe has been recruitment; increasingly, young graduates ask tough questions about a potential employer's social practices. European firms, with their more advanced commitment to social responsibility, Edelman argues, are developing a "halo effect" among consumers worldwide. For companies competing globally, that's a reason to know what NGO stands for.