Come in Spinner: Companies and NGOs — how close is too close?

The BP Gulf of Mexico oil spill is not only creating a mess in Florida and nearby States – it’s also creating a massive mess with BP’s decades-long campaign to work with NGOs on environmental issues.

Some companies and some NGOs see co-operation as anathema, inconsistent with what is a naturally combative relationship. Yet BP has worked assiduously on developing its ‘Beyond Petroleum’ positioning in conjunction with a wide range of environmental groups.

The Economist (5 June 2010) reported on the waves of criticism some of these groups, for example the Nature Conservancy, have been attracting from supporters and others for its work with BP. In the same article the magazine also canvasses the attempts of other companies such as Wal-Mart and McDonald’s to work with NGOs. Said The Economist:

“Firms on the lookout for ways to improve their image and NGOs hoping to bring about meaningful change seem like natural partners. Most of the time the benefits of co-operation outweigh the risks. But whenever money changes hands, suspicions are bound to arise. The NGOs which accepted BP’s largesse presumably now wish that they had brought a longer spoon to the feast.”

In Australia the relations between companies and NGOs and other stakeholders are complicated by competing theories and competing ideologies. Some NGOs and campaigners are totally opposed to any co-operation with the ‘enemy’ – witness the virulence with which the health thought police regularly attack alcohol, food and other companies. Where NGOs enter into licensing arrangements to raise money, such as the Heart Foundation tick program, the NGOs are also likely to be attacked by other groups.

Equally some companies – despite the talk about community social responsibility – see many NGOs as the enemy and can be virulent about them, if mainly in private. Many companies, during the post-1980s de-regulatory era, leapt on the Friedmanite injunction that the only responsibility they had was to maximise shareholder value. This was attractive to those managers who wanted to maximise profits, their pay and their bonuses, but ignored the fact that the quickest way to destroy shareholder value is to ignore stakeholders.

The core of the problem is the different approach the various competing interests take to what the PR/public affairs industry calls stakeholders. Worse, the term ‘stakeholder’ has become almost as meaningless as ‘working families’, ‘communities’ and other terms used by politicians and companies to pretend they are inclusive and concerned. Like some who want to help ‘the poor’, ‘the disadvantaged’ or whoever, many politicians and companies are more concerned about the generality than the specific.

Modern stakeholder theory stems from work by R. Edward Freeman (Strategic Management: A stakeholder approach 1984). In essence his view was that stakeholder theory is about identifying the groups who are stakeholders in a corporation and who need to be managed to ensure the licence to operate is constantly renewed. The licence to operate is really about the fact that companies, and most organisations, ultimately can only exist with the consent of the community. Sovereign risk is one problem but loss of community consent can be just as destructive. A point the mining industry needs to consider in its campaigns.

Since 1984 companies and organisations have compiled longer and longer lists of stakeholders ranging across investors, employees, suppliers, customers, governments, trade unions, community groups, NGOs, and so on. Eventually the lists become so large as to be unmanageable.

Increasingly companies are trying to segment the stakeholders in a way which helps simplify and define how stakeholders are approached and managed. A former client of mine, looking at all the literature and the weight of practice, said the best segmentation was into whether the stakeholders had a direct interest in your business (employees for instance); whether they were potential allies (trade unions and business associations); whether they were hard-core opponents (the health thought police or Greenpeace); whether they are independent monitors (Human Rights Watch or Transparency International) or whether they are uninvolved (which is the category the general public is normally in until an issue blows up).

Once you have done that you can then develop appropriate strategies. If you want to know the trade secrets as to how, they are discussed in more detail from page 42 of my latest book, How PR Works: But Often Doesn’t.

As far as partnerships in Australia go there are some very successful ones – the partnerships between banks and NGOs to promote financial literacy are a good example. The partnership between governments and the packaging and bottling industries which made kerbside recycling possible is another.

Such partnerships can help companies survive criticism and crises and can help address real problems. But when things go badly wrong – as with BP – partnerships can be counter-productive for both parties.

For companies the best advice is probably the old front page risk reality check – what will it look like for both parties if things go wrong and you end up on the front page of a newspaper? For NGOs the test is partially the same but, an even more important test for them, is whether the partnership actually helps make a difference. In BP’s case they seem to have failed on all fronts.

RITUAL DECLARATION OF INTEREST: The author has worked for alcohol, food, mining, packaging, banking and health clients and is a member of Transparency International.