Intelligent Enterprise

Better Insight for Business Decisions

RSS
Webcasts
Whitepapers
Subscribe
Home

January 1, 2002

Civics Lesson

The rewards of good corporate citizenship go beyond the ability to look at yourself in the mirror

By Don Tapscott

Corporate leaders around the globe are reinventing their organizations to respond to the intersecting realities of globalization, transparency, instant communications, and organized civil society. The networked economy demands deep transformations in business processes across the company — from the way companies deal with stakeholders and manage their supply chains, to the way they measure their success and govern their organizations.

The urgency of change is being driven by the emergence of a broader corporate bottom line. Shareholder returns are based as much on a company's track record as a corporate citizen as they are on solid economic performance. Companies that demonstrate vision in embracing new roles and responsibilities will gain public trust and reap rewards in the marketplace.

For a good sense of the direction in which we are headed, look at how many companies responded to the horrific events of September 11. As soon as the attacks occurred, companies immediately understood that corporate reaction would be judged by much tougher standards.

President Bush acknowledged the many difficulties companies would have in coping with the disaster but added, "There is more to corporate life than just profit and loss." This belief is why, for example, insurance companies quickly stepped forward and said they would not exercise loopholes in policies that preclude payouts in the case of acts of war or terrorism.

This type of response is not unprecedented. We often see similar behavior in times of war or natural disasters such as floods or earthquakes.

In almost every case, business as usual was set aside and everyone's behavior was measured against much higher standards. Because of technology, particularly the Internet, these higher standards and tougher metrics are going to evolve into the norm.

Because of communications technologies, we are working within a much more transparent and inquisitive world. This world is changing virtually everyone's behavior, whether they are consumers, taxpayers, educational institutions, government entities, or corporations.

In June, ExxonMobil Corp., the world's largest oil company, was hit by a lawsuit from the International Labor Rights Fund. The nongovernmental organization (NGO) accuses the company of being complicit in genocide, murder, and torture because it uses Indonesian military forces to secure its operations in Aceh, a region of Indonesia threatening to separate. ExxonMobil vigorously denies any responsibility, but has temporarily shut down its operations, forfeiting up to 1.66 billion cubic feet a day in natural gas production.

On other fronts, ExxonMobil is under pressure to change its approach to climate change. Two resolutions from religious institutional investors to promote investment in renewable resources and tie executive pay to environmental performance were tabled at its recent annual meeting.

In Europe, a boycott led by Greenpeace and Friends of the Earth UK is gathering momentum, attracting the support of several European parliamentarians and celebrities protesting ExxonMobil's environmental record.

Conventional wisdom holds there are only two ways to achieve competitive advantage. One is to offer products or services at a lower cost. The second is to offer a good or service that is superior or distinctive from the competition.

But now a third path is forming. The values and candor with which your corporation functions will be increasingly judged by consumers, employees, governments, and other stakeholders. Your corporate behavior will be rewarded or punished in the marketplace.

Rate This Article

Comments:

Optional e-mail address:

For starters, stakeholders will want to know how you produce your products. Is your supply chain ethical? Does your corporate strategy exploit flags of convenience by shifting activity to countries with less stringent labor or environmental laws? You will soon have to answer a host of questions going far beyond price and delivery dates.

Today you may resent being asked these questions. Tomorrow you will welcome them. Tomorrow, encouraging scrutiny of your operations will form a large part your success. Moreover, astute companies will work hard to make larger contributions to the community and help shape the values that form the basis of our society and the types of questions consumers will ask.

At a session of the World Economic Forum in Davos, Switzerland, Minoru Makihara, Chairman of Mitsubishi Corp., gave a speech during which he noted: "Corporations are widely seen to have increased power, but at the same time, the public's knowledge of corporations has been greatly increased by the Internet and NGOs. So we need to ask: How can corporations enter into dialog with the public, increase transparency of their accounts, deepen discussion with nongovernmental organizations, and develop meaningful corporate codes?"

I couldn't find one person after the speech who disagreed.

Don Tapscott [dtapscott@digital4sight.com] is president of New Paradigm Learning Corp. and coauthor of Digital Capital: Harnessing the Power of Business Webs (Harvard Business School Press, 2000).