Human rights, business and end users

We focus on social impact integrity in corporate supply chains, but what about corporate 'responsibility' for the downstream end-use made of a product or service?

I use the term 'responsibility' very broadly -- mostly in relation to 'liability' in the court of public / consumer / market opinion, rather than in any legal sense.

One manifestation of the shifting expectations of business in society is that some brand-conscious firms are paying far more attention to the use to which their products are put, in human rights impact terms. This is in addition to the more familiar concept of the attention to the human rights footprint of the 'upstream' supply chain through which they source components and ingredients for their products.

The sensitivities on this issue vary greatly by sector and firm and context -- this is true of corporate human rights impact generally.

One sector of interest is the pharmaceutical sector in relation to the supply of drugs capable of being used in state-administered lethal injections pursuant to a death penalty order.

Last week global pharma giant Pfizer became the last major firm to announce that it was taking steps to ensure that its products would not be procured for use in lethal injections (at least in the US).

This fell from concerns about the morality, if not the legality, of administering cocktails of drugs that did not always ensure a relatively swift and painless execution.

I blogged on this long-building issue some four years ago in relation to an EU-based firm exporting to the US: see here.

The more interesting question is whether this growing 'end-user due diligence' is capable of wider analogy to other products, or is specific to this issue...

Jo

Business and shaping the business of government

History not having ended, somewhere out there is a perfect equilibrium of state-business-civic relationships and roles, catalysing and manifesting an ideal form of sustainable, inclusive development.

Over dinners here in Oxford I envy science-nerd friends whose research seeks (and often finds) pathways, combinations, formulas to unlock or unblock cells or substances in ways that might dramatically improve life and health. Policy and political economy hold less tangible rewards. I console myself by saying that perhaps we policy folk have a similar vocation: finding judicious and productive formulas of governance and collaboration, to unblock whatever constrains, corrupts or conspires against better social, regulatory and growth models: ideal cooperative forms mapped to suit the unique DNA of particular societies, sectors or supply-chains. 

This week's post reflects on aspects of the just-published special report on 'Companies and the State' in The Economist of 22 February.

First, the lead article states that relations between business and government are becoming "increasingly antagonistic". That may be true in richer OECD countries (on which the report focuses). However, in contrast to any trend of antagonism, arguably in development policy circles and among leading multinationals there exists increasing pragmatism, mutual outreach and cooperation in pursuit of shared objectives (see for example this previous post).

Yet there is a long way to go in convincing policymakers and executives of the propriety and utility, respectively, of looking for appropriate, productive ways to harness the private sector's strengths in pursuit of greater public goods. This post on the lack of meat to back up recent rhetoric on cooperating with business makes the point, as does last week's post on policymakers' mindsets towards a business role in public health provision. In this sense, the Economist is right to conclude its report by saying that governments and business alike "should acknowledge the fact that they are partners not enemies".

Second, the report dwells on shortcomings of taxation strategies. In poorer countries, development policy will increasingly focus on taxation issues both in terms of financing development (governments) and as a strategy to foster more responsive government (donors). See here.

Third, the report calls (as that newspaper is wont to do) for less complex and convoluted regulation in order to stimulate productivity. This post argued that in stimulating business' capacity for virtue on social, enviro and governance issues in settings with low-capacity regulators, regulation that is based on broad principles rather than detailed codes may be preferable.  

Finally, the report considers the sometimes pervasive influence on government of corporate or sector lobbying. In many mid-income or developing settings, the same imbalances exist: parts of the business community either have too much access to government or too little. One challenge in feeling the way towards the ideal sustainable development equilibrium is to institutionalise effective, inclusive, responsive feedback loops between the public and private sectors, so that 'lobbying' is not a dirty word but a transparent, regulated part of the business of governing.

This is surely because in the social science of responsible business and responsive government, the microscope reveals that from cellular to system-level, the vital, fragile, organic and mysterious substance is trust: see here.

Jo

The Economist report is here.

The politics of business: 'crazy for good'

Politics, as they say, is a tricky business.

For companies this makes the politics of doing business in tricky places ... particularly tricky.

This is so even (or perhaps, in complex settings, especially ...) where a firm is trying to promote public good-spiritedness and aspirational values, typically in pursuit of its strategy for market position or building reputation / mitigating reputational risk.

Last week in Zimbabwe, Coca Cola found that its new can of Coke opened something of a small can of worms -- highlighting how even firms which adopt a studied neutrality on domestic politics can unwittingly find themselves forced to say where they stand on tense, changing local political issues, and in hard cases to make or avoid value-ridden judgments about which side of history they [may be perceived to] stand on.

The Zimbabwe issue arose as an incidental part of Coca Cola's global marketing / social awareness campaign 'Crazy for Good'. One feature of this is an adaptation of the standard red Coke can, altered to show open hands -- waving, reaching out to each other.

The problem (if it is one) is that in Zimbabwe, red is the colour of the Movement for Democratic Change (MDC-T); an open-palmed hand has long been its distinctive party symbol.

By contrast, its rival (Robert Mugabe's ZANU-PF party) is typically associated with the clenched fist gesture so often used by its long-time leader.

The 'Crazy for Good' / 'Open Friendship' campaign and its new Coke can happened to coincide with the lead-up to probable 2013 elections given that the mandate for Zimbabwe's dysfunctional post-2008 ZANU-MDC power-sharing government expires at the end of next month. Some over-sensitive ZANU politicians accused Coca Cola of blatantly aligning its brand with the MDC -- just in time for electioneering. The brand I suppose is typically associated, through the company's efforts over decades, with fun, freedom and friendship.

Coca Cola of course can easily refute the suggestion, pointing out that its brand colour has been red for decades and that this is a global campaign. (In a post-Arab Spring world in places with restless politicised youth one wonders how threatening some of the world's more paranoid and less secure leaders might find any new version of Pepsi's long-running mantra with its emphasis on a 'New Generation... !').

Anyway, the incident neatly raises the dilemmas that brand-sensitive firms can face in juggling neutrality on political issues (on the one hand ...) with their desire to align their brand with aspirational sentiments or universal values (on the other hand ...).

This dilemma is a subset of the wider difficulties global firms have in navigating local political turbulence, and often the strategic decision of whether to abandon pretence at neutrality, subtly re-align oneself for alternative possible futures, or hope that one's firm is not found exposed at the intersection of politics and business.

Coca Cola's recent full-page newspaper advert in nearby Swaziland raised some controversy -- it wished happy official birthday to the king of Africa's last absolute monarchy, which has strongly suppressed alternative political expression (even if the royal family as an institution retains considerable popular loyalty especially in rural areas).

Then there's a firm like South Africa's Nando's which took a different tack: one advert openly mocked Mugabe, resulting in threats to its staff in neighbouring Zimbabwe -- it withdrew the adverts, perhaps having calculated that Youtube hits would continue soaring and that the kudos in the SA market was worth whatever happened in the much smaller Zimbabwe one.

Close political ties can be handy, but also be a handicap ... That is, these issues are obviously especially acute in places like Angola where the local business elite (whose cooperation may, as there, be needed for any viable corporate strategy) is for all material purposes indistinguishable from the political elite. Relations, explicit or otherwise, that make things easy or which are unavoidable in the short term might carry with them long-term liabilities (whatever their implications on foreign corrupt practices laws and the like). Operating hand-in-glove with political elites carries both near-term reassurance and longer-term risks...; yet remaining even-handed can be difficult where one's brand or operation is singled out by either the incumbent or the opposition (or activists).

Greater demand for electoral democracy in sub-Saharan Africa means that firms which in the old days needed only to appease the incumbent may need to consider, for example, the risk that a change of administration might make them vulnerable where they are perceived to have 'taken sides'. Firms that have already sunk a lot of capital into a country or which hope to be there for a long time to come will need to strategise around the prospects of change and of the implications (there and abroad) of enforced lack-of-change.

Sometimes the risks are in plain sight; sometimes they are foreseeable even if unlikely; sometimes they take firms by surprise. In some cases, mere presence in a controversial country represents a value-based decision by reference to democratic or human rights norms -- or is seen that way.

In many cases, the firm's licence-to-operate and brand will emerge intact, perhaps only with a rap on the knuckles; most will be able to make a good fist of staying well away from political controversy. Firms that are newly entering have one set of dilemmas, but those with existing investments tied up in a country to some extent have one hand tied behind their backs in terms of backing down in the face of politicised counter-campaigns. The main consideration for brands with global exposure is an awareness of the importance of consistency across markets on value-based issues: the left hand needs to know what the right hand is doing.

Policy choices impacting the business environment can be highly political -- raising the question for business of when and how to explicitly join national conversations about such issues. In considering the role for socio-political leadership by business, this blog has referred for example to the dilemma individual firms face in South Africa in putting their heads 'above the parapet' rather than remaining silent. Speaking under the umbrella of a business chamber mitigates that risk. Note that this last week apparently saw a Guatemala business group criticising the genocide conviction of a former head of state: now that takes 'private' business engagement on public interest issues to a whole different level!

Jo

See the South Africa version of the Coca Cola 'Crazy for Good' campaign -- here.

See one (note -- mainly anti-ZANU) news story of the Zimbabwe-Coke story -- here.

See my earlier post on the Swaziland-Coke story -- here.

See the Nando's advert about Mugabe -- here.

See discussion in an earlier post of Coca Cola's entry into Myanmar -- here.

See discussion in an earlier post of (limited) reputational risk from mere country presence -- here.

Corporate (re-)entry, sanctions and risk: the Myanmar / Burma example

Geopolitics, universal values and corporate strategies intersect where firms decide to (re-)enter 'transitional' states emerging from relative international isolation.

Previous posts have discussed African settings where bilateral or bloc-mandated sanctions apply (from Sudan and Eritrea in the Horn of Africa, to Zimbabwe and Madagascar in southern Africa), but this week's post looks at Myanmar (Burma).

On April 22 the EU lifted all its remaining trade, economic and personal sanctions on Myanmar (bar the arms embargo) in recognition of its reforms towards greater inclusivity and political space.

So I asked my Oxford Analytica colleague Herve Lemahieu -- who follows the country closely -- a few questions about the issues where risk, regulation, reputation and responsible business conduct meet in post-sanctions Myanmar:

JF: What have been historical (1990s and on) patterns of Western corporate engagement and how quickly is this changing?

HL: “Two decades ago, Western companies were rushing out of Myanmar under pressure from shareholders and activists. Pepsi Cola, Apple, Levi Strauss, Unilver, Texaco, Carlsberg, Heineken, Disney and Hewlett-Packard were just a few of the big names to exit the country following high-profile campaigns. In the mid-1990s and into the early 2000s, Western economic, financial and political restrictions, in place ever since the failed pro-democracy uprising of August 1988, were steadily ratcheted up and bolstered by consumer and civic pressure groups discouraging all trade, investment and tourism.

There is little evidence that this boycott had much more than symbolic value. Twenty years of military rule and Western sanctions allowed a narrow, state-linked business elite to thrive while hitting the general population the hardest. The West lost influence while allowing Asian competitors an open field. Rather than acquiesce in Western calls for sanctions or add to pressure for regime change, Beijing and ASEAN favoured the military regime's own top-down transition and seven-point roadmap to ‘discipline flourishing-democracy’.

Many western observers failed to recognise what the military regime was trying to do during its two-decade rule because it did not conform to categorical ideals of democratisation. However, the integration of opposition leader Aung San Suu Kyi and her National League for Democracy (NLD) into the fold of the country's ‘disciplined democracy’, in which the military remains the most influential de-facto and constitutional powerbroker, has been judged ‘good enough’ for Western businesses to rapidly return to one of Asia’s last remaining frontier markets.”

JF: Are corporate engagement strategies out of line with diplomatic ones, and does it depend on whether Western or other company / government?

HL: “Government and corporate policies are now, broadly speaking, mutually reinforcing. Most Western governments have conceded that sanctions exercised only limited political leverage over the previous military regime, and are opting instead for pragmatic engagement to secure political and commercial goals in the country. For their part, many companies have learned from past experience to become more risk-averse and reputation-conscious as they prepare for market re-entry. However, there are still nuanced differences in the economic diplomacy espoused by different capitals, with varying private-sector implications:

· Japan has led the field in normalising ties and increasing its commercial presence in Myanmar -- something political liberalisation now allows it to do at far less cost to its international reputation.

· The EU has today agreed to follow Norway, Australia and Canada by permanently lifting sanctions, rather than conditionally renewing their suspension.

· That leaves the US the only country to maintain curbs on the country as part of its piecemeal ‘action-with-action’ approach of easing sanctions through presidential waivers.

Corporate and diplomatic strategies still clash in as much as US business leaders have complained that Washington's policies require extensive compliance paperwork and present legal/reputational uncertainty, while European and Asian rivals gain first-movers advantages. Many US multinationals are undeterred, including Coca-Cola, General Electric, Hilton Worldwide, Visa International and MasterCard which have all entered Myanmar in the past six months.”

JF: Is there a case for saying that corporate engagement at this time helps support wider reform / transition in Myanmar? What counter-arguments do you hear among those watching the country?

HL: Some Western politicians and lobby-groups have sought to portray Myanmar’s transition and the resurfacing of ethnic and religious violence as, respectively, evidence of the effectiveness of, and continued need for, conditionally withholding western business activity in the country. However, governments and voters alike are becoming more sceptical of their ability (or indeed the general desirability) to micro-manage political change through blunt economic polices implemented from half-a-world away.

As the logic for broad-brush 'complicity-by-general-association-or-presence' risk starts to recede for corporates re-investing in the country, risk will start to lie far more in particular relationships and actions that firms might take, such as labour relations, community and environmental impacts. Given the absence of well-developed physical, financial and regulatory infrastructure, the challenge will be for corporations to self-regulate, hedge risks, and assess their own ways in which they can contribute to the wider reform process.

Already, we have seen prospective and actual businesses drive the government’s efforts to adopt international standards, from labour rights to financial regulation and environmental protection:

· Nearly 400 government officials were sent to jail on corruption-related charges between mid-2011 and December 2012 (almost as many as political prisoners released in the same period). This includes a crackdown on the endemic practice of accepting or soliciting kickbacks and bribes to award contracts.

· The government is negotiating entry into the Norway-based Extractive Industries Transparency Initiative and will likely remodel its energy contracts according to the voluntary regime’s stringent requirements for financial transparency, environmental standards and corporate governance for the natural resources industry.

· Japanese trading houses – including Mitsubishi, Mitsui, Marubeni and Sumitomo – have spearheaded efforts to diversify away from the extractives sector by investing in the labour-intensive sectors, such as manufacturing, services and agriculture.”

My thanks to Hervé.

The Myanmar outcome came a day after the Bahrain Formula 1 Grand Prix, where the organisers (and indirectly, the sport's many sponsors) were forced to defend their decision to hold the race in the face of a campaign for greater political freedoms in the Gulf state. Politics, human rights and calls for sporting boycotts are nothing new, but there is no doubt that especially brand-sensitive corporates nowadays need to navigate these issues more swiftly, consistently and comprehensively.

For previous posts on this topic, see here (corporate engagement in ‘pariah’ states), here (entering 'closed' complex settings like Ethiopia) and here (reputational risk from mere presence?).

Jo

ps -- of note to a blog on this general subject matter relating mainly to Africa, the US Supreme Court last week rejected Nigerian plaintiffs' arguments that US courts should exercise jurisdiction (under the ATC Act) over claims against Shell for conduct allegedly occuring outside the US. In a future post I'll reflect on litigation strategies in the context of wider efforts to 'level the playing field' for responsible business activities by firms -- whether from the 'West' or 'emerging markets' -- in Africa.

Corporate dilemmas in Africa: geopolitics and reputational risk

Just as different firms and funds have varying appetites for risk in Africa, so not all firms are equally exposed to various types of risk. This is particularly true of reputational risk.

This short post reflects on how most sources of reputational risk in Africa will probably continue to come not from mere presence in a country -- even one that itself has a poor reputation -- but from the traditional sources of reputational risk such as supply chain (labour relations, community or environmental impact, or quality control) incidents.

When it comes to the significance of reputation (and so the importance of its degree of vulnerability), so much depends on the sector, the nationality of the firm (Western firms are more vulnerable, generally speaking) and the extent to which a firm has a transnational footprint where things like consistency and contagion-perception can matter.

Thus foreign banks interested in Angola face different reputational risks to foreign beermakers; while often arbitrary distinctions arise (especially where the business and political elite are small and entwined), they can be relevant: investing in palm oil in Equatorial Guinea does not, on the face of it, raise the same lay person's response as investing in oil there.

Why write about this now? Last week saw Uhuru Kenyatta sworn-in as Kenya's new president following the March elections. Given that for now he still faces trial before the International Criminal Court (and given that Sudan's president, another ICC indictee, was initially to attend his inauguration), much of last week's media coverage turned on what the ICC dimension in Kenya means for Western governments' dilemma -- torn between (on one hand) not undermining the ICC and all it stands for, and (on the other hand) their interest in engaging with a duly-elected, not-convicted-of-anything leader of a major and strategic African partner state.

It is also a state with good investment and economic growth potential. I've not seen any accompanying questions about the appropriateness of investment dealings, by private firms, with a government led by an ICC indictee -- corporate diplomacy or foreign policy, if you will.

In my view there is not really any issue in the Kenya case: it is very hard indeed to see that any firm will (or in principle should) suffer reputational damage simply from maintaining or initiating such links now; the risks, if any, lie far more in particular relationships and actions that firms might take, than any broad-brush 'complicity-by-general-association-or-presence' risk. By contrast the latter risk -- whether fairly or not, and partly because Washington maintains some sanctions -- probably obtains in relation to a country like Sudan.

Yet the private sector inhabits a public world where its decisions and actions will impact the public interest -- and vice-versa. Thinking in terms of distinct public and private spheres is limiting even just in a narrow corporate operational sense: this is not to say that the state (on behalf of the public) has a legitimate interest in all private dealings. Instead for companies at least it means being conscious that a particular firm's actions can (often quite randomly or arbitrarily) become seen as illustrative of big political debates -- suddenly, hashtags appear linking one's business in the public mind with narratives of crimes against humanity; likewise, seemingly small issues and events can become seen as linked to much wider stories.

Hence -- for those firms with reputational exposure -- the links between attempts to respect and protect the public interest, and what the public will likely take an interest in.

Jo

ps - see the first April post on public trust in firms -- a key element of reputation; see also, for instance, this post on corporate engagement in 'pariah' states -- here.

pps - in the last post related to this topic (here) I referred to a talk on 'corporate foreign policy' that my colleague Dr Stephanie Hare gave for our firm at the Chicago Council on Global Affairs. Here is a link to a podcast of her talk.

Corporate Sustainability in Africa: below the State

Big multinational firms operating in Africa are finding host governments ever more proactive about seeking the private sector's help in improving the business climate -- and in helping government's political and policy challenges in meeting social and developmental goals.[*]

Business-government relations were one topic under discussion at the summit I attended last week in Cape Town, 'Growing Beyond Borders' (Strategic Growth Forum).

Discussion on the topic covered familiar issues, for instance, delineating the proper relative roles of governments and business in providing public goods and services like safety, healthcare and basic infrastructure (see previous posts on this Blog on 'business and government').

Yet what about relations below the national level, between foreign firms and provincial/state or municipal/local government authorities?

This relatively neglected topic did not come up at the Forum -- or at least the distinctions between different tiers of government did not. What important public policy (and related corporate strategy) issues arise when influential firms and sub-national governments engage one another -- what opportunities exist to promote public interests, what risks arise to private sector interests?

The fact that a large majority of corporate social investment / corporate responsibility strategies and spending are very local in nature and impact means that firms are, especially in the extractive sectors, often very familiar with sub-national government relations. Moreover, it is only natural that where the subject is nationally-applicable fiscal or other regulatory measures, the focus will instead be on business dialogue with the national government.

But in general I think it is fair to say that debate on business-government relations in Africa focusses on national goverments in a way that neglects an important trend: in the same way that investment into Africa often focusses on cities rather than countries (many firms have a Lagos city/state strategy not a Nigeria-wide one, for instance), city and provincial/state leaders in Africa appear to be becoming more proactive about directly engaging externally on everything from investment self-promotion to climate change mitigation.

If so, this trend holds the promise of finding, beneath the national-level, a wider set of people and institutions among which business-government dialogue and cooperation can occur on alleviating social or environmental or governance bottlenecks or backlogs, on giving substance to rhetoric about pro-sustainability public-private development partnerships, and so on. For example, corporate contributions on air or water pollution mitigation, youth job-creation, or greener supply-chains may be too political or daunting when approached at a national level, but responsible business might find more to talk about and do (and show measurable progress on) with a mayor's office.

This 'emerging' trend of greater foreign investor engagement with sub-national African public authorities may not be new (much pre-colonial trade and diplomacy developed between city-states that pre-dated present-day countries; city officials have a taste of 'foreign policy' roles when they bid to host major world sporting events). Nor of course are more recent trends of sub-national government pro-activity on foreign policy or global issues limited to Africa -- witness various US states moving ahead with their own carbon emissions-related legislation whatever Washington's position in multilateral forums; my friend Jabin Jacob, for example, is an expert on sub-national investment and other relations between Chinese provinces and Indian states; Australian state governments have fairly developed 'foreign investor relations' capacities.

In the African context, Nikia Clarke (here in Oxford) has recently pointed out the growing direct bilateral relations between Chinese cities and provinces with African ones, irrespective of national-level interactions. Mineral-rich provinces of large states with weak central governments -- like Congo-Kinshasa -- are increasingly confident in making direct overtures to foreign investment. One is just as likely, at an African investment conference, to find a Nigerian state governor as one is to meet a federal investment promotion official. Often, there is considerable scope for such city or state officials to discuss where the private sector can help alleviate local social or developmental problems, furthering the local public interest while cementing a firms' local 'social license' to operate, or its ease of operations.

Having briefly mentioned above the promising dimensions of such trends and relationships in terms of advancing sustainability concerns, two caveats spring to mind.

First is that while we should welcome plurality of 'bottom-up' inputs and initiatives by all levels of sub-national government on globally-shared sustainability challenges, and the private sector's role in these conversations and activities, these are ultimately no substitute for the sort of multilateral or bilateral movement that follows dialogue between sovereign states. Second is that in the African context, relations between central and provincial or city authorities will often be highly political, some even fraught with a history of secessionism: corporate engagement with sub-national governments to address particular localised issues or build local regulatory capacity might, executed poorly, create risks of adverse reaction from central government.

Jo

* Ps -- the pattern of greater business-government dialogue relates to countries other than South Africa, where relations between big business and the ANC-led Alliance have particular distinguishing features: for previous posts see for example here (balancing too much and too little business access to officials) and here (building trust) and here (private sector role in development).

'Corporate foreign policy': phones and filters, norms and no-go's

Corporate or investor reputation is not only based on values but on how consistently they are applied.

In a networked, info-sharing world, this creates potential reputational (and operational) vulnerabilities for firms or financiers involved or interested across countries with varying democratic, human rights and governance/transparency standards.

The notion of multinational firms needing a 'corporate foreign policy' is strongly tied to the recognition that such firms may need a coherent and clear principled position on acute or chronic serious socio-political issues arising in particular countries of operation.

Beneath modern corporate responsibility frameworks is the tendency towards a normative assumption (or at least aspiration) that a firm's policies on social and governance issues are universal -- applicable wherever the firm operates; yet implicit in operating (and, especially, competing) across jurisdictions is the sense of a need for flexibility especially where engaging in situations where political space is more constrained and austere. (EU human rights law in other contexts refers to a 'margin of appreciation' afforded, there to states, in their local interpretation and application of norms).

It is easy to see that compromises reached in some places may expose a firm to allegations, back home, of laxity in upholding human rights or other standards -- while attempts (or perceived attempts) to promote certain values in a host country may expose a firm to awkward government relations. In hard cases, and faced with competitors for whom reputational risk is far less relevant, firms will think hard before risking their license to operate for the sake of bolstering their (global or local) 'social' license to operate -- even if in the much longer term it is conceivable that a principled stance on a country or issue may improve their strategic business position.

Three coming events prompt this re-visit to the 'corporate foreign policy' (CFP) question. First -- this week -- is a talk on the topic at the Chicago Council on Global Affairs by my colleague Dr Stephanie Hare. Second -- next month -- is another talk here in the UK. (The former promises to deal with issues such as the consistency question; the invitation for the latter seems to explain CFP as little more than 'do try harder to understand the nuances of your host country'...)

The third event -- which ties these CFP thoughts to the sub-Saharan African settings that I follow -- is one I am attending, this week's Ernst & Young 'Growing Beyond Borders' Strategic Growth Forum, in South Africa.

Two large African countries that I do not expect attendees to ask or talk about much are Sudan and Ethiopia. This is despite their objective importance and the attention such African investment and business talks give to demographic factors as elements of frontier market attractiveness (Ethiopia has over 80 million people, Sudan over 30 million; Addis Ababa and the Khartoum-Omdurman conurbation are major African cities). At least among Western investors, there is little interest in either country in the consumer-facing sectors -- such as telecommunications -- so captivating investors elsewhere on the continent. Despite both having governments that strongly constrain free political activity, the two are not analogous -- Sudan is still subject to US economic sanctions, whereas Ethiopia is a key Western strategic ally in the region and something of a donor 'darling'. The countries' respective images are such that the CFP (reputational) implications of investing in Ethiopia are considerably less than those relating to Sudan.

Ethiopia's mobile phone and internet penetration rate is well below the east African average -- like other strategic sectors, activity is restricted to certain local elites and entities, while its authorities actively monitor and filter local telecomms and internet usage. As Dr Hare has noted, CFP concerns are often at their sharpest around cases where global firms with universalist brand aspirations are prevailed upon by less democratic authorities to restrict user services, for example in cases of domestic political (pro-democracy) crisis. Ethiopia is unlikely rapidly to liberalise (in a commercial sense) its telecomms sector; but should it begin to embark -- in the aftermath of the death of long-standing ruler Meles Zenawi -- on a new era of opening up some sectors of its tightly-controlled economy to foreign firms, new entrants will need to ask whether the degree of continued state interest in users' content, or the political stance of local partners, are compatible with any universalist aspirations or commitments that the foreign firm may have.

Firms have to do their own filtering if they are to decide their value stance, reputational or regulatory exposure, and how pragmatic they will be in trading-off certain principles and preferences.

The global and sector-specific normative framework is still evolving for responsible business conduct in cases of value-challenging political and economic governance dilemmas. Under varying (but arguably growing) degrees of public or regulatory scrutiny, firms and funds are deciding their own filter-gauge and normative threshold for what constitutes an acceptable set of choices and actions when confronted by value-laden dilemmas about their operations.

As I've argued before, the 'CFP' label can mask that these issues are not entirely new (think, for instance, of apartheid divestment campaigns and decisions). They are nevertheless one more issue on the risk dashboard when contemplating country entry, expansion or exit; where a country's political space is opening up, holding the promise of first-mover or hope-signaller advantage, it is one issue on the 'opportunities' dashboard corresponding to risk calculations.

Jo

See the most recent post on related issues (corporations and principled engagement in 'pariah' states, with links to other previous posts on CFP and on corporate 'nationalism') -- here.

CFP is distinguishable from -- but closely related to -- topics such as the use or attempted use states make of activity abroad by their corporate nationals for official foreign policy purposes and to defend or promote the national interest (private or state-owned corporations as witting or unwitting agents of state foreign policy).

Corporate diplomacy: engagement in 'pariah' states

2012 saw a somewhat unprecedented level of Western diplomatic engagement in Myanmar / Burma. Accompanying this has been a surge of commercial interest in the opportunities apparent in the country's re-opening.

2013 then began with Google's chairman announcing plans to visit a far more diplomatically isolated country, North Korea (despite the US state department's discomfort).

2013 is also the year that I hope will finally see publication of a chapter I co-wrote, albeit on aid not investment, for a book on Principled Engagment in 'Pariah' States (Kinley and Pedersen, eds.).*

The Google-North Korea visit was not necessarily undertaken in a corporate 'pre-entry' capacity, but raises interesting questions not just about diplomatic strategies for engaging with isolated regimes, but for the role of corporate country entry or outreach in such 're-opening' processes or attempts -- whether by state diplomatic design or independent initiative.**

In the continent I cover, Western business activity in a number of countries is constrained by, among other things, the real or perceived reputational or regulatory risks of seeking to enter where US or other sanctions apply in some form or another.

Sudan, Zimbabwe, Eritrea and Madagascar all (I think that's all) to some extent can be categorised as sanctioned and subject to varying degrees of Western diplomatic isolation. The late apartheid era in South Africa, or business activity in Rhodesia after 1965 are obvious African examples of controversial corporate engagement continuing. If, as some think, this year brings the prospect of transformative political change in Zimbabwe, the question could arise inside firm X or Y of whether a more proactive country engagement strategy ought to have been undertaken or planned in anticipation of a more relaxed or less controversial and complex environment for business.

Reach out or hold back?

Such situations raise peculiar issues for firms and for policymakers, ones where private initiative and public interest overlap closely.

Corporate strategies in such situations must balance potential 'first mover' advantage with the potential to miscalculate the extent of transformative change, leading to serious commercial losses or sustained pro-democracy activist campaigning (the latter on the basis that the engagement with a 'reforming' regime lacks a sufficiently principled basis). Moreover, if the firm's move is considerably out of sync with its home state there is also the possibility of limited home country diplomatic support in navigating complex local politics in the receiving country.

Firms like Google whose products or services so directly involve questions of political values and human rights such as freedom of expression have a clear commercial and reputational imperative to develop a clear, consistent and communicable 'foreign policy', for example in situations where more repressive governments seek to very narrowly constrain the company's operations. Such strategic issues are not limited to 'pariah' states, but the extra public attention and diplomatic sensitivities involved in such settings raise the stakes.

This blog post cops out now -- I don't purport to offer a 'solution'.

At the level of state diplomacy, my own instinct tends to lie with principled engagement, given how counter-productive (and damaging to the ordinary citizen) isolation can be. The UN's 2011 'Ruggie' guidelines on business and human rights, among other things, give increasing normative guidance to firms in terms of what the 'principles' might be in 'principled engagement' by corporates in politically isolated states:

* In some situations, a US company (say) that is far more comfortable with country (re)-entry than the US State Department could have a role in contributing to political 'normalisation', and so lead the way...

* ... Yet diplomacy is an art, and there will remain many situations where firms would be well advised to follow their government's lead even if this feels excessively cautious and appears to handicap them relative to competitors from other states.

It will depend on the situation, and the company's exposure in particular to reputational risk: the private sector inhabits a public world. In high-profile 'pariah' country entries, it can quickly become a very publicised world indeed.

Happy 2013!

Jo

Related previous posts include those on 'corporate foreign policy' (here) and on 'business and nationalism: foreign policy attribution' (here).

Here is a link to a paper related to the 'Principled Engagement' project / book.

If you're interested, Jabin's blog (China in India) is here.

* The idea that Zimbabwe, for instance, is a 'pariah' state is one that I find somewhat problematic, not least because such mindsets / categories obscure avenues for principled engagement; it is debateable whether targetted Western sanctions there are having their intended effects, while I am told there are many in Washington who see US sanctions on Sudan as obsolete and retarding a whole generation's development.

** There's a lot to be said about avoiding seeing such settings as vacuums free of transnational business activity or penetration and simply lying waiting for 'entry'. Also, 're-entry' overlooks that many Western banks and firms have never left a place like Zimbabwe throughout its 'isolation', and there's by no means any particular principled reason why they should have done so.

Business and nationalism: foreign policy attribution

Are there potential African analogies to the way that recent anti-Japanese nationalism in China included calls in China for boycotts of Japanese products?

The issue illustrates the potential rapid (and rabid) emergence of a nexus between high geopolitics and the ostensibly apolitical sphere of private firms and consumers:

* So it is that contested Beijing-Tokyo (and Taipei) claims to the Senkaku ('Diaoyu') Islands have led recently to campaigns in China to boycott Japanese electronics, cars and other goods, and indeed to violence targetting such. Moreover, iPhone mapmakers are now more conscious that hosting a map stating one status or another may be taken as a corporate endorsement of a state position.

* So too French winemakers over twenty years ago suddenly found their produce boycotted by Australasians not because of anything relating to how it was made (or tasted) but -- as my colleague Stephanie Hare reminded us -- as a mark of protest against the French government's persistence with South Pacific nuclear tests.

But this blog focusses on Africa. What scope exists for acute periods of high nationalist (or racial) sentiment, stirred up by popular reactions to foreign policy-level / state-to-state issues, to manifest as boycotts or violence against firms and individuals -- not because of any conduct on their part, but only by virtue of their association with the country whose foreign policy actions or positions are seen locally as problematic?

[We can put aside South Africa's recent government regulation compelling vendors to label goods made in Israeli settlements beyond the 1948 borders as made in the 'occupied Palestinian territories'. That is a different case, one of state action, founded in a classic foreign policy position dispute, affecting private commercial conduct.]

Bigger transnational firms may be advised to develop a 'corporate foreign policy' to anticipate or respond, among other things, to cases where they face public pressure in a host state as a result of being associated, in local minds, with the geopolitics of their home state.

South African retail and telecoms firms doing strong business in Nigeria this year experienced a brief period of turbulence as Nigerians responded to a diplomatic dispute between the two countries over visa issues.

But I think that in the main in Africa, future boycotts or violence that we may see targetting foreign firms or businesspeople are more likely to be relatively unorganised (and so possibly more dangerous) and based on local grievances about perceived exploitation or comparative success, than about indignation following the attribution, in effect, of their countries' foreign policy.

The saying that 'all politics is local' is particularly apposite in this sense. In most conceivable African scenarios, a firm or its brands or staff are far more likely to be exposed on the basis of local social, environmental or governance performance than local anger at the Great Games of its home state.

[By 'foreign' I here mean non-African: there is no shortage of intra-African xenophobia, for example against Congolese smalltraders in north-eastern Angola, Somali stallkeepers in South Africa or Burkinabe migrants in Ivory Coast.]

Foreign firms and businesspeople are often vulnerable to being political scapegoats -- especially as economic times get tougher -- but in general, and until the link is explicitly made in some way in some context, it is embassies rather than businesses that will feel the force of any local protest at some state-to-state insult or insinuation.

Jo

Ps - This post ties in with last week's (on dilemmas for CEOs speaking out on politicised policy issues).

It also relates to a recent one on corporate diplomacy in Africa -- briefly discussing the potential, across the continent, for locals to attribute many of the actions of individuals or firms to their government of origin. The example there (Chinese nationals and attribution to Beijing) might create image management issues for the government, although it is also arguable that local perceptions of Beijing's influence might restrain groups from violent acts against Chinese nationals and stimulate greater local government protection. In this sense, being a firm or businessperson attributed to a major power may provide both a shield and a source of vulnerability from organised or spontaneous violence or boycott.

[Speaking of 'attribution', I'd like to acknowledge the recent discussions with work colleagues on which this post has partly drawn].

Public policy, private leadership and social media

Does leadership always involve decisive overt action? When does good leadership by a firm on a issue of significant public interest suggest one stands back rather than steps forward?

We have just ended our annual 'Global Horizons' conference, where one of the most interesting panels looked at leadership -- and the communication dimensions of this -- in a 'wired world'.

Debate included not just social media as a tool of (and something impacting) states' foreign policy, but also the policy of social media firms in dealing with states using their platforms in this way, with censorship / self-censorship on content that affects public policy issues like security or human rights, or firms' policies in designing applications intended to promote popular participation in governance and accountability.

(The recent reaction to a Youtube video deemed offensive to Islam has of course given further impetus to these debates, discussed previously -- here).

The panel at our conference spoke about the risks and limitations of social media platforms, but tended largely to adopt the view that leaders (from whatever sector) who did not use Twitter and other tools risked losing the initiative. Nature abhors a vacuum, went this argument, and if one doesn't fill it with one's position, others could distort or swamp that position.

However, it strikes me that there will be cases where leadership by a private sector executive (or group of them) on an issue that has spiked in public importance might sometimes involve saying less, not more.

That is, contrary to the idea that leaders should 'not just stand there, but do something!', might there not be circumstances where the better position is 'don't just do something, stand there'...?

What do I mean?

I was running the Africa discussion group where some participants were interested in discussing South Africa's recent mining sector unrest. One issue that corporate leaders continue to grapple with in that country is how far and when to raise their head (singly or as an industry) 'above the parapet' on hotly-debated, highly-politicised issues.

I don't purport to have any particular insight or experience on the tricky question of how CEOs of big mining firms should show leadership on issues that appear to rise above labour relations and become part of national debates about livelihoods, access to essential services, free expression and so on. Business leaders played a central role in facilitating government-ANC negotiations that led to the end of apartheid and democratic elections -- how's that for 'private sector, public world' -- but this was principally a behind-the-scenes role. The mining (and wider business community) in South Africa has been internally divided on the utility of entering public debates on issues such as proposed mines nationalisation in that country.

There is a role for business leadership on public policy issues in Africa, especially (as my last post intimated) where governments are unable or unwilling to address, for example, social issues that perpetuate injustice (and might potentially disrupt business activity). Indeed, I can imagine writing many a post decrying the lack of private sector leadership on some issues. Moreover, CEOs are often entitled and probably well advised to put their side of a story that has entered the public domain in an acute or serious way.

However, I can envisage many circumstances where 'leadership' by corporate actors involves saying less, not more, on an ongoing issue.

The main issue in corporate leaders speaking out on public debates -- whether through loudhailer or Twitter -- will be credibility.

If that is so, most of the leadership that firms could show might amount to deeds, not words. So while big business in African settings may need to ensure its contributions and constraints are better appreciated in the wider community, I do not think this necessarily means an over-active media profile on hot, hard case debates. Often it may be more appropriate -- and safer for firms -- that officials lead on politicised policy issues.

I think of these lines in Rudyard Kipling's great poem on leadership, 'If':

'If you can keep your head when all about you
Are losing theirs and blaming it on you ...

... And yet don't look too good, nor talk too wise...'

Talking too wise can have difficult consequences for firms grappling public policy dilemmas (some social media platforms may not be amenable to wise talk ... ).

In the regions I cover, credibility will remain at a premium in the content of CEO communications -- whatever their medium -- on issues at the intersection of business, politics and society.

Jo

Corporate diplomacy in Africa: austerity and downturn

The effects of the current era of budget austerity on the capacity of state foreign diplomatic services raises interesting questions and dilemmas about corporate diplomacy.

I here mean firms, mainly in the extractive industries, engaging directly with their host governments on major public policy, reform and governance issues -- traditionally the remit of bilateral diplomacy or aid bodies -- and acting (or being perceived) as 'ambassadors' for their home country.*

The issues are ones both for public policymakers and for corporate strategists.

They are by no means new issues, and the idea (or rather fact) of major corporations acting to some extent as foreign policy organs of their home state attracts controversy about the notion of 'private empire' or improper influence, and questions about the proper extent of private authority. It is a topic I covered extensively in doctoral work, but is also closer to the heart: I was born in a country (Zimbabwe) established by a private crown-chartered shareholder company in the late 19th century...

So while the issues are not new, two events in the last week in countries I follow prompted this post:

* Zambia Local mineworkers caused the death of a Chinese supervisor during minimum wage disputes. If only in symbolic terms, this is a significant development in a country where the role of Chinese firms and businesspeople has created diplomatic difficulties for Beijing, with Zambia being seen as something of a 'test case' on the 'China in Africa' debate.

* The Sudans Last week too, news of the intended resumption of South Sudan's oil production (a key sticking point in tense relations with Sudan) came a day after Hillary Clinton's inaugural visit there.

The latter is interesting because while public diplomacy (Clinton, Thabo Mbeki and others) might appear to have broken the oil deadlock, it is equally plausible that this resulted also from pressure from firms invested or interested in the sector. Now in the Sudans these are principally Chinese firms, and distinguishing between public and private -- sometimes hard enough, historically, with major global energy firms -- is often difficult if not untenable in such cases.

(Angola's state-owned oil conglomerate Sonangol is a prime, emerging and African example of the seamless and unsurprising fusion of foreign policy with commercial aims).

However, the Zambia example involved a mine privately run by Chinese nationals. Beijing is conscious that many Africans will attribute the conduct of expatriate Chinese nationals to some grand design, whereas it can by no means be assumed that Beijing has interest in or influence or control over everything Chinese nationals do or dig up in Africa. Still, the mine incident shows how -- for better or worse -- private actors' conduct can affect public diplomatic relations.

Of course many former actual ambassadors and foreign service officials work in government relations for multinationals (part of the blur in this area, probably inevitable, and not necessarily problematic) -- but many corporate employees act de facto as ambassadors either by design or by locals attributing them that status.

For many Western countries, the issue arises sharply in light of the effects of current austerity regimes on the capacity of foreign services. My colleague Tom Wales last week published an interesting brief on how, as their global footprint has broadened, Canadian mining industry executives have increasingly been playing the role of de facto Canadian ambassadors in developing countries (eg technical and governance advice) even as austerity is shrinking Canada's formal presence in many of these countries.

Here one potential 'for better' upside to austerity's effects on public diplomatic capacity is that governments such as Canada's can harness the strengths, resources and influence of major firms in support of objectives from conflict prevention to building governance capacity in host developing countries.

Arguably, it makes sense for public policymakers to look for ways both to 'civilise' the conduct abroad of firms associated with the country, and to encourage firms to contribute to foreign policy objectives such as building local regulatory capacity in resource-rich poorer countries.

However, aside from the public policy risks involved in any such 'outsourcing' are the risks for firms: twin events involving fatalities in Guinea this week are revealing:

* In the north-east, locals protested in effect against the operations of a foreign-owned mine, saying it had attracted criminality to the area.
* In the south-east, locals protested in effect in favour of a foreign-owned mine, albeit aggrieved that its opening date had been postponed and hoped-for jobs not realised.

As we probably now enter a downturn in global commodities demand, the latter situation is more likely to be common and may test firms' diplomatic capacities, especially where they lack formal diplomatic assistance, just as provision of social services by firms can create expectations that prove difficult to manage.

Jo

* I would partly distinguish 'corporate diplomacy' from 'corporate foreign policy' -- though clearly related: see previous post here.

I also do not mean 'private diplomacy' (ripe for its own blog post, the now-prevalent role of private individuals and outfits, such as the Centre for Humanitarian Dialogue in Geneva, in attempting to supplement governments, the UN and other bodies by engaging in conflict prevention / resolution mediation and influence, and other forms of so-called third track diplomacy. For one slightly out of date mapping of these bodies, see here).

PS - Days after this post my good friend Dr Jabin Jacob wrote this on whether Indian and Chinese oil firms might lead (and moderate) the way and ways of their governments: here.

'Corporate foreign policy'

What do cranes, social media firms, lethal injection formulas, foreign investment in mobile phone companies and Coca-Cola factories have in common?

Last month marked the symbolic anniversary of the ‘Arab Spring’. If the geopolitical events of 2011 have shown global firms and brands anything, it may be the significance of having a coherent principled position explaining where they stand when bigger issues -- democracy, human rights, human security, and the rule of law -- are acutely at stake.

That is, such firms increasingly need a ‘corporate foreign policy’: not just a strategy for operating in various countries -- aside from contingency plans, firms always need to negotiate and sometimes compromise with host governments -- but a considered and clearly communicable position on where they stand should great controversy arise, or good conscience lay some claim.

These dilemmas are particularly acute in countries with weaker democratic credentials, but many firms respond in an ad hoc fashion, risking either their reputation with customers or their relations with governments, or both. This is an interesting and evolving aspect of the work we’re developing, and the subject of an unpublished paper by Prof Tim Fort and my colleague Dr Stephanie Hare. They focus on the choices faced by internet and social media companies -- whose services are used by activist, opposition and civil society groups as a platform for protest and publicity -- when governments seek to close down such virtual (and often virtuous) public spaces:

• They document how Google coded a ‘speak to tweet’ application for Twitter, a notable part of the social protests, while Facebook carried postings of text and images from protesters in Cairo’s Tahrir Square.
• They contrast Vodafone and France Telecom, who complied with government requests to shut down their network, and later re-opened the network, allowing the government to send mass text messages to customers of these networks, attempting (unsuccessfully) to counter protest sentiment.

Now internet and mobile phone providers face different constraints, but in situations like Tahrir Square both find it difficult to argue that they are merely businesses and not -- as Michael Skapinker wrote of the unpublished paper -- somehow players in the political process (Financial Times October 27, 2011; he also notes Nokia Siemen’s dilemma in Iran, where it tried to respond to government using its network to gather information on activists; Google’s experience in China is another case).

CARS AND CRANES

I’ve been meaning to blog on this for months...:

·         Then yesterday came a report that General Motors has settled a civil suit brought in the US as part of the long-running ‘apartheid reparations’ set of cases by South African claimants. These groups allege that major companies which did not sever commercial relations with the apartheid regime ought to be considered liable for human rights abuses committed by the South African government, including on the basis that their operations helped the state self-finance.

·         This week too the US Supreme Court has been hearing arguments in the Ogoniland (Nigeria) cases of whether a corporation (there, Shell) can be held liable for human rights violations under a US statute giving jurisdiction in US courts for civil wrongs committed in violation of international law -- such as torture -- wherever these occur.

The jurisprudence on these issues is vast and complex, and they're covered exhaustively elsewhere. For many firms, the practical prospective question is how to avoid incurring liability at all -- whether in some future court, or in the court of general public opinion, where corporate reputations are made and lost.

Recently, US states that apply the death penalty turned to Danish chemicals firm Lundbeck AS for supplies of sodium pentobarbital and other chemicals used in lethal injections after the British government barred its firms exporting chemicals for such use. Lundbeck requested US authorities not to use its products thus, but argued that it was impractical for it to boycott certain markets (trace how its chemicals are used). The point here is mainly that Lundbeck staff probably had no sense that they would suddenly be thrust in the spotlight, or a thorough policy position on the death penalty.

A more recent prompt for finally penning this blog also concerns the death penalty. It was seeing a photo in the Sunday Times of February 26 showing a public hanging in Iran: a man dangling from a commercial crane arm. In the context of concerns about the Iranian penal system, the practice of using cranes for state executions there has forced foreign crane-building firms to reconsider Iran as an export market.

SOUTH AFRICA TO SWAZILAND

The issue has already arisen twice this year in the region I cover most closely, southern Africa:

·         Among Coca-Cola’s largest bottling operations in Africa is its Swaziland one. When the firm ran a birthday message for King Mswati III -- the continent’s last absolute monarch -- exiled Swazi democracy activists criticised its perceived explicit support for the king during ongoing suppression of free political activity in Swaziland.

·         South Africa’s continentally-active mobile phone firm MTN is now in the spotlight on allegations that in order to win a tender for running a state-owned phone network in Iran, it sought to influence the South African state’s foreign policy position on Iran in the UN Security Council and elsewhere. A defeated Turkish bidding firm made the allegation that MTN asked Pretoria to ensure a relatively soft stance was taken on nuclear and other issues.

Both MTN and Coca-Cola are no strangers to the challenges of operating in a wide range of places with all manner of host governments. MTN vigorously denies any wrongdoing, and Coke’s Swazi operations support livelihoods for many locals at a time of particular economic hardship in the kingdom; operating there requires cordial relations with the royal household (and can conceivably enable a moderating influence on regime conduct). The cases don’t so much say anything about the particular firms as they do about the significance of firms ensuring they accept (and can readily and persuasively explain) the reputational and other risks they run by choosing to operate wherever they do. Things can change quickly in hitherto peaceful investment climates.

POLICYMAKERS?

There is a somewhat troubling dimension -- a theme mentioned in my first ever blog -- to the ‘corporate foreign policy’ idea: isn’t part of the concern that the private sector already has too much influence on government policy in ways that the public does not always see or understand? On a strict view, elected governments make ‘policy’ -- corporations have business strategies. Also, giving ‘corporate foreign policy’ a name should not obscure that many global firms have wrestled with these issues for decades (as indeed the apartheid divestment campaigns in the 1980s showed).

But what we’re talking about here is globally-operating firms (especially brand-sensitive ones) thinking strategically about what their position is, and should be, on controversial positions taken by foreign governments in countries in which they operate; many of these will not be democratic countries in the above pure policymaking sense. And while these dilemmas are not new ones for companies, the instant / social / mobile media age increases the fallout radius and urgency of corporate ‘foreign policy’ foul-ups.

Global brands are operating in ‘the worthiness age’ (see Bassi et al’s Good Company, BK, 2011). It is one reason for setting up this blog; so while it is important to monitor inappropriate blurring of corporate and governmental foreign policy, the more firms that adopt a considered view of their operations and attempt worthy outcomes, the better. And it feels good to advise those firms open to asking these questions.

Jo Ford

Ps – I note that a blog called ‘corporate foreign policy’ exists, although I don’t necessarily agree with all its views.