How activism pushes companies to be political
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Have you ever wondered why some companies seem more politically engaged than others? When activists shine a spotlight on an industry for alleged links to social or environmental exploitation, most companies seek to remain in the shadows, fearful of unwanted publicity. But there are often one or two that respond proactively, working with activists to hammer out a solution.Take the global fashion industry, whose largest brands have been linked to garments produced in “sweatshops”, or jewellery made with “blood diamonds” and “dirty gold”. Sportswear giant Nike eventually responded positively to accusers who associated its products with worker exploitation, albeit with mixed results. As a central focus of the campaign, perhaps Nike’s response – to attempt to improve working practices abroad – was somewhat foreseeable. But many of its competitors, who were also targeted, lagged well behind. Likewise, there were varied responses from jewellery retailers to the issue of “dirty gold”, when the metal is mined in unethical and environmentally damaging conditions. Tiffany & Co. is probably the best example of leadership. The company was involved in the movement in the late 1990s to eradicate blood diamonds from global supply chains, and subsequently worked to ensure that the gold it uses is responsibly sourced (even before the campaign to tackle dirty gold was launched in 2004). Compare this to the slow and sometimes belligerent response from many of Tiffany’s competitors, who faced similar reputational risk. After a sluggish start, other major jewellery companies eventually followed Tiffany’s lead – and the mining industry has begun to take notice. The leadership of firms like Tiffany proved to be an important catalyst – and demonstrated how they got in front of activism. In my book, Dirty Gold: How Activism Transformed the Jewelry Industry, I set out to explore why some companies lead the industry response to activists, the different ways they do so, and the impacts of their leadership.
Expanding political opportunitiesManagers cannot simply spend their firm’s resources on political issues – they are constrained by market forces and a fiduciary responsibility to shareholders. They need a business case to back such expenditure. When activists target these companies, they offer just such a business case. Corporate executives do not always need to respond, as activists are rarely powerful enough to force companies to do their bidding. But activists can at least create an opportunity for these executives to act politically. So why do some companies lead while others simply follow (or do nothing at all)? By studying the responses of gold jewellery retailers to the No Dirty Gold campaign, I found that a history of interaction with activists (even on different issues) best explains why some firms come to lead the private sector’s response. When campaigns demand that a company change its practices, corporate executives tend to weigh up the costs and benefits of complying. They may estimate the risk they face to their brand image against the benefits of mitigating this risk and improving this image. Costs include shifting and monitoring their supply chains. Benefits may include accessing new markets and enhancing the marketability of their brand. The ways in which they engage with activists will also be influenced by the corporate culture of the company. Is it a company that engages with political issues? A company that prides itself on its attitude to sustainability?
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