Tuesday, September 05, 2006

Goliath, Meet David...

Andrew Hoffman, the Holcim Professor of Sustainable Enterprise at the University of Michigan, has a fascinating op-ed piece up at Grist today on the lessons that all companies can learn from Michigan's recent suspension of the purchase of Coca-Cola products (now lifted). As Hoffman notes, this act by the university was unique not only because it hinged on environmental and labor issues, but also was spurred by the action of a very small activist organization:
First, this decision was not due to any problems with product or pricing. Instead, the university cut the contract because of concerns over environmental issues in India and labor issues in Colombia. Second, and more amazingly, the decision was prompted by one man and the small nonprofit he runs out of his home in Southern California. Amit Srivastava and his India Resource Center have mobilized students on the Ann Arbor campus and elsewhere to petition their administrations to ban Coke from their campuses, and they are succeeding. Third and finally, this unusual form of pressure is leading the company to do something it would never have previously agreed to: open its overseas facilities to independent, transparent, third-party environmental and labor audits.

While the contract has been temporarily reinstated, the future of Coke's relationship with the university rests on the results of those audits. All eyes are on the outcome of this process, as it sets a precedent for other vendors with the university -- and other universities across the country.
Hoffman argues that Coke's giving in to the pressure by student activists and the university may turn out to be a harbinger of things to come, as corporate responsibility and sustainability are no longer just feel-good concepts: rather, they're critical to the bottom line as corporations must navigate new expectations for doing business by the rules:
The fact is, sustainable development is rooted in business strategy. Even Milton Friedman, the oft-cited defender of self-interested capitalism, wrote much more than the overused argument that "the social responsibility of business is to increase its profits." He also wrote, "There is one and only one social responsibility of business: to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game." Sustainability is merely another way of saying that the rules of the game are changing.
Ultimately, Hoffman argues that the large corporations that acted often with impunity in previous centuries now have to deal with something akin to Thomas Friedman's "flat earth": individuals have a lot more power to make their voices heard through the megaphone of information technology. The brick wall that they could once throw up is crumbling, and many activists stand ready to take corporate giants to task on irresponsible behavior, and can do so with much more force. Without the ability to exert pressure on a few media outlets, the only path that a corporation can take to insure stock values remain high is that of social and environmental responsibility.

Coke's example is a good one; one also need only think of Lee Scott's admission to Jeffrey Hollender that trying to ride out criticism by activists only gave those critics more time to refine their message. Of course, that puts a lot of responsibility on those of us pushing for corporate social responsibility -- we have to get our facts straight and present them that way. If we do that, though, we may find that our little sling has a lot more force behind it than we imagined.

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