Social Activism on Responsibility – Is your Company at Risk?

As part of CRF’s research for our upcoming Masterclass on Responsible Business, we asked HR and Corporate Responsibility professionals about their perception of the drivers of responsibility in their organisation.

Perhaps surprisingly, given concern about it in the popular and business presses, we found that ‘responding to activist pressure’ was not a high-priority driver of responsibility for the organisations in our sample.

Yet for some organisations, it clearly should be. As part of our research, we took a close look at the business case for responsibility. One of our conclusions is that an integrated approach to responsibility makes the most sense for those large, highly visible, global companies that are at risk of being (or already have been) targeted by social activists. Their brand recognition and global reach make such organisations, de facto, vulnerable to having their businesses practices under the microscope. In fact, the size of the organisation might help explain why responding to activism was not a high priority for respondents to our survey (most of whom represented organisations with less than 5,000 employees).

But recent research from the Kellogg School of Management at Northwestern University introduces an interesting nuance. The research describes a paradox in which “once social movement activists are aware of a company’s claims to decency and moral excellence, they actually become more critical of its practices”. At the same time, “less prestigious corporations with a middling record in a range of areas—sustainability, the environment, human rights—are often spared”.

Rather than being discouraged by this finding, Kellogg suggests that businesses distinguish between primary stakeholders (investors, employees, creditors) and secondary stakeholders (consumers, NGOs, religious groups, community activists), and understand how to respond to each. Kellogg’s research reveals that the activities of neither group actually impact a company’s financial performance, but “the activities of primary stakeholders can serve to increase a company’s perceived environmental risk, which has a negative effect on financial performance”. This is because primary stakeholders have more credibility with risk managers than secondary stakeholders, who are perceived as fringe outsiders with little knowledge of the company’s inner workings. Kellogg notes that “our research suggests that investors may care less about a company’s actual environmental performance and more about its perceived environmental risk”.

Kellogg thus advises organisations to respond first and foremost to the concerns of primary stakeholders – but this doesn’t mean writing secondary stakeholders off. Social activists ultimately want to be heard, so opening communication channels can be very beneficial for managing relationships with them. These activists are often also very knowledgeable about the issue(s) that concern them, and smart organisations will harness that knowledge to design better policies and gain credibility.

For a deeper dive into the whys and hows of Responsible Business, join CRF at our upcoming Masterclass ‘Responsible Business – How Can HR Drive the Agenda?’, where you will also receive a copy of our full research report.

(To find out more about this programme and to register your attendance, please contact Rachel Flax at rachel@crforum.co.uk).

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