The Political Bottom Line

Oil companies were also in the spotlight in 2005 for lobbying on climate change. Exxon Mobil, for example, was criticized for influencing US energy policy in ways that undermine action of carbon emissions.166 Corporate influence over political processes is a key concern of critics of globalization, and has featured in previous annual reviews. The scale of lobbying is significant. In 2004 alone, the collective invoices of Washington lobbyists were likely to have exceeded $3 billion. In Europe an estimated 15,000 lobbyists represent a 60-90 million euro industry, but no comprehensive figures are available as disclosure only takes place on a voluntary basis.167 The Alliance for Lobbying Transparency and Ethics Regulation-EU has argued that “The enormous influence of corporate lobbyists undermines democracy and all too frequently results in postponing, weakening or blocking urgently needed progress in EU social, environmental and consumer protections.”

In addition to corporate lobbying, corporate political contributions became a growing concern for investors during 2005. Responding to pressure from faith-based shareholders prior to their Annual General Meetings, pharmaceutical companies Johnson & Johnson and Schering-Plough agreed that they will account for and publicly disclose on their websites an annual list of corporate political contributions. This was a success for the Interfaith Center on Corporate Responsibility (ICCR), which coordinated a series of resolutions on this issue at Merck & Co., Abbott Laboratories, Wyeth, and Eli Lilly. Major funds backed the resolutions, including The New York State Common Retirement Fund, the US’s second-largest public pension fund. Margaret Weber of the Adrian Dominican Sisters, who filed primary filer with Schering-Plough explained that "companies need to be held accountable to their shareholders for their political activism”.168

Meanwhile, in the UK, the issue of corporate lobbying became central to corporate responsibility debate in the late summer. Friends of the Earth UK published a report in July that condemned the UK’s largest trade association, the Confederation of British Industry (CBI), for routinely exaggerating the costs of environmental regulation and falsely presenting its anti-regulatory position as if it has consensus support across the business community.169 The report, "Easy Listening", details instances such as CBI lobbying on the EU's Emissions Trading Scheme leading to the Government increasing the UK's greenhouse gas allocation by 20 million tonnes per year. The report challenges the CBI's negative view of regulation and says good legislation would drive innovation and investment.170 The environmental group’s Executive Director, Tony Juniper, said "there is little evidence to back up the CBI's mantra that regulation damages UK competitiveness. Time and again, they have exaggerated the costs of regulation and ignored the benefits. It's time the Government started to demand hard evidence from the CBI and started listening to other, more progressive business voices.” His argument was endorsed by the Chairman of the Environmental Industries Commission, representing almost 280 companies working in the environment sector, Adrian Wilkes. He said "scare-mongering by polluting industries regularly exaggerates the costs of pollution control, making the Government back-pedal on environmental protection.”171

Historically trade associations have pursued the collective interests of their members either by restricting government involvement in their member’s affairs, or encouraging intervention where it could create or protect markets. The sustainable development challenge requires a new paradigm from trade associations, where they pursue the longer-term strategic interests of their members by attending to the problems of free riders. Unfortunately the level of dialogue at an International Labour Organisation conference of employers organisations in Geneva in October did not suggest that this new paradigm is imminent, with negative implications for the ability of this world body to play an effective role on the corporate citizenship agenda.

Consequently, some companies have been breaking ranks with the reactionary positions of many trade associations, and lobbied the political process for socially beneficial innovations. Examples include Electrolux supporting producer responsibility on electrical goods, and Marks & Spencer's support for more legislation on the use of chemicals.172 Companies are also taking collective action where there is none from traditional trade associations. A group of large corporations including BAA, BP, Cisco Systems and HSBC have publicly petitioned governments for more action on climate change. In a letter arguing for more government leadership, they wrote that ‘the private sector and governments are caught in a “Catch 22” situation ... Governments tend to feel limited in their ability to introduce new policies for reducing emissions because they fear business resistance, while companies are unable to take their investments in low carbon solutions to scale because of lack of long-term policies.’173

In the September issue of the Journal of Business Strategy and the Environment, three key reasons were identified for this broadening of the corporate citizenship agenda to include political action. First, the growing criticism of the ability of voluntary corporate responsibility initiatives to deliver social and environmental benefits; second, the increasing awareness and targeting of corporate political activities by NGOs; and third, a realisation amongst certain corporate executives and financiers that, without changes to public policies, an individual company’s own voluntary responsibility may not deliver sufficient commercial returns and government may need to intervene to punish the laggards.174 That the voluntary corporate responsibility policy community in the UK is grappling with the implications of this shift of attention to the ‘political bottom line’ was illustrated by three new publications.

The Institute of Business Ethics published their analysis of the issue175 and then SustainAbility and WWF published results of their analysis of how 100 of the world’s largest companies report on their lobbying practices. In September the Institute of Social and Ethical Accountability followed up with a publication that suggested a framework for corporate management of this issue.176 Each of the reports discussed issues of the transparency of political influence, stakeholder consultation and communication in the development of political positions, the level of coherence between political influence and espoused business policies, and the content of the political influence in relation to wider social or environmental standards.

Transparency is a key focus for Sustainability and WWF. “Until this ‘black box’ of lobbying is comprehensively opened up, allowing the interface between private business and governments to be more transparent and better understood, trust — which has been flagging for many years — will remain elusive” (p. 11). However, Accountability was ambiguous on the importance of greater transparency. One of its arguments against transparency relates to practicality. It noted that “lobbying is by its very nature an informal process and thus often opaque” (p. 45). As c illustrated in a column on the topic, “the quiet word at a charity event, the brief conversation in the Wimbledon enclosure... will always take place and be unrecorded.”177 This is not, however, reason for not making more political influence transparent where possible to do so. Another argument put forward against transparency was that lobbyists do not want it: “many lobbyists argue that transparency and effectiveness in lobbying are sometimes incompatible, given the variable timescales, informality and inherent confidentiality of their profession,” they wrote (p. 45). Some might question the reasoning that because a profession does not want something it is not worth pursuing. The third reason was that transparency was not, in itself, enough. “Transparency and responsibility are not the same thing. For example, many people would disapprove of a company lobbying against restrictions on tobacco sales to minors, even if done openly and acceptably within a country’s legal framework” (p. 45). Oddly, this is exactly the reason why transparency is important, to allow such conflict to be surfaced, and hopefully, eventually resolved through various process of engagement. Nevertheless, Accountability did propose transparency as an important part of its framework for responsible lobbying.

WWF, Sustainability and Accountability highlighted the importance of engaging stakeholders on corporate lobbying positions. The aggregates company Lafarge, is one large corporation that engages stakeholders in public policy discussions.

Accountability, however, also expressed doubts that stakeholder consultation would prove effective in this area. “There is an inherent difficulty in defining a process standard which would make both corporate lobbyists and their clients happy, while at the same time assuaging the concerns of those with opposing viewpoints on substantive issues.” Given that Accountability’s main work in the last 10 years has been the proposition of best practice for stakeholder dialogue, through AA1000, this suggestion that a process standard involving transparency and consultation is not a sufficient solution is notable.

The Accountability report moves beyond these caveats to make the argument that the consistency between a company’s political activities and its expressed values is the most important issue. This responds to the fact that a key reputational risk for corporations arise from claims of hypocrisy. The easiest target for campaigners is where a company's stated values are directly contravened by the objectives and conduct of its lobbying. This consistency could not be judged by external audiences, including auditors, if there is no transparency. SustainAbility and WWF therefore propose a framework that integrates transparency and consistency. They rated companies from the provision of no information, through to basic, developing, systematic and integrated reporting. Over 51 companies achieved at least a basic rating and a handful of corporate reports, including BASF, BP, Chevron, Dow, Ford, General Motors, GlaxoSmithKline and HP provided more detailed information. However, the report still identified what was considered inconsistency between lobbying positions and corporate policies on sustainable development. For instance, “while Ford and General Motors may have high levels of transparency and a growing sophistication in reporting their lobbying activities, they still actively resist controls on greenhouse gas emissions via sponsorship of their industry trade group.”

Accountability noted that consistency is not a sufficient criterion for making lobbying ‘responsible’, as highlighted by their mention of tobacco lobbying, above. The involvement of the United Nations Global Compact in co-publishing the report meant that the role of international standards on human rights and the environment would have to be addressed. Therefore within the concept of consistency or coherence, Accountability includes consistency with ‘universal values’ as well as internal policies and codes. Similarly, implicit in the Sustainability/WWF position is that some objectives of corporate lobbying are better or worse – they favour lobbying which they consider supports governments protecting human rights and the environment. What neither report considered was who decides what is the best way of enacting a ‘universal value’, realising human rights, or protecting the environment. To return to the issue discussed at the beginning of this column, who should decide that financial sector liberalisation is the best way to increase the realisation of the universal values embodied in the convenant on economic, social and cultural rights? Or that water privatization is the best solution for watershed management?

This brings us to the question of why particular views are held, arguments are made, and whose views and arguments become the rules of society. These are questions of democratic governance. The meaning of democracy was not discussed in detail in any of the 3 reports, with only short comments that lobbying is one aspect of freedom of expression, and therefore central to democracy, but that some consider the growing volume of corporate lobbying is a threat to democracy. A key reason why corporate political activities are more contentious today is because of concerns about the abuse of power. Therefore, the challenge is how to ensure the democratic governance of markets for the public interest, and any serious discussion of corporate lobbying must engage with concepts and mechanisms of democracy.

It is a fundamental misunderstanding of democracy to defend corporate lobbying on the grounds of freedom of expression. Powerful organisations have freely expressed their opinions throughout the ages in systems of feudalism, monarchy, corporatism and fascism. Democracy is about self-governance, and therefore communication by the governed with the mechanisms of governance needs to be equitable. The problem is that organisations with large resources have more opportunity to influence; to craft their messages in ways that resonate, and communicate them at the right times, more often. This means that people with more resources have their interests more effectively put to government, which is a challenge to democratic governance. Arguments for lobbying to be more internally consistent will not address this problem. Instead, the challenge is to find ways of ensuring more diverse communications with government.

These reports illustrate how the epistemic community of corporate responsibility consultants and promoters usually looks at social challenges in a way that puts companies at the centre of the analysis, and in terms of what is possible to be done voluntarily by individual companies. Although it is useful to explore potential management tools or define what constitutes voluntary best practice, if this establishes a paradigm where the notion of democratic governance or the role of regulation are not appreciated, then the process can be counter-productive.

The ignoring, or active dismissing, of the role of regulation in addressing the challenge of corporate lobbying ignores the impacts of one the most significant regulatory moves on transparent government in the recent history of the UK. The Freedom of Information of Act came into force in 2004, and in the first six months, one in ten voluntary organisations surveyed reported that they had already used the Act. Ashridge Management School and the National Council of Voluntary Organisations (NCVO) reported that “more than 20,000 organisations have plans to make requests about government relationships with companies.178 The Act could therefore have an enormous impact on the political lobbying activities of companies.” The level of enquiries for information may mean that all communications will be routinely logged on the internet, leading to an unprecedented new level of transparency.

Currently the debate within the corporate responsibility community has not seriously questioned why we should look at responsible lobbying. There exists a confusion between identifying a financial argument as a mechanism for achieving a principled goal, and the financial argument being seen as the goal. Some have assumed that the reason to promote ‘responsible’ lobbying is to protect business from reputational damage. Others have listed a range of public policy issues they wish to see action on as the objective, such as moves on climate change or international trade negotiations. However, the goal of the responsible lobbying agenda needs to become broader: to be the promotion of democratic governance. This would involve the creation of more democratic patterns of lobbying rather than a few more strands of lobbying we like, and less of that which we don’t like, depending on who ‘we’ happen to be. This perspective suggests that most responsible forms of corporate lobbying would be that aimed at encouraging governments to adopt new regulations on the conduct of politicians and civil servants, to ensure that policy processes are less influenced by corporate lobbying, and instead to invest in mechanisms of active pluralism where the voices of the underrepresented and weaker groups in society are sought out. The Freedom of Information Act is one example.

Key to this notion of responsible lobbying is the use of one’s power to help empower others, and ultimately to address systemic power imbalances. Currently very few companies are actually lobbying for systemic changes. One example is the Cooperate Financial Services (CFS) in the UK. It has worked with the CORE campaign, a coalition of NGOs, to advocate mandatory ethical and environmental reporting in the UK, and has called for the establishment of key performance indicators as the basis of materiality questions in the UK’s Operating Financial Review (OFR). By supporting mechanisms that would provide various stakeholders with more rights to information and more requirements on managers to respect those stakeholders, CFS is addressing a systemic issue.

This is a small step towards addressing broader power imbalances through corporate lobbying. As Professors Kate Kearins and Jem Bendell contended in The Political Bottom Line, managers will need to “address the systemic problems of the global economy and the compromised independence of communities and governments. If this happens then broader issues may appear on the horizon of management —the independence of democratic processes and the media, and the negative social impacts of currency speculation, tax management and evasion.”179

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contents © Greenleaf Publishing, apart from the Introduction © jem bendell, 2006. site by waywardmedia.com