Turning Gadflies into Allie

February 4, 2008

Multinational companies are the driving force behind globalization, but they are also the source of many of its most painful consequences, including currency crises, cross-border pollution, and overfishing. These remain unsolved due to two kinds of failures. For one, such issues are, by their nature, beyond the scope of individual governments to avoid or resolve. For the other, transnational organizations, such as the World Bank, the International Monetary Fund, and the World Trade Organization, have proved unequal to the task.

Into the breach have leaped not-forprofit, nongovernmental organizations (NGOs) of concerned citizens.Realizing that news of cross-border problems can also cross borders, NGOs have sponsored angry protests in Seattle, Davos, Göteborg, and Genoa. While these are perhaps the best-publicized demonstrations of nongovernmental organizations’ activism, they are hardly the only ones. NGOs have seized on all forms of modern persuasion – from advertising to boycotts and even sabotage – in order to influence public sentiment toward global traders, manufacturers, and investors.The NGOs hope that they can effect policy changes in this way.

In many NGOs’ view, companies that incorporate offshore to avoid taxes or that send jobs overseas demonstrate a lack of allegiance to their country of origin. At the same time, by failing to bring with them the labor and human rights standards prevailing in the developed world, these companies appear unconcerned with the welfare of the countries where they do business. Yet their economic power frustrates official efforts to control their activities.

Such views can harden into a purely oppositional stance.Guy Taylor,a spokesperson for London-based Globalize Resistance, says his organization has as its aim a world free of corporations and that it would welcome their destruction. Yet while an anticorporate backlash continues to grow, many influential NGOs are increasingly composed of seriousminded, educated professionals who pursue a more moderate agenda. While NGOs may not forswear tough public campaigns against companies they think are acting selfishly or shortsightedly, lately they have become more willing to enter into negotiations with them.

NGOs like these have the skills, resources, insights, and depths of popular support that make it unwise for companies to confront them head-on. For example, in 2001, NGOs obliged Aventis to spend more than $500 million on buying back genetically modified Starlink corn from growers, ultimately leading it to spin off its agricultural business. NGOs have also virtually closed the EU market to the agricultural biotech industry. And in the face of a public relations disaster that nongovernmental organizations such as Doctors Without Borders and Oxfam International incited, GlaxoSmithKline,Merck, Bristol- Myers Squibb,Roche, and other pharmaceutical companies withdrew a lawsuit challenging a South African law that undercut patent enforcement of their AIDS drugs.

Those companies might have avoided such outcomes by partnering with NGOs instead of flatly opposing them. Doing so would have offered the companies the chance not only to avoid costly conflict but also to use NGOs’ assets to gain competitive advantage. I’ve found evidence of NGOs’receptiveness to such an approach in case studies, archival data, and in-depth interviews with executives from Greenpeace, the World Wildlife Fund, the Marine Stewardship Council, and other NGOs. I’ve also spoken with frontline managers and the CEOs of companies such as Shell, ExxonMobil, and Monsanto, who attested both to the costs of being attacked by NGOs and to the challenges and benefits of partnering with them.

So far,however, most companies have proved ill equipped to deal with NGOs. One reason is that NGO attacks pose very different challenges from those mounted by business competitors.Large companies know how to compete on the basis of product attributes and price. But NGO attacks focus on production methods and their spillover, often noneconomic effects. Similarly, NGOs are able to convert into liabilities companies’ standard competitive strengths such as size and wide market awareness of their brands. That’s because the wealthier and better known a company is, the juicier the target it makes. (See the box that lays out businesses at risk.)

NGOs have developed special, often Internet-enabled, capabilities for turning the tables in these ways. For one thing, NGOs are ferocious networkers. It is not out of the ordinary for an NGO in, say, Bangalore to share information and coordinate strategies with counterparts in Boston and Budapest. One favorite NGO strategy is “swarming” – an attack on a single corporation by a host of small, modestly funded advocacy groups. Corporations like to think of themselves as operating on “Internet time,” but NGOs are much nimbler. Issue-centered global coalitions of hundreds of NGOs can materialize and mobilize within days.

Emboldened by their successes,NGOs continue to take on, or form around, new causes. The number of NGOs with global concerns has quadrupled this past decade, a fact partly reflected in the twentyfold increase over the last ten years in mentions of NGOs generally in the Wall Street Journal and the Financial Times. To such advocacy groups and independent watchdog organizations, simple compliance with all applicable laws is not the end of a corporation’s responsibilities – if the laws themselves are insufficiently protective. To NGOs’way of thinking, they have a permanent mandate to fill the regulatory vacuum. In the face of such numbers and expectations, companies would be well advised to look for common ground.