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Abstract

Corporate sustainability has gone mainstream, and many companies have taken meaningful steps to improve their own environmental performance. But while corporate political actions such as lobbying can have a greater impact on environmental quality, they are ignored in most current sustainability metrics. It is time for these metrics to be expanded to critically assess firms based on the sustainability impacts of their public policy positions. To enable such assessments, firms must become as transparent about their corporate political responsibility (CPR) as their corporate social responsibility (CSR). For their part, rating systems must demand such information from firms and include evaluations of corporate political activity in their assessments of corporate environmental responsibility.
CSR NEEDS CPR: CORPORATE SUSTAINABILITY AND POLITICS
Thomas P. Lyon, Magali Delmas, John W. Maxwell,
Tima Bansal, Mireille Chiroleu-Assouline, Patricia Crifo, Rodolphe Durand,
Jean-Pascal Gond, Andrew King, Michael Lenox, Michael Toffel, David Vogel, Frank Wijen
February 21, 2018
Abstract
Corporate social responsibility has gone mainstream, and many companies have taken
meaningful steps towards a more sustainable future. Yet global environmental indicators
continue to worsen, and individual corporate efforts may be hitting the point of
diminishing returns. Voluntary action by the private sector is not a panacea---regulatory
action by the public sector remains necessary. Such public sector progress will be more
likely if it is supported by influential segments of the business community. Recent court
rulings in the U.S. make it easy for companies to hide their political activities from the
public, yet the indicators of CSR used by ratings agencies and socially responsible
investment funds mostly ignore corporate political action. We argue that it is time for
CSR metrics to be expanded to critically assess and evaluate firms based on the
sustainability impacts of their public policy positions. To enable such assessments, firms
need to become as transparent about their political activity as many have become about
their CSR efforts, and CSR rating services and ethical investment funds need to demand
such information from firms and include an assessment of corporate political activity in
their ratings.
We thank the Albert and Elaine Borchard Foundation for their generous financial support. This article was the
product of a conference on “Corporate Sustainability 2.0: Leading Systemic Change,” that was funded by the
Foundation and held at the Chateau de la Bretesche, Brittany, France on June 26-29, 2016. It was inspired by the
work of the Alliance for Research on Corporate Sustainability (ARCS), whose purpose is to support rigorous
academic research on corporate sustainability. We thank the Editor and four anonymous referees for valuable
comments that helped us to focus and deepen the paper significantly.
1
1. Introduction
Corporate sustainability, once viewed as utopian, irrelevant or even subversive, has gone mainstream. Of
the Fortune 500 global companies, two-thirds now issue sustainability reports, describing a wide variety
of environmentally-friendly activities.
1
Most leading business schools have courses in corporate
sustainability, if not full-fledged dual-degree programs aiming to create a sustainable world “through the
power of business.” Support for corporate sustainability comes from both ends of the political spectrum.
Think tanks like the Property and Environment Research Center advocate “free-market
environmentalism,” frustrated that government intervention to protect the environment has gone too far.
At the same time, non-governmental organizations (NGOs) like the Rainforest Action Network have
embraced “private politics,” engaging directly with corporations to produce change because they are
frustrated that government intervention has not gone far enough. Both perspectives reflect a belief that
market forces can help lead the business world towards a more virtuous relationship with the social and
natural world.
This expansion of business concern for its social and natural environment represents real
progress, and is to be applauded. Global challenges like ocean acidification, global terrorism, fisheries
depletion, poverty, deforestation, toxic chemical emissions, and climate change are considered “wicked”
problems because of their complexity and intractability, and help from all quarters is needed. Business
leaders who take a long view want to ensure that the resources on which they depend will be healthy and
robust in the future. But in a world of global economic competition, it is essential to have “rules of the
game” that create a level playing field including financial incentives for firms to internalize the costs of
their actions on the natural environment and the societies of which they are a part. Indeed, recent research
suggests that the most important drivers of corporate environmental, social and governance (ESG)
performance are actually country-level political institutions.
2
How are the right “rules of the game” to be put in place? Traditionally this has been the
responsibility of the state, not of the private sector. Yet these rules will emerge more readily with support
2
from influential segments of the business community. Of course, the interests of business are diverse and
no one expects firms to take public policy positions that damage the interests of their shareholders. It is
natural that some firms will support policies that enhance sustainability, and others will oppose them. But
with the rules of the game so important, it is also natural that companies are beginning to be evaluated by
stakeholders based on the political positions they take.
In this article, we argue that the time has come for corporate political action to be taken into
account by activists, scholars, consumers and investors who care about sustainability. Those who assess
firms on their social and environmental performance should add another critical dimension to their
assessment of civic virtue and responsibility, namely the extent to which firms support (or oppose) public
policies that contribute to sustainability. To make this possible, firms must become as transparent about
their political activity as many have become about their sustainability activity. Although this is clearly a
nascent issue in corporate responsibility, there are signs that leading parts of civil society are already
beginning to advocate for greater transparency around corporate political action. Managing this emerging
set of stakeholder pressures will pose fascinating new challenges for corporate strategy beyond markets.
2. The Promise and the Limits of the “Market for Virtue”
A decade ago, in an influential book, Vogel (2007) assessed the potential for business leadership---driven
by the “market for virtue” rather than by legal requirements---to fill the “governance gap” left by an
increasingly gridlocked state.
3
He found numerous success stories for this sort of “civil regulation” as
distinct from “government regulation,” ranging from working conditions in developing countries to the
natural environment to human rights and global corporate citizenship. Nike has adopted labor and
environmental standards for the over 700 factories abroad that make its products, has created a credible
monitoring process, and has canceled contracts with suppliers who perform poorly; supplier codes-of-
conduct and supplier auditing are now common practice among leading brands. Home Depot, Lowe’s and
other retailers have adopted voluntary codes of conduct that have helped to preserve old-growth forests
and improve forestry practices in North America and beyond. Thousands of companies around the world
3
have signed onto the UN Global Compact (which bills itself as the world’s largest corporate sustainability
initiative), and agreed to its principles for the improvement of human rights, the treatment of labor and the
environment, and the reduction of corruption.
Moreover, a body of data is emerging that demonstrates quantitatively the impact of some
corporate sustainability initiatives. Energy-efficient commercial buildings that are LEED or Energy Star
certified have an occupancy rate 11% higher than other buildings and sell for 16%-17% more.
4
These
initiatives have the ancillary benefit of reducing greenhouse gas (GHG) emissions. In addition, products
that are perceived to offer health benefits have found a growing niche in the marketplace: organic food
accounts for over 5% of total food sales in the U.S., and grew 8% in 2016 to top $40 billion for the first
time.
5
Furthermore, over 20% of all wild-caught fish
6
and 15% of wood harvested from temperate forests
around the world
7
comes from fisheries and forests certified as sustainable.
For all its success, however, the market for virtue is often “narrow and limited in its ability to
solve social and environmental problems.
8
Voluntary codes of conduct in the apparel sector did not
prevent the 2013 collapse of the Rana Plaza textile factory in Bangladesh that killed 1,134 workers.
9
New
certifications for sustainable forestry have emerged that offer weaker standards for firms that do not want
to meet the most stringent demands.
10
The UN Global Compact has been widely criticized, and even
derided as a form of “bluewash” by Ralph Nader.
11
BP, once lauded as a leader in the fight against
climate change, has had its reputation ruined by the massive Deepwater Horizon explosion that killed 11
workers and created the largest oil spill in U.S. history.
12
Globally, 90% of fisheries are fully or
overfished,
13
the agricultural production system is under stress from a burgeoning world population,
14
and
water supplies are threatened around the world.
15
There is mounting evidence that climate change poses
severe threats to global well-being, and by some estimates we have until just 2020 to bend the “climate
curve” and rein in climate change before damaging warming becomes inevitable.
16
The 2015 State of
Green Business report---authored by the normally upbeat Joel Makower, executive editor of
GreenBiz.com---struck a somber note. “Companies continued to tinker with incremental changes in their
products and operations to reduce their carbon emissions, energy use, waste, chemicals of concern and
4
other aspects of their ‘environmental footprint’.” But despite these efforts, he continued, “All told, they
were necessary but wholly insufficient to address their fair share of environmental impacts.
17
All of this reinforces Vogel’s (2007) argument. Civil regulation can partially fill the governance gap
but cannot fully replace public policy. The “carrot” of market incentives can reward sustainability
leaders, but it cannot force all of the laggards to follow suit. For that the “stick” of penalties for poor
performance is required, and that remains largely the domain of government.
18
Vogel (2007, p. 173)
concluded:
“If companies are serious about acting more responsibly, then they need to reexamine their
relationship to government as well as improve their own practices. And those who want corporations
to be more virtuous should expect firms to act more responsibly on both dimensions. Civil and
government regulation both have a legitimate role to play in improving public welfare. The former
reflects the potential of the market for virtue; the latter recognizes its limits.”
3. Corporate Political Responsibility
Although Vogel did not use the term, he was effectively calling for corporate political responsibility
(CPR)which we define as a firm's disclosure of its political activities and advocacy of socially and
environmentally beneficial public policies---not just corporate social responsibility (CSR). In fact, one
can argue that “Compared with companies’ efforts to green their operations, corporate political actions
such as lobbying or campaign funding can have more influence on environmental protection, and
arguably represent the greatest impact a company can have on protectingor harmingthe
environment.”
19
From this perspective, CPR may be the most important element of a company’s
sustainability strategy.
Corporate political responsibility is not entirely unheard of. Consider the domain of climate
change mitigation.
20
In 1997, then-CEO John Browne of BP became the first oil industry executive to
acknowledge the role of human activity in creating climate change. In 1999, Ford Motor Company pulled
out of the Global Climate Coalition, an industry lobbying group that rejected climate science and opposed
5
climate legislation.
21
In 2007, the US Climate Action Partnershipa coalition of environmental activists
and business corporationswas established to lobby for a mandatory cap-and-trade system for carbon
emissions in the US. Its “Call for Action” created the blueprint for the Waxman-Markey bill that
successfully passed the US House of Representatives in 2009. In 2011, a group of European firms
including Aviva and Danone likewise issued a public call for the European Union to adopt deeper
greenhouse gas emissions cuts.
22
The Prince of Wales Corporate Leaders Group brings together a group
of large multinational firms including Unilever, Tesco and Acciona to press for stronger public action on
climate change.
23
When President Trump announced his plan to withdraw from the Paris Climate
Agreement, Jeff Immelt, then-CEO of General Electric, tweeted: “Climate change is real. Industry must
now lead and not depend on the government.”
24
The We Are Still In movement, a coalition of U.S.
business, education and local government leaders committed to upholding the U.S. commitments to the
Paris Agreement on Climate Change, provides a vivid example of what CPR looks like. Hundreds of
companies have come together with local governments, universities and non-profit groups to offer their
vocal support for national and international commitments to mitigate climate change.
25
Examples of CPR also come from the social world, as when Emmanuel Faber, CEO of Danone,
pushed for a reform of French civil law to revise the articles defining the company and to open a new
status for public benefit corporations in France.
26
Another example came when Apple CEO Tim Cook
spoke out publicly opposing a pending religious freedom law that critics warned would allow
discrimination against same-sex couples.
27
After President Trump was unable to articulate a consistent
criticism of the neo-Nazis who marched through Charlottesville, Virginia on August 11, 2017 and caused
the death of an innocent young woman, numerous CEOs resigned from the President’s Manufacturing
Council, including Merck CEO Ken Frazier, Under Armour CEO Kevin Plank and Intel CEO Brian
Krzanich.
28
Bill George, former CEO of Medtronic, argues that it is increasingly important for CEOs to
speak out on key public issues. George recognizes that CEOs face difficult tradeoffs when deciding to
speak out, but argues that “business leaders should base their stands on the company’s mission and its
values. If these are violated, then they have an obligation to speak publicly.”
29
6
Unfortunately, there is evidence that some companies use their corporate sustainability initiatives
as cover for their political efforts to block meaningful change. Writing in Harvard Business Review,
Senator Sheldon Whitehouse of Rhode Island laments that:
“Despite the statements emitted from oil companies’ executive suites about taking climate change
seriously and supporting a price on carbon, their lobbying presence in Congress is 100% opposed
to any action. In particular, the American Petroleum Institute, the oil industry trade association, is
an implacable foe. Given the industry’s massive conflict of interest, there is every reason to
believe they are playing a double game: trying to buy a little credibility with these public
comments while using all their quiet lobbying muscle to crush any threat of bipartisan action on
the carbon pricing they claim to espouse.”
Similar concerns arose when CEOs of large firms like Dow Chemical and Corning Inc. signed an open
letter to the Wall Street Journal urging the U.S. to remain in the Paris Agreement, while simultaneously
supporting the Industrial Energy Consumers of America (IECA), a lobbying group that was pushing the
Administration to withdraw from the Agreement.
30
These examples show how some firms try to get away
with taking symbolic action that sounds good in an annual report or in the newspaper while hiding the
fact that they are blocking substantive progress on the political front. This sort of two-faced strategy
makes a mockery of “corporate social responsibility” and turns it into a public relations gimmick. It
illustrates the dark side of business participation in politics, and raises the question of whether business
should be involved in politics at all.
4. The Case Against Corporate Political Responsibility
In fact, there is a long tradition of arguing against business engagement in politics. Milton
Friedman famously argued in 1970 that “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.
31
Business leaders had no special expertise in social welfare, Friedman argued, and
should leave it to the realm of politicians. Aneel Karnani presented an updated version of this argument
7
in this Review in 2010.
32
However, both Friedman and Karnani naively ignore the role business leaders
play in creating those very rules of the game. Business does not simply keep its nose out of politics---it is
actively involved, to the tune of roughly $2.6 billion a year in lobbying expenditures.
33
Indeed,
Friedman's close colleague George Stigler argued that “as a rule, regulation is acquired by the industry
and is designed and operated primarily for its benefit.
34
Coming from the opposite end of the ideological
spectrum, Robert Reich made a related point in 1998 in this Review. Echoing Friedman, Reich argued
that in a system where business firms view their primary responsibility as a fiduciary one towards
investors, they have a secondary responsibility to the rest of society to “respect the political process by
staying out of it.”
35
Unfortunately, although this nostrum is appealing, it is also unrealistic at present. Recent
Supreme Court decisions clearly affirm that corporations have the right to participate in politics, and
further establish that there are no absolute limits on how much companies can spend for political
purposes, and no requirements to disclose the spending if they structure it in particular ways.
36
In
Citizens United v. Federal Election Commission 558 U.S. 310 (2010), the Supreme Court held 5-4 that it
is unconstitutional to restrict independent political expenditures by business, non-profit organizations,
labor unions and other associations. Nor do donors even need to disclose their contributions, if they give
to a 501(c)(4) “social welfare” organization that engages in “issue advocacy” rather than “express
advocacy” for a particular candidate. What this means in practice is that the organization does not use the
“eight magic words” that appeared in a footnote in Buckley v. Valeo (1976): vote for, elect, “support,
cast your ballot for,” Smith for Congress,” vote against,” defeat,” reject,” or any variations thereof.
An ad saying “Crime is bad. Smith is soft on crime. Jones is tough on crime.” would not count as
“express advocacy” even though it strongly implies that one should support Jones. The bottom line is that
corporations can now legally and covertly give unlimited amounts of “dark money to fund issue ads to
influence elections.
It is understandable that companies prefer to keep their political activities secret, and that they
are wary of backlash when their involvement in the public arena is exposed. New research shows that
8
firms that have faced a social movement boycott shift their political action away from campaign
contributions and towards more covert forms such as lobbying or CEO donations.
37
The backlash can
come from both ends of the political spectrum. From the right, the Wall Street Journal has attacked firms
that support cap-and-trade policy as “Kyoto capitalists” that seek to profit from a “cynical approach to
regulation” whose costs are “foisted on the backs of others”.
38
Even efficient policies will be derided by
those who believe “the free market” is always best left alone. From the left, activists often level charges
of greenwashing at firms that highlight their environmental good deeds while downplaying their less
savory activities. Firms that are small, pure-play environmental startups have a good chance of escaping
such criticism, but this is much more difficult for large incumbent firms with diversified portfolios. Fears
of backlash may be overstated, however: when a list of 91 companies contributing to a 501(c)(4) dark
money group were exposed by the New York Times in 2014, their share prices actually rose.
39
5. The Need for Transparency
Even if it is unrealistic to exclude business from politics, that does not mean that unlimited covert
business spending in politics is a good thing. In fact, there are reasons to believe quite the opposite is
true. Secrecy breeds a host of problems. One is the corporate hypocrisy described by Senator
Whitehouse, whereby firms are able to curry favor with the public through CSR activities while blocking
laws that would require them to stop imposing environmental costs on their neighbors.
40
Another is the
corruption that can set in when wealthy individuals or organizations are able to buy political favors. A
third is the policy bias that emerges when the true sources of lobbying are hidden. One example is
astroturf lobbying, in which companies covertly fund artificial grassroots action to block the passage of
laws that would increase their costs.
41
(Unfortunately, the Lobbying Disclosure Act of 1995 was stripped
of any mention of such tactics, allowing them to persist.
42
) Another example, ushered in by Citizens
United, is the use of tax-exempt “social welfare” advocacy groups to make unlimited political
expenditures without revealing the identities of the funders.
43
9
The importance of transparency is hard to overstate: it is the crucial safeguard to protect society
from capture by private interests. Moreover, without transparency, shareholders themselves are cheated
because they are kept in the dark about how the funds they put at risk are being used. It is encouraging
that firms are becoming more transparent about their environmental impacts. Indeed, a large and growing
number of firms are reporting in a manner consistent with the Global Reporting Initiative (currently
considered the gold standard for environmental disclosure), with participation growing from 12 firms in
1999 to over 5,000 today. A few organizations, like Puma, have even begun issuing environmental profit
and loss statements that estimate environmental impacts in dollars and cents. Although the practice of
monetizing environmental impacts remains imperfect, it does help to simplify and focus sustainability
reporting, and consulting organizations like Trucost are constantly refining the analytical methods for
doing so.
Unfortunately, it is rare to find firms that are equally transparent about their political activity.
Sustainability LLC, in conjunction with the World Wildlife Fund, conducted a study of 100 of the world’s
largest corporations and rated their disclosure of political activities. Nearly half the firms provided no
information at all about their political involvement. Of those that did disclose, none achieved the highest
rating and only a handful (BASF, BP, Chevron, Dow, Ford, General Motors, GlaxoSmithKline and HP)
achieved even the second-highest level.
44
Climate change provides an interesting example of the limitations of current disclosure
requirements. Recent research has found that there are two types of firms that tend to lobby politicians on
the issue: those with high levels of greenhouse gas emissions per dollar of output and those with low
levels of emissions per dollar.
45
Current disclosure rules do not require firms to be transparent about what
types of policies they support, merely how much money they spent lobbying on a particular issue. But an
educated guess would be that high-emission firms are lobbying for weaker regulations than low-emissions
firms would prefer. After all, it has been shown that states were more likely to adopt a renewable
portfolio standard if they had a staffed office of the American Solar Energy Society in their state.
46
Investors, consumers and activists who view climate change as an important issue increasingly want to
10
know in greater detail just what policies firms have been advocating when they visit their Representatives
and Senators, or the White House.
The demand for political transparency will likely become stronger as the Millennial generation
grows in influence, because these “digital natives” have grown up with an expectation of radical
transparency from the products they buy and the companies for which they work.
47
Furthermore,
although disclosure regarding money in political campaigns is crucial, CPR must also include various
other possible activities that are adapted to the variety of political systems and regimes across the globe.
One of the most important of these is avoiding corruption, which remains a powerful force in many parts
of the world. The UN Global Compact has made fighting corruption one of its key action items, and may
serve as a vehicle for broader calls for political transparency. In order to see where the future of political
disclosure lies, however, it is important to understand the current state of environmental, social and
governance ratings.
6. CPR and Social Responsibility Metrics
To what extent do existing social responsibility metrics capture corporate political action? For decades,
socially responsible investing (SRI) has used a variety of “screens” to help investors channel their
financial support away from activities they deem socially undesirable, such as tobacco or apartheid.
Ratings organizations such as KLD Research, Innovest, RiskMetrics, Asset4, Sustainalytics and Vigeo
Eiris have sprung up to offer screening services to investors that include a variety of ways to evaluate
firms’ environmental, social and governance (ESG) performance.
48
In broad outlines, these services help
investors to fund businesses they believe are making the world a better place, and reduce funding for
businesses undermining our social and environmental future. More narrowly focused organizations like
CDP (formerly Carbon Disclosure Project) have also emerged to press publicly-traded firms emitting
greenhouse gases to disclose detailed information about their exposure to the physical and economic risks
related to their carbon emissions; CDP has recently added questions related to corporate activity that
could directly or indirectly influence public policy on climate change.
49
11
Given the important role of public policy in pointing the way towards a sustainable future, it is
rather surprising that most SRI advisors do not currently recognize the role of business in the public
policy process. Consider what is currently being measured in corporate ESG metrics. One of the oldest
and best known ESG rating systems originated from KLD Research, which was acquired by RiskMetrics
in 2009, itself then acquired by MSCI in 2010. The stated purpose of the MSCI ESG ratings is to “to help
investors to understand ESG risks and opportunities and integrate these factors into their portfolio
construction and management process.”
50
Its key issues for each of the three categories are presented in
Table 1. Reading through the issues and their explanations (which are not reproduced here for reasons of
brevity), it is clear they focus on how the company manages its own direct impacts. None of the existing
measures explicitly mentions corporate political action. One of the Governance issues is “Business
Ethics,” and because corporate political action to block climate change legislation or toxic chemical
reform could be seen as unethical, it could theoretically be partially subsumed under the existing
categories, but this is a very indirect path at best, and it is does not appear this is currently done under the
MSCI rating system.
51
The Asset4 criteria also pay scant attention to political action. The ratings system’s broad
environmental criteria are resource use, emissions, and innovation; its broad social criteria are workforce,
human rights, community, and product responsibility; and its governance criteria are management,
shareholders, and CSR strategy. All focus on direct corporate operations, not on corporate political
action. However, in addition Asset4 does track “Controversies,” which includes “business ethics
controversies” such as “political contributions or bribery and corruption.” It includes two specific
measures “Community Reputation Policy Elements/Political contribution” and “Lobbying Political
Contributions.
52
Likewise, Sustainalytics does not devote much attention to political action, though it does include
Policy on Political Involvement and Contributions” and “Total Value of Political Contributions.”
53
These
measures are quite blunt, and make no attempt to capture the firm’s positions on the issues on which it
lobbies, opting instead for a simple aggregate dollar value of contributions. Moreover, even this fails to
12
capture spending on issue advertising and other activities that are allowed in the U.S. under the Supreme
Court’s Citizens United decision.
In short, the metrics used to evaluate CSR and corporate sustainability today by most ratings
systems almost completely ignore the role of business in shaping public policy.
7. Emerging Signs of Change
The situation is beginning to change, however. The GRI Sustainability Reporting Standards, created in
1997, “are the first and most widely adopted global standards for sustainability reporting.
54
One of the
newest additions to the GRI reporting framework is standard 415, which addresses the topic of public
policy. “The purpose of this disclosure is to identify an organization’s support for political causes. This
disclosure can provide an indication of the extent to which an organization’s political contributions are in
line with its stated policies, goals, or other public positions. Direct or indirect contributions to political
causes can also present corruption risks, because they can be used to exert undue influence on the political
process. Many countries have legislation that limits the amount an organization can spend on political
parties and candidates for campaigning purposes. If an organization channels contributions indirectly
through intermediaries, such as lobbyists or organizations linked to political causes, it can improperly
circumvent such legislation.
55
Standard 415 has an effective date of July 1, 2018, although “Earlier
adoption is encouraged.” Reporting “includes an organization’s participation in the development of public
policy, through activities such as lobbying and making financial or in-kind contributions to political
parties, politicians, or causes.More specifically, GRI recommends “The reporting organization should
report: (1) the significant issues that are the focus of its participation in public policy development and
lobbying; (2) its stance on these issues, and any differences between its lobbying positions and any stated
policies, goals, or other public positions.
56
Note that these requirements go well beyond simply reporting
aggregate expenditures on lobbying, and would expose firms engaging in the hypocritical mix of pro-
environmental public rhetoric and anti-environmental political action condemned by Senator Whitehouse.
13
In a related step, the Organization for Economic Cooperation and Development (OECD) has
issued guidelines for Transparency and Integrity in Lobbying. These also go beyond simply reporting
aggregate amounts of money spent on particular issues, and note that disclosure should “elicit information
on in-house and consultant lobbyists, capture the objective of lobbying activity, identify its beneficiaries,
in particular the ordering party, and point to those public offices that are its targets. Any supplementary
disclosure requirements should take into consideration the legitimate information needs of key players in
the public decision-making process. Supplementary disclosure requirements might shed light on where
lobbying pressures and funding come from. Voluntary disclosure may involve social responsibility
considerations about a business entity’s participation in public policy development and lobbying. To
adequately serve the public interest, disclosure on lobbying activities and lobbyists should be stored in a
publicly available register and should be updated in a timely manner in order to provide accurate
information that allows effective analysis by public officials, citizens and businesses.
57
Another interesting new development is the CPA/Zicklin Index of Corporate Political Disclosure
and Accountability, produced by the non-profit Center for Political Accountability and the Zicklin Center
for Business Ethics Research at Wharton. It rates the entire S&P 500 on the transparency of their political
spending, and finds substantial improvement over time.
58
It does not, however, cover the critical area of
lobbying expenditures. Another encouraging development is a joint effort by Transparency France and
nine partner companies to craft a guide to reporting lobbying expenditures.
59
This will help create norms
of good practice in transparency around lobbying. But CPR goes far beyond lobbying. There are at least
nine distinct channels through which firms exercise political influence, including lobbying, but also
supporting think tanks, creating front groups, funding Political Action Committees (PACs) and super
PACs, financing foundations, working through trade associations, participating in peak organizations,
serving on advisory committees to government, and placing executives in administration roles.
60
All of
these must become a part of how we understand and evaluate CPR.
A more narrowly focused effort comes from a large group of institutional investorsincluding
HSBC Global Asset Management, Trillium Asset Management, the University of California system, and
14
the Harvard Management Companyconcerned about climate lobbying in particular. In collaboration
with Principles for Responsible Investment (PRI), these investors announced that: “Our expectation is
that, when companies engage with public policy makers, they will support cost-effective policy measures
to mitigate climate change risks and support an orderly transition to a low carbon economy. While an
increasing number of companies have robust climate change policies and position statements and play a
constructive role in policy discussions, we are concerned that many are also members or supporters of
trade associations, think tanks and other third party organisations who lobby against policies to mitigate
climate risks in a way that is inconsistent with our goal of maximising long-term portfolio value.
61
The
investors call for companies to support cost-effective policies to combat climate change, and to provide
robust and detailed reporting on their direct and indirect lobbying on climate, including that done through
trade associations or other membership groups.
Arguably, the most advanced ratings system for corporate political action is that conducted by
Vigeo Eiris, the leading source of CSR metrics in the European market.
62
Starting in July, 2010, Vigeo,
in partnership with Transparency France, announced that it would include the transparency and integrity
of influence strategies and practices in its system for rating companies’ social responsibility.
63
In
particular, its rating framework builds on the OECD guidelines, and covers includes both in-house
lobbying and working with external specialists such think-tanks, lobbyists, and trade associations, to
influence legislative and regulatory processes. In 2013, Vigeo issued its first report on disclosure of
corporate lobbying practices. It characterized the overall level of disclosure as “predictably weak,” but
noted that North American companies appear to be somewhat ahead of European companies, and that the
Electric and Gas industry and the Chemical sector are the most advanced in their reporting on political
activity.
64
Vigeo Eiris rates corporate lobbying practices on three levels. At the Leadership level, it looks
for the visibility of the company’s commitment to ensure transparency and integrity of lobbying practices,
its exhaustiveness and the extent to which the company is clear about where oversight responsibility lies
and involves the board in assuring compliance. At the Implementation level, it looks for employee
15
training programs, “publication of detailed information on lobbying activities (the list of fields of interest,
information on the company’s networks and on the budget allocated to lobbying activities),” and
Disclosure of the positions communicated to public authorities.” Finally, at the Results level, it
examines the quality of disclosure of direct and indirect lobbying expenditures, public scandals in which
the company might be involved, and stakeholder criticisms of the firm’s lobbying practices.
65
The actions of the OECD and the GRI, the creation of the CPA/Zicklin Index of Corporate
Political Disclosure and Accountability, the PRI investor expectations on climate lobbying, and the
expansion of the Vigeo Eiris ESG system to include lobbying activities all suggest we are at the cusp of a
new wave of demands for political accountability. This should not be terribly surprising. Supreme Court
decisions like Citizens United vs. FEC have made it easier for companies to hide their political activities,
and provoked widespread outrage. Indeed, 45% of the US population lives in a state or locality that has
supported amending the Constitution to overturn Citizens United.
66
As has happened so often throughout
history, a social movement is emerging to make demands that go beyond what is currently required by
law. Political transparency and accountability will help to offset the widespread perception that
government has been captured by the business sector, and will empower investors, consumers, employees
and everyday citizens who wish to promote a transition to a sustainable and equitable economy.
8. Implications for Practice
For NGOs and activist investors, the implications of CPR are straightforward: because corporate
political activity has as much if not more impact on sustainability as CSR, it should be monitored and
evaluated just as carefully and as extensively as we assess CSR. This also means that civil society actors
who want to encourage virtuous corporate behavior should demand as much disclosure for corporate
political activity as they do for CSR and judge firms accordingly. This does not mean that all civil society
actors will agree on what constitutes politically responsible behavior, any more than they agree on what
constitutes socially responsible behavior. For example, some would argue that labor standards that
restrict children from assisting their mothers in making textiles are counter-productive, while others might
16
disagree. Similarly, reasonable people might disagree as to whether public policies that favor rooftop
solar installations are in the public interest, since they may increase the challenges of managing the
electric grid. The point is not to encourage a uniformity of thinking about whether particular
environmental policies are or are not in the public interest. Rather, it is to encourage civil society actors
to take corporate political action just as seriously as CSR, to monitor it, and to debate what “counts” as
CPR and what does not.
For business managers the implications are more nuanced. It is unrealistic to expect firms to
support public policies that financially disadvantage them in any significant way. We would not expect a
coal company to support policies that would stop coal mining or an oil company to support policies that
would stop drilling for oil.
What then might we realistically expect? We would make three suggestions.
First, fully disclose your corporate political activity. This may seem utopian in view of Citizens
United and other Supreme Court decisions that currently allow unlimited covert political spending. Yet
in the longer run, we do not expect current conditions to last. Social expectations change over time, and
in the information age transparency is becoming taken for granted. Dark money and lobbying are
unpopular with the public and with civil society actors, and the pressure for political disclosure is unlikely
to abate. As with many other areas of corporate social performance, some firms will choose to enhance
their legitimacy with the public by taking an early leadership position, while others wait to see exactly
how much will be expected of them. Firms that already have taken leadership positions on sustainability
are likely to be the first movers in this new domain as well.
Second, align your political activity with your public pronouncements and CSR efforts. For
example, if a firm is seeking to voluntarily reduce its carbon footprint, then we would expect it also to
support public policies that require all firms to reduce their greenhouse gas emissions. To do otherwise is
to expose the firm to the risk of being attacked for hypocrisy. For example, Target Corporation, long
known for progressive stands and support of gay rights, came under attack for its donations to MN
Forward, a political group that supported a gubernatorial candidate who opposed same-sex marriage.
67
Of
17
course, these elements of corporate non-market strategy should also be aligned with a firm’s market
strategy to achieve maximum competitive advantage.
68
Third, support public policies that will enable the private sector to better pursue sustainability
efforts and commitments. This does not mean supporting public policies that are financially
disadvantageous to the firm, but on the contrary supporting politics that enable the firm to act more
responsibly without suffering a competitive disadvantage. For example, it would not be reasonable to
expect an oil company to support restrictions on fracking, but it might be reasonable to ask it to support
regulations restricting greenhouse gas emissions from fracking, since that would be environmentally
beneficial and the additional operating costs marginal. Put another way, we expect firms (especially those
that wish to be seen as leaders) to support public policies that are in their enlightened, long-run self-
interest -- just as we have come to do in the CSR realm, where it is now widely expected that firms will
treat workers in developing countries decently in order to avoid public backlash. In other words, we
expect companies to recognize the business case for government regulation, just as many have recognized
the business case for CSR.
For business scholars, CPR offers a wealth of new research opportunities. An enormous literature
exists on the connection between CSR and profitability,
69
and more recently a literature has emerged on
whether, or more accurately, when, it “pays to be green.”
70
Less attention has been devoted to
understanding when it pays to support green public policies. Some research suggests that the payoffs to
political action are so high as to raise the question of why there is “so little” money in politics.
71
Yet
other work suggests that much corporate political spendingunless it is in regulated industries--may be
simply indulging the whims of corporate managers without providing much benefit for shareholders.
72
More research is needed to home in on where and when it pays to advocate for more sustainable policies.
9. Conclusions
The concepts of CSR and corporate sustainability have become household words in recent decades, but
they have their limits and are sometimes derided as mere window-dressing.
73
To become more
18
meaningful they need to be re-invented, and expanded to include a more holistic understanding of the
firm’s full impact on the social and natural world. Particularly important is a more responsible
engagement with government. Business support can make the difference between passing policies that
support progress toward a more sustainable world, or blocking them. Corporate leaders can play an
enormously important role by demonstrating their own willingness to be transparent about their political
activities and by speaking out to demand new norms and rules of transparency for all firms. Failure to do
so robs shareholders of their right to know how the funds they invest are being used, and robs citizens of
their right to a government not captured by special interests.
Civil society leaders and researchers also face corresponding new challenges. Once they have
access to reliable and complete information about corporate political action, they can propose, evaluate
and stimulate the creation of new norms and public policies for corporate political responsibility. A major
challenge in this regard will be developing evaluative frameworks for assessing the extent to which
corporate political action supports policies that will truly lead to more sustainable outcomes. Researchers
will continue to play an important role in testing existing sustainability metrics and developing new and
improved reporting frameworks.
Many citizens of western democracies despair over the inability of their governments to solve the
pressing problems of our times. They suspect that a big part of the problem is the influence of money and
corporate power in politics. Although not a panacea, creating new norms of corporate political
responsibility (CPR)---coupled with radical transparency around corporate political action---is a
promising step. Moreover, important organizations like the Global Reporting Initiative, the OECD and
Vigeo Eiris are already moving in this direction. The demand for political transparency is unlikely to fade
away. The challenge for managers will be whether to embrace this movement and take a leadership
position in support of greater transparency around corporate political action, or to resist it for as long as
possible. Either way, as demands for political transparency grow, it will become increasingly difficult for
companies to execute a strategy that involves contradictions between virtuous public statements and self-
serving lobbying and other political activities.
19
Table 1: MSCI Environmental, Social and Governance Indicators
Pillars
Themes
Key Issues
Environment
Climate Change
Carbon Emissions
Product Carbon Footprint
Financing Environmental Impact
Climate Change Vulnerability
Natural Resources
Water Stress
Biodiversity & Land Use
Raw Material Sourcing
Pollution & Waste
Toxic Emissions & Waste
Packaging Material & Waste
Electronic Waste
Environmental Opportunities
Opportunities in Clean Tech
Opportunities in Green Building
Opportunities in Renewable
Energy
Social
Human Capital
Labor Management
Health & Safety
Human Capital Development
Supply Chain Labor Standards
Product Liability
Product Safety & Quality
Chemical Safety
Financial Product Safety
Privacy & Data Security
Responsible Investment
Health & Demographic Risk
Stakeholder Opposition
Controversial Sourcing
Social Opportunities
Access to Communications
Access to Finance
Access to Health Care
Opportunities in Nutrition &
Health
Governance
Corporate Governance
Board
Pay
Ownership
Accounting
Corporate Behavior
Business Ethics
Anti-Competitive Practices
Tax Transparency
Corruption & Instability
Financial System Instability
20
1
http://www.environmentalleader.com/category/sustainability-reports/
2
Ioannis Ioannou and George Serafeim. “What Drives Corporate Social Performance? The Role of Nation-
Level Institutions.” Journal of International Business Studies 43.9 (2012): 834-864.
3
David Vogel. The Market For Virtue: The Potential and Limits of Corporate Social Responsibility.
Brookings Institution Press. (2007).
4
Piet Eichholtz, Nils Kok, and John M. Quigley. “Doing Well By Doing Good? Green Office Buildings.”
The American Economic Review 100.5 (2010): 2492-2509.
5
https://www.ota.com/news/press-releases/19681
6
Jason Potts, Ann Wilkings, Matthew Lynch, & Scott McFatridge. (2016). The State of Sustainability
Initiatives Review: Standards and the Blue Economy. Winnipeg: International Institute for Sustainable Development
(IISD), p. 332.
7
Steering Committee of the State-of-Knowledge Assessment of Standards and Certification. (2012).
Toward sustainability: The roles and limitations of certification. Washington, DC: RESOLVE, Inc.
8
Alfred A. Marcus. Innovations in Sustainability. Cambridge University Press, 2015, p. 2.
9
https://www.theatlantic.com/business/archive/2017/05/rana-plaza-four-years-later/525252/
10
Devin-Judge Lord, Constance L. McDermott, and Benjamin Cashore. How Do Forest Certification
Policies Change Over Time?: Comparing Forest Stewardship Council And The Sustainable Forestry Initiative
Standards In The United States, 2008-2013. Working Paper, Yale Program on Forest Policy and Governance, 2015.
11
https://www.commondreams.org/views/2000/09/18/corporations-and-un-nike-and-others-bluewash-their-
images
12
https://www.theguardian.com/environment/blog/2011/apr/14/bp-pr-campaign-gulf-oil-spill
13
https://www.theguardian.com/environment/2016/jul/07/global-fish-production-approaching-sustainable-
limit-un-warns
14
http://www.fao.org/docrep/017/i1688e/i1688e.pdf
15
https://www.economist.com/news/briefing/21709530-water-becomes-ever-more-scant-world-needs-
conserve-it-use-it-more-efficiently-and
16
https://www.nature.com/news/three-years-to-safeguard-our-climate-1.22201
17
https://www.greenbiz.com/report/state-green-business-report-2015
18
There has been much interest in the power of investors to penalize companies for unsustainable actions,
but empirical evidence suggests market penalties may simply anticipate expected legal penalties. See Jonathan M.
Karpoff, John R. Lott, Jr, & Eric W. Wehrl. The reputational penalties for environmental violations: empirical
evidence. The Journal of Law and Economics 48.2 (2005), 653-675.
19
Auden Schendler and Michael W. Toffel, “The Factor Environmental Ratings Miss.” MIT Sloan
Management Review 53.1 (2011): 17-18.
20
Shahzad Ansari, Frank Wijen, and Barbara Gray, “Constructing a Climate Change Logic: An Institutional
Perspective on the “Tragedy of the Commons,” Organization Science, 24.4 (2013): 1014-1040.
21
Despite the well-known limitations of both companies’ efforts, the specific actions cited here were
nonetheless acts of corporate political responsibility at the time they were taken.
22
https://www.euractiv.com/section/public-affairs/news/green-businesses-rock-employers-lobby/
23
https://www.corporateleadersgroup.com/about
24
https://www.cnbc.com/2017/08/15/expect-more-ceos-to-speak-out-on-vital-issues-risking-the-wrath-of-
the-trump-commentary.html
25
The group’s initial membership included 902 businesses and investors (20 of them part of the Fortune
500), 183 colleges and universities, 125 cities and 9 states. Participating firms include such familiar names as
Apple, Google, Tesla, Target, eBay, Lyft, Adidas, Facebook, and Nike, and represent over $6.2 trillion of the U.S.
economy. The group’s declaration concludes with these words: “It is imperative that the world know that in the
U.S., the actors that will provide the leadership necessary to meet our Paris commitment are found in city halls, state
capitals, colleges and universities, investors and businesses. Together, we will remain actively engaged with the
international community as part of the global effort to hold warming to well below 2°C and to accelerate the
transition to a clean energy economy that will benefit our security, prosperity, and health.”
https://www.wearestillin.com/we-are-still-declaration
21
26
In addition, the merger of Danone’s North American dairy business with WhiteWave has created
DanoneWave, the largest benefit corporation in the U.S. http://www.csrwire.com/press_releases/39933-Danone-
CEO-Announces-Intention-to-Deepen-Work-with-B-Lab.
27
Aaron K. Chatterji and Michael W. Toffel, “The Power Of C.E.O. Activism: How Politically Outspoken
Executives Sway Public (and Consumer) Opinion,” Grey Matter. New York Times (April 3, 2016), SR10.
28
https://www.vox.com/policy-and-politics/2017/8/16/16157398/trump-manufacturing-council-disband
29
https://www.cnbc.com/2017/08/15/expect-more-ceos-to-speak-out-on-vital-issues-risking-the-wrath-of-
the-trump-commentary.html
30
Lee Fang. CEOs Praised for Backing the Paris Accord Also Funded Lobbyists Pushing Trump to
Withdraw. The Intercept, June 4, 2017. https://theintercept.com/2017/06/04/paris-accord-trump-lobby-ceo-
withdraw/
31
Milton Friedman, M. The Social Responsibility of Business is to Increase Its Profits. New York Times
Magazine, September 13, 1970.
32
Aneel Karnani. “Doing Well By Doing Good: The Grand Illusion. California Management Review 53.2
(2011): 69-86.
33
https://www.theatlantic.com/business/archive/2015/04/how-corporate-lobbyists-conquered-american-
democracy/390822/
34
George J. Stigler. The Theory of Economic Regulation. The Bell Journal of Economics and
Management Science, (1971) 2.1: 3-21.
35
Robert B. Reich. The New Meaning of Corporate Social Responsibility. California Management
Review, 40.2 (1998). 8-17.
36
There remain restrictions on the amount of money they can contribute directly to politicians’ campaigns,
but no limits on the amounts they can spend on “independent” political expenditures or on lobbying.
37
Mary Hunter McDonnell & Timothy Werner. Into the Dark: Shifts in Corporate Political Activity after
Social Movement Challenges.” (2016). Wharton School Working Paper.
38
“Kyoto’s ‘Capitalists’,” Wall Street Journal, December 13, 2014.
https://www.wsj.com/articles/SB110290434517998109
39
Timothy Werner, T. Investor Reaction to Covert Corporate Political Activity. Strategic Management
Journal. 38 (2017): 24242443.
40
https://www.somo.nl/wp-content/uploads/2008/05/The-Lack-of-Consistency-between-Corporate-
Lobbying-and-CSR-policies.pdf
41
Thomas P. Lyon & John W. Maxwell. Astroturf: Interest Group Lobbying and Corporate Strategy.
Journal of Economics & Management Strategy, 13.4 (2004): 561-597.
42
“Early drafts of the Lobbying Disclosure Act of 1995 included provisions requiring the registration of
firms engaged in astroturf lobbying and the reporting of the expenditures made on those actions. Those provisions,
however, failed to make it out of committee. As the bill’s sponsor, Senator Carl Levin, testified before a House
committee considering the bill: ‘Every reference to grass roots lobbying—and even to paid efforts to stimulate
artificial grass roots lobbyinghas been deleted from the bill . . . I am personally disappointed that we were unable
to do anything to address the issue of a form of grassroots lobbying referred to as astroturf lobbying, in which
lobbyists hire professional experts to run phone banks and generate mail in support of their efforts. In my view,
these paid, professional astroturf campaigns bear nothing in common with the genuine grassroots activities.’”
Thomas P. Lyon & John W. Maxwell. Astroturf: Interest Group Lobbying And Corporate Strategy.” Journal of
Economics & Management Strategy, 13.4 (2004), 561-597, page 580.
43
In Citizens United vs. Federal Election Commission the Supreme Court held 5-4 that tax-exempt
501(c)(4) “social welfare” groups such as the National Rifle Association or the Sierra Club were allowed to make
political expenditures, as long as the group’s “primary” purpose is not electoral advocacy. Moreover, these groups
are required to disclose only their total political expenditures, but not the identities of their donors. In
Speechnow.org vs. Federal Election Commission, the DC Circuit of Appeals ruled that non-profit organizations
created to make “independent” political expenditures (those not formally associated with a particular campaign) did
not have to be organized as Political Action Committees (PACs), and hence could take unlimited amounts of money
from corporations as well as from individuals.
44
Sustainability LLC, Influencing Power: Reviewing the conduct and content of corporate lobbying
Washington, DC (2005).
45
Magali Delmas, Jinghui Lim & Nicholas Nairn-Birch. Corporate Environmental Performance and
Lobbying. Academy of Management Discoveries, 2.2 (2016), 175-197.
22
46
Thomas P. Lyon & Haitao Yin. Why Do States Adopt Renewable Portfolio Standards?: An Empirical
Investigation. The Energy Journal, (2010): 133-157.
47
https://www.forbes.com/sites/sarahlandrum/2017/02/22/how-companies-are-saving-money-and-making-
millennials-happier/#32ad49592591
48
Innovest and KLD Research were subsequently acquired by RiskMetrics, which in turn was acquired by
MSCI.
49
https://b8f65cb373b1b7b15feb-
c70d8ead6ced550b4d987d7c03fcdd1d.ssl.cf3.rackcdn.com/comfy/cms/files/files/000/000/991/original/General_Cli
mate_Questionnaire.pdf
50
ESG Ratings Methodology: Executive Summary, MSCI ESG Research, February 2017.
https://www.msci.com/documents/10199/123a2b2b-1395-4aa2-a121-ea14de6d708a
51
A related offering is the MSCI KLD 400 Social Index, which “comprises companies with high
Environmental, Social and Governance (ESG) ratings and excludes companies involved in Alcohol, Gambling,
Tobacco, Military Weapons, Civilian Firearms, Nuclear Power, Adult Entertainment, and Genetically Modified
Organisms (GMO). The Index aims to serve as a benchmark for investors whose objectives include owning
companies with very high ESG ratings and excluding companies involved in the production of products and services
with high negative social and/or environmental impact.”
52
Remco Van den Heuvel. How Robust are CSR Benchmarks? Comparing ASSET4 with Sustainalytics,
Masters Thesis, Tilburg University (2012).
53
Remco Van den Heuvel. How Robust are CSR Benchmarks? Comparing ASSET4 with Sustainalytics,
Masters Thesis, Tilburg University (2012).
54
https://www.globalreporting.org/Information/about-gri/Pages/default.aspx
55
GRI 415: Public Policy, Global Sustainability Standards Board.
https://www.globalreporting.org/standards/gri-standards-download-center/gri-415-public-policy/2016
56
GRI 415 also provides more detailed guidance on political contributions than Asset4 or Sustainalytics.
“The reporting organization shall report the following information: a. Total monetary value of financial and in-kind
political contributions made directly and indirectly by the organization by country and recipient/beneficiary. b. If
applicable, how the monetary value of in-kind contributions was estimated.”
57
https://www.oecd.org/gov/ethics/Lobbying-Brochure.pdf
58
http://files.politicalaccountability.net/index/2016CPAZicklinIndex.pdf.
59
http://www.transparency.org/ news/pressrelease/fostering_transparency_in_lobbying_activities_in_france
60
Steven R. Barley. Building An Institutional Field to Corral A Government: A Case To Set An Agenda
For Organization Studies. Organization Studies, 31.6 (2010), 777-805.
61
https://www.unpri.org/download_report/8535
62
The two firms merged in 2015. http://www.vigeo-eiris.com/vigeo-and-eiris-completed-their-merger-2/
63
See the press release from Vigeo, “Vigeo to rate corporate lobbying practices,” July 1, 2010.
https://www.transparency.org/news/pressrelease/20100618_france_vigeo_to_rate_corporate_lobbying_practices
64
http://www.vigeo-eiris.com/wp-
content/uploads/2013/06/20130613_PR_Lobbying_Study_EN_pdf.pdf?x60030
65
https://www.csrhub.com/files/Vigeo%20Thematic%20Report%20sample.pdf
66
http://united4thepeople.org/state-and-local-support-2/#AddRes
67
https://www.mprnews.org/story/2010/07/27/target-campaign-donations
68
Thomas C. Lawton, Jonathan P. Doh, and Tazeeb Rajwani. Aligning for Advantage: Competitive
strategies for the political and social arenas. Oxford University Press, 2014.
69
Joshua Daniel Margolis and James P. Walsh. People and Profits?: The Search for a Link Between a
Company's Social and Financial Performance. Psychology Press, 2001. Herman Aguinis and Ante Glavas. “What
We Know and Don’t Know About Corporate Social Responsibility: A Review and Research Agenda. Journal of
Management 38.4 (2012): 932-968.
70
Stuart L. Hart and Gautam Ahuja. Does It Pay to be Green? An Empirical Examination of the
Relationship between Emission Reduction and Firm Performance. Business Strategy and the Environment 5.1
(1996): 30-37. Andrew King and Michael Lenox. Exploring the Locus of Profitable Pollution Reduction.”
Management Science 48.2 (2002): 289-299.
71
Stephen Ansolabehere, John M. De Figueiredo, and James M. Snyder Jr. Why is There so Little Money
in US Politics? Journal of Economic Perspectives 17.1 (2003): 105-130.
23
72
Michael Hadani and Douglas A. Schuler. In search of El Dorado: The elusive financial returns on
corporate political investments. Strategic Management Journal 34.2 (2013): 165-181.
73
Aneel Karnani. Doing Well By Doing Good: The Grand Illusion. California Management Review, 53.2
(2011), pp.69-86.
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We review articles about corporate political activity (CPA) published in Business & Society since its beginnings 60 years ago and in a set of other leading management journals over the past decade. We present evidence that most studies of CPA use the political markets’ perspective. Under the premise that the contemporary political environment has changed significantly since the inception of the political markets’ perspective, our review asks two interconnected questions. First, to what degree have changes in the political environment challenged the ability of the political markets’ perspective to understand the pillars of politics: issues, institutions, interests, and information? Second, to what degree have CPA scholars augmented or diversified their theoretical arguments to accommodate these changes in the political environment? We document the CPA literature across these dimensions and questions and note that many scholars are already adopting other theories side by side with the political markets’ perspective.
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The purpose of this study is to theoretically and empirically extend the debate of the curvilinear linkage between corporate sustainability performance and its reporting practices (CSPR) and corporate financial performance (CFP) over its linearity assumption. The study focused on the financial and non‐financial metrics of the top global energy firms from 2006 to 2018 to accomplish this objective. It employed an estimated generalized least square method on the balanced panel of 3211 firm‐year observations. The findings assert the existence of a curvilinear relationship by spurning the linearity assumption. Further, results revealed a significant inverted U‐shaped relationship between CSPR and CFP. In addition to this, the investigation reveals that this relationship exists with the environmental and social attributes of CSPR. While the governance attribute was initially insignificant, however, it also exhibits a significant inverted‐U relationship after interacting with earnings. As a result, it adds to the existing literature by identifying earnings as a significant moderator in explaining the curvilinear relationship between CSPR and CFP. The inverted U‐shaped relationship may assist top management in developing a sustainable social and environmental policy based on a reactive strategy and help in formulating strategies to balance the value‐cost trade‐off for sustainable development.
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The disaggregation and geographic dispersion of global value chains (GVCs) have expanded the responsibility of international buyers from firm-level corporate social responsibility (CSR) towards social sustainability of their emerging country suppliers. We theorize, in this paper, that the effectiveness of lead firms’ GVC governance strategies for social sustainability—which can be audit-based or cooperation-based—depends on the local institutional context of the supplier. Supplier country institutions exert legal and civil society pressures for social sustainability, which shape suppliers’ attitude and receptiveness towards lead firm requests. Using unique primary data from 356 garment and footwear suppliers in 11 emerging countries, which supply to Western European or North American buyers, we show that GVC governance strategies are particularly effective for suppliers’ social sustainability implementation when there is ‘contextual fit’ with local institutional pressures for social sustainability in the supplier country. Our study identifies the boundary conditions of GVC governance modes, and demonstrates a complementary relationship between organizational arrangements and their institutional-level counterparts in the context of social sustainability.
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Between 2006 and 2009, firms spent over a billion dollars lobbying on climate-related bills and issues. Such spending is largely perceived as a strategy by industry to oppose regulation. Research has barely begun to investigate how firm-level performance on salient political issues affects corporate political strategy. In this paper, we address this issue in the context of the recent climate change policy debate in the United States. We propose a U-shaped relationship between greenhouse gas (GHG) emissions and lobbying expenditures. To test our proposition, our study leverages novel data on firm-level GHG emissions and lobbying expenses aimed specifically at climate change legislation. Our results, based on 1,141 firms from 2006 to 2009, suggest that both dirty and clean firms are active in lobbying, which challenges the view of adversarial corporate strategy.
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In today's multipolar world economy, strategic alignment is a key determinant of competitive advantage. Coca-Cola, Danone, Diageo, DuPont, Lufthansa and Tata are some of the companies that strive for a pragmatic approach to balancing competitive strategies with political and social obligations. Aligning for Advantage argues that to build and sustain corporate success, companies must synchronize business objectives and market positions with political and regulatory activism and social and environmental engagement. Moreover, to be credible and realizable, these external market and nonmarket strategies need to be equally attuned with corporate vision, values, and culture. The book advances a managerial process and conceptual framework for aligning corporate strategy. In some cases alignment may mean deep, strategically embedded partnerships with governments, NGOs, or other stakeholders. In others, alignment may take the form of looser, temporary collaborations with outside organizations. No matter the approach, the relationship between nonmarket and market strategies should be deliberate and genuine, not accidental or artificial. Truly aligned strategies should reconcile and modulate sometimes conflicting external demands in a way that is appropriate for the corporation's geographic and market positions. In the end, companies must leverage their overall nonmarket strategy as a source of competitive advantage
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Research summary: Citizens United v. Federal Election Commission and subsequent developments created a covert channel for firms to allocate resources from corporate treasuries to political activity. Through the use of a financial market event study of an accidental disclosure of firms' contributions to a Republican nonprofit organization, I examine investors' reactions to covert investment in independent political expenditures. I find that, on average, contributing firms experienced positive abnormal returns around the disclosure event and that these abnormal returns were more positive for firms in heavily regulated industries as well as those previously making campaign contributions to candidates. However, firms that recently faced a shareholder resolution on political spending disclosure experienced negative abnormal returns, suggesting that the controversial nature of covert activity moderated investors' reactions. Managerial summary: The purpose of this study is to examine how investors reacted to an accidental disclosure of firms' investments in “dark money,” a new form of corporate political activity allowed by the U.S. Supreme Court in its Citizens United decision. I find that, on average, investors reacted positively toward firms identified as making these new political investments, especially if the firms previously engaged in electoral politics or operate in heavily regulated industries. However, this reaction turned negative if the firm recently faced a shareholder resolution asking that it voluntarily disclose all of its political investments. An implication for managers is that they should consider their firms' legal and information environments as fully as possible before committing resources to new and potentially controversial political tactics. Copyright © 2017 John Wiley & Sons, Ltd.
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To what extent can competition between companies encourage innovations in sustainability that have the potential to solve some of the world's major challenges? Using a series of case studies, this book pits closely related competitors against each other to examine the progress in and obstacles to the evolution of sustainable innovations in energy efficiency, solar power, electric vehicles and hybrids, wind energy, healthy eating, and agricultural productivity. It delves into the efforts of Tesla Motors to bring about a revolution in personal transportation, and the challenges Toyota and General Motors (GM) confront in commercializing hybrids. It explores the movement to healthy food by cereal companies General Mills and Kellogg's, and depicts the battles between Whole Foods and Walmart for the world's palate. By examining the experiences that particular businesses have had with sustainable innovation, this insightful book reflects upon lessons learned and encourages readers to think carefully about the challenges that lie ahead.
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