Civil society and business ethics

• Prepared for class discussion

• By
• Prof.S.Suryanarayanan
Overview
• Show how the role played by various types of civil society
organizations in society constitutes them as important
stakeholders of corporation
• Examine the tactics that such groups might employ towards
corporations to achieve their purposes
• Discuss the impacts of globalization on the nature and
extent of the role played by civil society towards
corporations
• Discuss the appropriate relationships between business and
civil society
• Assess the role of civil society in providing for enhanced
corporate sustainability
Civil Society as ‘third sector’

State sector Market sector

Government Business

Civil society
sector
Including NGOs,
pressure groups,
charities, unions,
etc
Civil Society Organizations
Civil society organizations include a whole plethora of pressure groups, non-
governmental organizations, charities, religious groups, and other actors that are
neither business nor government organizations, but which are involved in the
promotion of certain interests, causes, and/or goals
Diversity in CSO characteristics
Scope Type
Individual Community group
Grass-roots Campaign group
Local Research organization
Regional Business association
National Religious group
Transnational Trade union
Global Technical body

CSOs
Structure
Activities
Informal
Academic research
Formal
Market research
Co-operative
Policy research
Professional
Information provision Focus Entrepreneurial
Campaigning Natural environment Network
Protests & demos Social issues
Boycott co-ordination Development
Poverty alleviation
Human rights
Animal welfare
Civil Society Organizations as stakeholders

The ‘growth in the number, power and influence of CSOs

represents one of the most important societal
developments in the past twenty years, in terms of how
the dynamics of public debates and government policies
concerning corporate behaviour are changing’ (Yaziji and Doh,
2009: 16)

The stake held by CSOs is largely one of:

• Representing the interests of individual stakeholders
• Representing the interests of non-human stakeholders
 Different types of CSOs
Sectional groups Promotional groups

Membership Closed Open

Represent Specific section of Issues or causes

society
Aims Self-interest Social goals

Traditional status Insider Outsider

Main approach Consultation Argument

Pressure exerted Threat of withdrawal Mass media publicity

through
Degrees of trust in different types of
organization in selected global regions
80

70

60

50
NGOs
40 Business
Government
30

20

10

0
North America Europe Asia Pacific Latin America Global Total

Source: 2009 Edelman Trust Barometer

Recognizing CSO stakes
• Many CSO groups tend to ‘self-declare’ themselves as stakeholders in a particular
issue
• Issuing statements
• Launching campaigns
• Initiating some kind of action towards the corporation
• Self-declaring does not necessarily lead to recognition
• Ignoring CSOs may have detrimental long-term consequences
CSO tactics
• Indirect action
• Sometimes criticised for providing misleading information
• Violent direct action
• Often illegal
• Tends to generate the most publicity
• Is this action ‘civil’ at all?
• Non-violent direct action
• Demonstrations and marches
• Protests
• Boycotts
• Occupations
• Non-violent sabotage and disruption
• Stunts
• Picketing
Boycotts
• A boycott is an attempt by one or more parties to achieve certain objectives by
urging individual consumers to refrain from making selected purchases in the
marketplace
• Four different purposes for boycotts:
• Instrumental boycotts
• Catalytic boycotts
• Expressive boycotts
• Punitive boycotts
 Some well-known boycotts
Target CSO Organizer Dates Main issues Outcomes
company

ExxonMobil Greenpeace, Friends 2001-4 Anti climate change position, including active lobbying Raised awareness and brought (unsuccessful) shareholder
(Esso) of the Earth, People against Kyoto global warming treaty; lack of investment resolutions to the AGM. ExxonMobil has since shifted to a more
and Planet in renewable energy accommodating climate change position

Triumph Burma Campaign 2001-2 Manufacturing operations in Burma Announced withdrawal from the country in 2002
International

KFC People for the Ethical 2003- Cruelty towards chickens in the KFC supply chain Some improvements in practices. Campaign called off in Canada due
Treatment of Animals to new animal welfare plan but continues in US, UK, and several
(PETA) other countries.

PG Tips Tea Captive Animals' 2004 Use of performing chimpanzees in advertisements - Removed advertisements featuring the chimpanzees in 2004, having
Protection Society claimed to reduce animals to ridicule, and to involve used the image for 45 years. Now uses animated animals.
(CAPS) taking young chimps from their mothers, and potential
physical punishment

Body Shop Naturewatch 2006- Sale of Body Shop to L’Oreal, which is part owned by A Naturewatch press release claimed that the Body Shop had lost
Nestlé. Main issues involved L’Oreal’s use of animal millions in revenue in just one year due to the campaign. No change
testing in policy at L’Oreal.

Guess The Coalition to 2007-8 The international clothes retailer Guess sells products Following an international campaign, Guess announced that it
Abolish the Fur Trade made with real fur. would not buy fur after September 2007, and would stop selling fur
(CAFT) in their 800 shops worldwide by April 2008.

Heinz Stonewall 2008 Company accused of discrimination against Ad is investigated by Advertising Standards Authority. Heinz sticks
homosexuals after it dropped a UK advert featuring two to decision not reinstate ad despite a motion being filed in
men kissing following the receipt of more than 200 Parliament condemning decision.
customer complaints
CSO accountability
• CSO stakeholders might be said to include:
• Beneficiaries
• Donors
• Members
• Employees
• Governmental organizations
• Other CSOs
• General public (especially those who support their ideals)
• Recently, growing number of organizations similar to CSOs being
initiated within business
• Accountability of CSOs to supposed beneficiaries tends to raise
most debate
• Force agendas on beneficiaries without understanding needs
• Limited involvement of beneficiaries in decision making
• CSO donor interests receive higher priority
• Lack of effective mechanisms for beneficiaries to feedback on CSO performance
Globalization and civil society organizations

• Globalization reshaping relations between corporations and

CSOs:
• Engagement with overseas CSOs
• Potentially new set of unfamiliar groups
• Many developing and transitional economies lack strong and
institutionalized civil society (e.g. China)
• Global issues and causes
• Problems that transcend national boundaries (e.g. climate
change, water conservation, human rights)
• Critique of globalization
• Globalization of CSOs
• ‘the resistance will be as transnational as capital’
• Global civil society
Charity and community involvement
• Starting point for a consideration of business involvement in civil
society
• One-way support – benefits communities and civil action but does not
usually allow them much voice in shaping corporate action.
• Types of involvement:
• Corporate foundations to channel philanthropy
• Employee volunteering. This allows achievement of the following aims:
• Making a meaningful social contribution
• Contributing to the development of their human resources
• Enhancing the firm’s reputation
• Increasing employee morale
• Building ‘social capital’ within the community
Business-CSO collaboration
• Closer and more interactive relations between civil society
and corporations
• Sometimes called social partnerships
• Limitations of business-CSO collaboration
• Difficulties managing relations between such culturally diverse
organisations
• Difficulties ensuring consistency and commitment
• Partnership appear to mask continuing hostility and/or power
imbalances between the ‘partners’
• The question of power imbalance
• The distribution of the benefits of partnerships
• CSO independence
 Some examples of business-CSO
collaborations
Name of Country Main CSO(s) involved Main corporation(s) Launch Aims and objectives
initiative involved
Change for International UNICEF Major airline carriers incl. 1987 To collect unused currency from passengers
Good Alitalia, British Airways, and convert it into life-saving materials and
Cathay Pacific, JAL, Quantas services for needy children
Marine International Originally developed by Unilever (at outset), now 1997 Establishment of standards and independent
Stewardship WWF-UK, now MSC is an thousands of retailers, certification for sustainable fishing
Council independent CSO in itself suppliers and restaurants
(MSC) globally
Ethical UK/ 15 NGOs & 3 trade unions 50+ companies, incl. Gap, 1998 To define best practice in ethical trade and
Trading International incl. International Jaeger, Monsoon, Tesco, Body enable firms to implement labour standards in
Initiative Confederation of Free Shop international supply chains
Trade Unions, Anti-Slavery
International & Christian
Aid
Juice UK Greenpeace Npower 2001 Development of a ‘clean’ electricity product
which is based on renewable energy sources.
Sustainable US/ The Rainforest Alliance Kraft Foods 2003 To bring coffee beans certified for social and
Coffee International environmental sustainability into Kraft’s
mainstream brands, including Kenco Yuban,
and Carte Noir.
International Indonesia Oxfam Unilever 2004-5 Development of a research programme to
Business and explore the nature of Unilever’s Indonesia
Poverty business and its impacts on people living in
Reduction poverty.
HSBC International The Climate Group, HSBC 2007 To combat climate change by ‘inspiring action
Climate Earthwatch Institute, by individuals, businesses and governments
Partnership Smithsonian Tropical worldwide’, including programmes in
Research Institute, WWF education, research, conservation, and
engagement with business, government and
communities.
Green Works US Sierra Club Clorox 2008 Endorsement of ‘green’ line of cleaning
products
 Drivers towards business-CSO collaboration

Drivers for business engagement Drivers for CSO engagement with

with CSOs business
Consumer expectations Growing interest in markets
NGO credibility with public Disenchantment with government as
provider of solutions
Need for an external challenge Need for more resources
Cross-fertilisation of thinking Credibility of business with government
Greater efficiency in resource allocation Cross-fertilisation of thinking

Desire to head off negative public Access to supply chains

confrontation and protect image

Desire to engage stakeholders Greater leverage

Social enterprise
The escalating number of CSO alliances with
businesses suggests an increased attention in the
sector to using market-based solutions to address
social problems
• Venture Philanthropy, also called philanthrocapitalism
• application of venture capital techniques to grant making
• Social enterprise
• Has developed since the 1990s
• Novel way of embedding dual social and economic goals into the
nature of organizations: social enterprises are designed to address
social problems from the outset
 Key differences between social enterprise, CSOs &
corporations

Social Enterprise Civil society Corporation

organization
Aims Social and economic Social value creation Economic value creation
value creation
Role of profit Profit earning; limits on Nonprofit making Profit maximising
profit distribution
Activities Production and trade of Production of social Production and trade of
social goods and goods and services, goods and services
services campaigning, advocacy,
research, grant-giving,
etc
Funding Self-funding (at least Grants, donations, or Self-funding
partially) membership dues
Governance Based on participation Based on participation Based on accountability
and democracy amongst and democracy amongst to providers of capital
stakeholders stakeholders
Problems with social enterprise
• Compromise of social mission
• Demands of the marketplace can lead to ‘mission drift’
• Moral legitimacy
• The more business-like social enterprises become, the less moral
legitimacy they may have for key stakeholders
• Escalation of risk
• Social enterprise tends to emphasise risk taking and innovation
which can pose threats to essential services and clients
• Prioritisation of profitable markets
• The need for sustainable revenue encourages a focus on potentially
profitable social goods and services, rather than unprofitable areas
where clients might be more needy
Civil Regulation

Civil regulation is the ability and power of CSOs to shape, influence or

curb business practice
• Focus on relations and outcomes
• Key drawback is that regulation is voluntary

Key points
• Civil society can act as a conduit through which individuals citizens can exert
some kind of leverage on, or gain a form of participation in, corporate decision-
making and action
• CSOs are now part of systems or regimes of ‘global governance’ (e.g. Vogel 2008)
Balancing competing interests
• Civil society: wide variety of disparate actors promoting different issues
• Business must take account of these different issues simultaneously
• e.g. energy industry – wind power
• Groups supporting wind power as clean source of renewable energy that supports local areas
financially
• Groups against wind power because they ‘despoil’ the countryside
• This is a battle of green vs. green
Fostering participation and democracy

“Organizations…that affect you and your community,

especially when they affect the material foundations of
your self-determination, must be able to be influenced by
you and your community…What are required are new
forms of democratic governance so that people can
determine their own futures in a sustainable environment”
(Bendell, 2000:249)
Summary

• Discussed the role that civil society has played in business ethics
• Taken a fairly broad definition of what constitutes civil society
• The representational nature of CSO stakes makes their claim rather more indirect
than for other constituencies
• Gradual shift in the nature of business-CSO relations from primarily
confrontational to a more complex, multifaceted relationship that still involves
confrontation, but also charitable giving, collaboration and aspects of civil
regulations