Companies are increasingly joining actions on political and social rights
Over the past decade, we’ve seen a dramatic turnaround in U.S. corporate culture from passive observers to active agents of social change. We’ve seen this in actions like tech firms rejecting President Trump’s entry ban, or major corporations threatening to withdraw from North Carolina and Indiana unless anti-LGBTQ laws were repealed.
But we’ve also seen it in ways that cut to the heart of business. Amid efforts to scrap the requirement that companies disclose their use of conflict minerals, Apple, Intel and Tiffany publicly announced their support for a law that made their own sourcing more difficult, honoring customer expectations that their products would remain “conflict-free.”
Companies are riding social waves to try to claim publicity rewards
Two factors explain the shift.
First, companies are changing their own policies and corporate partnerships in concert with public pressure, not just in reaction to it. Consider the fact that within 48 hours of #BoycottTheNRA’s launch, a dozen companies had pulled their NRA corporate partnership programs. Of course, there have been more mass shootings for several years now, with no such corporate action. Had the students not started their protests and supported a boycott along with other civil society organizations, it’s unlikely that these firms would have acted.
But neither was this an old-style boycott that, over time, built a critical mass of support until companies realized they were losing sales or reputations. Instead, companies saw an opportunity to earn free kudos by quickly severing ties with the NRA. Our research suggests that this reflects a corporate sea change over the past 10 years. As we see in their attitudes toward conflict minerals, corporations care about the issues that matter to their core stakeholders, including consumers and activist shareholders that demand to socially responsible investments. Thus, firms that reduce or eliminate the use of conflict minerals believe they will also gain a competitive advantage. Executives increasingly want to show that they “do the right thing” when they can, as quickly as possible.
Being part of the leading edge on a trending topic lets firms ride a wave of positive publicity, which may then crash down on their competitors. Social media amplifies these effects. For example, #BoycottTheNRA only became the top trending hashtag after most companies had already withdrawn their NRA support, with four times as many tweets two days after the withdrawals than on the day before them. For an astute firm, dumping the NRA before most of its own customers even knew about the boycott not only showcased the firm’s social responsibility but also brought in free publicity via tens of thousands of happy tweets. And these rewards came for cutting a problematic partner that many may have been looking to jettison anyway.
Of course, few companies want to be the first to speak out for fear of being alone, and most firms got “free rider” publicity benefits for adding their names to the growing list of NRA rejecters. Companies know that the opportunity to be rewarded with good publicity or risk being punished with bad publicity is increasingly U-shaped. Those that wait too long to reply — as FedEx did — risk becoming the target of boycotters’ fury, and remembered as “the bad guys.”
Corporations as “good people”
There’s another factor. The companies at the forefront of this trend believe that they do not reduce risk by avoiding it or attempting to contain damage. Instead, by working for what they consider to be positive social change, businesses reduce risk to their brand by contributing to the communities in which they operate. In the phrase that many firms use, they’re hoping to “do well by doing good.”
For example, in response to the international refugee crisis, Starbucks pledged to hire 10,000 refugees by 2022. Starbucks argues that this is not simply charitable; it will also help the company expand its workforce and bolster its global bottom line. In the United Kingdom alone, the firm expects a shortage of 40,000 baristas by 2025. Some groups oppose the move — but clearly Starbucks has calculated that this will appeal to its core customers.
Are the risks greater than the rewards?
These strategies have their risks. The NRA has 5 million members of a market of about 200 million licensed drivers. In the cutthroat car rental business, losing 2 percent of the potential market can make a real difference between success and failure, especially in parts of the country where the NRA is popular.
Traditionally, companies would calculate that the political risks were too high to do anything but ride out the storm. None of these companies had products or services associated directly with the shooter. They hadn’t sold anything to the NRA directly; rather, they were offering discounts to NRA members. In the past, the risk-reward calculus would have suggested that firms do nothing, claiming that good customers were unwittingly caught in the middle of a social debate.
But the student protesters realized, after the Florida legislature and federal government treated them dismissively, that the free market was the best place to appeal to next. And companies decided that prompt action would be rewarded with an upright, responsible image for at least some of their key stakeholders.
How will companies decide which position benefits them the most?
Companies are neither saviors nor devils, but rational actors crafting policies that mirror the societies within which they operate, so that their customers feel loyalty to and unity with the brand.
But what happens when what a company perceives as “doing good” today turns out to be bad for the bottom line tomorrow? Georgia Lt. Gov. Casey Cagle suggested (possibly in violation of Delta’s First Amendment rights) that Delta stop punishing the NRA, or watch Republican lawmakers strike down a sales tax exemption on jet fuel. Absent the possibility for “win-win” social-business strategies that firms often seek, how will Delta respond?
This puzzle shows the risks that firms face when they chase malleable public opinion. And when consumers’ options are based not on quality but upon ideological bent, everyone may end up worse off.
Jason Miklian is a fellow in business and peacebuilding at the Centre for Development and the Environment, University of Oslo.
Jennifer Oetzel is the Kogod International Business Professor at American University.