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Corporate Diplomacy Corporate Diplomacy The Strategy for a Volatile, Fragmented Business Environment Ulrich Steger International Institute for Management Development (IMD) withaforewordby Antony Burgmans CEO, Unilever Corporate Diplomacy Corporate Diplomacy The Strategy for a Volatile, Fragmented Business Environment Ulrich Steger International Institute for Management Development (IMD) withaforewordby Antony Burgmans CEO, Unilever Copyright#2003JohnWiley&SonsLtd,TheAtrium,SouthernGate,Chichester, WestSussexPO198SQ,England Telephone(+44)1243779777 Email(forordersandcustomerserviceenquiries):[email protected] VisitourHomePageonwww.wileyeurope.comorwww.wiley.com AllRightsReserved.Nopartofthispublicationmaybereproduced,storedinaretrieval systemortransmittedinanyformorbyanymeans,electronic,mechanical,photocopying, recording,scanningorotherwise,exceptunderthetermsoftheCopyright,Designsand PatentsAct1988orunderthetermsofalicenceissuedbytheCopyrightLicensingAgency Ltd,90TottenhamCourtRoad,LondonW1T4LP,UK,withoutthepermissioninwritingof thePublisher.RequeststothePublishershouldbeaddressedtothePermissionsDepartment, JohnWiley&SonsLtd,TheAtrium,SouthernGate,Chichester,WestSussexPO198SQ, England,[email protected],orfaxedto(+44)1243770620. This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold on the understanding that the Publisher is not engaged in rendering professional services. If professional advice or other expert assistance is required, the services of a competent professional should be sought. Other Wiley Editorial O⁄ces John Wiley & Sons Inc., 111 River Street, Hoboken, NJ 07030, USA Jossey-Bass, 989 Market Street, San Francisco, CA 94103-1741, USA Wiley-VCH Verlag GmbH, Boschstr. 12, D-69469 Weinheim, Germany John Wiley & Sons Australia Ltd, 33 Park Road, Milton, Queensland 4064, Australia John Wiley & Sons (Asia) Pte Ltd, 2 Clementi Loop #02-01, Jin Xing Distripark, Singapore 129809 John Wiley & Sons Canada Ltd, 22 Worcester Road, Etobicoke, Ontario, Canada M9W 1L1 British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library ISBN 0-470-84890-1 Project management by Originator, Gt Yarmouth, Norfolk (typeset in 12/15pt Garamond) Printed and bound in Great Britain by Biddles Ltd, Guildford and King’s Lynn This book is printed on acid-free paper responsibly manufactured from sustainable forestry in which at least two trees are planted for each one used for paper production. Contents Acknowledgments viii Foreword by Antony Burgmans (Unilever) x Preface xii 1 Introduction and Overview 1 1.1 Yes, You Can Get Away with It 1 1.2 What Corporate Diplomacy Is All About 6 1.3 A Summary of the Research Findings 7 2TheTangledWorld–TrendsandCountertrends25 2.1 What’s New About Globalization? 26 2.2 Globalization and Its Fears 31 2.3 The Predictable Countertrend: Globalization Critique 35 2.4 Backlash Against Corporations 40 3 The Players in the Global Village 45 3.1 Back to the ‘‘Security State’’? 45 3.2 Global Companies 54 3.3 The Emergent ‘‘Civic Society’’ 58 3.4 Organized Crime and Terrorism 64 3.5 Media 68 vi Contents 4HowBusinessHasManagedNon-MarketInteractions uptothePresentDay73 4.1WhereIndustryFailed:TheLessonsofMonsanto73 4.2DoStakeholdersMatter?84 4.3GenericStrategiesforDealingwithBusiness EnvironmentPressure89 4.4The‘‘TransmissionBelts’’thatin£uencethe BusinessEnvironment101 4.5WhyCompaniesAreBecomingMoreVulnerable: TheRoleofBrands106 4.6Don’tLookBack114 5DetectingandPreventingTroubleAhead121 5.1TheNeedforanEarlyAwarenessSystem(EAS)121 5.2PreventingTrouble–TheIssueChecklistfor Companies132 5.3HowDoesItLookfromtheNGOPointofView? TheActivistChecklist155 6MakingCorporateDiplomacyHappen173 6.1BuildingaRobustBusinessCase173 6.2TheHarderPart:ImplementingaStrategy176 6.3ProgressiveCompanies–RetardedIndustry Associations? 183 6.4 Where the Nice Guys Meet 194 6.5 Can Financial Markets Drive ‘‘Corporate Citizenship’’? 200 7 Corporate Communication 205 7.1 What Is the Di¡erence? 205 7.2 Target Groups for Corporate Communication 212 7.3 The Content of Communication 216 7.4 How to Solve the Worst Case Scenario 218 Contents vii 8‘‘Suits’’and‘‘Sandals’’:BalancingCon£ictand Co-operation223 8.1HowNiceWillNGOsBetoCorporations?223 8.2MappingtheBattle¢eld231 8.3Problem-solvingCo-operation:TheLessonsfrom theMarineStewardshipCouncil(MSC)235 8.4ExxonMobil:EnjoytheConfrontation241 9LearningfromThreeReferenceExamples247 9.1ABB:FromCleaninguptoPioneeringCorporate SocialPolicy247 9.2DaimlerChrysler:ResponsivenessandDetermination257 9.3Shell:WhatDoesItMeantoBeaSustainable EnergyCompany?268 AppendixI–BusinessCasevs.BusinessEthics285 AppendixII–RelevantIMDCaseStudies291 Further Reading 293 Index 295 Acknowledgments Asalways,inthisbookIhavecollected,processedandframedtheideas, experiencesandsometimesthesu¡eringofotherpeople,takingadvan- tageoftheuniquepositionthattheInternationalInstituteforManage- mentDevelopment(IMD)occupies–beingcloseenoughtobusiness to see what is happening but still detached enough to observe. So my ¢rst thanks go to the literally scores of executives from global com- panies who, in the constant stream of interviews, discussions, dinner conversations and questions, moulded my concepts and thinking to £ow like a river shaping its bed as it goes along. Most in£uential among them were the ‘‘standard bearers’’ in IMD’s Learning Network, my role models for Corporate Diplomacy: Hans Adams, Dow Chemical Co.; Ruth Blumer, Sulzer Ltd.; Jeroen A. Bordewijk, Unilever BestFoods; Peter Hughes, Philip Morris Int’l SA; Bart Jan Krouwel, Rabobank; Teresa Presas, Tetra Pak Int’l; Michael Robertson, ABB Group; Shawqi Hamdan Sajwani, Dubai Aluminium Co. Ltd.; Michael Schemmer, Bombardier Transportation GmbH; Thomas Strei¡, Swiss Reinsurance; and Pierre Trau¥er, De Pont de Nemours Int’l SA. The intimate sharing of experience was the real litmus test for the conceptual thinking outlined in this book. Next in line is the great team of the Forum for Corporate Sustain- ability Management at IMD who supported my research in many ways: Aileen Ionescu-Somers, Kay Richiger, and especially Oliver Salzmann who participated in the literature and case research (as did Acknowledgments ix Benjamin Bieber) and took care of the ¢nal shape of the manuscript. Debbi Brunettin improved my Teutonic English with patience and competence. My colleagues Derek Abell, Joe DiStefano, Jay Galbraith, George Haour, Jan Kubes, Jean-Pierre Lehmann and Piero Morosini were conspicuous in their readiness to give me feedback, encourage- ment, and trails to follow. The academic literature was less relevant than I had originally hoped. Nevertheless, I owe a lot to my discussions with, among others, Stuart Hart, Forest L. Reinhardt, Paschen von Flotow and Jan-Olaf Willums. Being closer to the corporate side, it was helpful that Thilo Bode (formerly with Greenpeace, now with Food Watch), Chris Hails, and Paul Steele (World Wide Fund for Nature [WWF]) and especially Heike Leitschuh-Fecht with her ‘‘go-between’’ experience, challenged me along the way and helped me to better understand how NGOs (non-governmental organizations) are evolving and how they perceive the issues. In the same category I should like to include John Elkington, the most wonderful person to disagree with, and his team from Sustain- Ability. However, in the end it is a very personal book that re£ects my own experiences and shows how my views and thinking have developed through observation, research, and constant exposure to global managers. Consequently, I take sole responsibility for any errors, short- comings and £aws that may be found in the book. Foreword Weoperateinaglobalbusinessenvironmentinwhichtherateandscale ofchangecanbeperplexing.Whilepro¢tmayappeartobetheone andonlyreasonthatweareinbusinessthereismoretobusinessthan justpro¢tablegrowth. Somepeoplearesuspiciousofanyassociationbetweensocietyand companies.But,asUlrichStegerpointsout,‘‘Companiesareinter- twinedwiththesurroundingsociety.’’AtUnileverwebelievethisand livethis.CorporateSocialResponsibilityisintegraltoouroperating tradition.Wealsohaveasystemofethicalprinciples,theCodeofBusi- nessPrinciples.Thereisnothingnewinthis,ithasalwaysbeenthe wayourcompanyrunsitsbusiness–thoughitisnowreassuringly fashionable. The reasons are simple enough. Millions of people put their trust in us each day for their food, their household hygiene and grooming. We must retain that trust. People expect us to be accountable for what we do. That is why we have been engaged in making our operations more transparent through stakeholder dialogue and reporting. Running a business that meets the needs of stakeholders (consumers, customers, suppliers, shareholders, etc.) can also release social value. In this book, Ulrich Steger cites the example of the Marine Stewardship Council (MSC). Unilever founded the MSC together with the World Wide Fund for Nature to establish sustainable ¢shing. As of 2005, Uni- lever aims only to buy and process ¢sh from sustainable sources. We Foreword xi will inform the consumer of this decision and are certain that the consumer will prefer ¢sh products obtained according to sustainable methods. If our colleagues in the industry do the same, this will be a tremendous impulse for the entire project. In addition, it is easy for managers and people in corporations to underestimate the potential impact of their skills. Unilever is a manu- facturer of branded products and we are good at communicating with people and training them. We are using
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