Last Updated Apr 28, 2009 7:49 PM EDT
In an era when corporate CEOs are regularly pilloried for their high paychecks and/or the undue risks their companies take, managers need to gain a grounding in the latest approaches in corporate social responsibility. Kellogg's Daniel Diermeier teaches the next generation of business leaders how to manage stakeholders, create sustainable and responsible business processes, and shape corporate messaging to an increasingly wary consumer base.
BNET: In addition to crisis management and corporate social responsibility, your work covers new approaches to regulating global companies through the market. Tell us about this notion of "private politics" and how companies are affected by it.
Diermeier: We've wanted to understand the growing influence of advocacy groups over the last decade as an influence over how businesses conduct themselves. Let's say you're a large consumer brand like McDonalds. One of the challenges they have had is the public concern about nutrition, environmental practices, and so forth. What we've learned is that consumers of a company like McDonalds are more influenced about their consumption choices by these outside groups. Some of these third parties have an agenda around animal rights or the environment. It's really become an alternative form of regulation or political influence that doesn't utilize public institutions like legislatures or the courts, but utilizes the marketplace. The most dramatic example of the past five years deals with Wal-Mart and how they changed their supply chain from something that was based on cost reductions and logistic efficiency to something influenced by a whole range of policies from sustainability to "blood free" diamonds [not from international conflict zones]. If you move Wal-Mart, then there's an entire industry segment that moves with it.
BNET: In my class we studied how Wal-Mart was a leader of the trend to introduce compact fluorescent light bulbs and increase energy efficiency in U.S. homes -- even before their customers really knew they wanted them. Still, my students were very suspicious of Wal-Mart's goals and thought it was a gimmick. How do consumers judge the legitimacy of these kinds of programs in giant companies like Wal-Mart?
Diermeier: Companies go through phases with these kinds of challenges. The first one is denial, the second one is anger, and then at some point they start treating the issues seriously as a management problem. My assessment is that Wal-Mart would not have engaged in developing a lot of these practices if there hadn't been a lot of pressure on them. It was really alien to their culture originally. I would say that Hurricane Katrina was the turning point for them internally, and they have adjusted very dramatically. They are very proactive and strategic about it. It has become a source of pride for the company. This was pretty clear when Lee Scott retired; his tenure was really viewed as a turning point for the company on these issues, and attention to them is reasonably well-integrated into their culture at this point.
BNET: Is this phenomenon impacting other business environments around the world?
Diermeier: If properly done, this kind of advocacy can have an impact on global policies that electoral or regulatory mechanisms really couldn't impact. Rain Forest Action Network has been successful in having certain investment banks accept global sustainability standards concerning what kind of investment projects they fund. If you think about this kind of program, it can impact logging in Indonesia or how Wal-Mart's manufacturing is conducted in China or Vietnam. This is an "exporting," if you will, of Western values into production facilities all around the world using global supply chains as your main mechanism.