Klaus Schwab: Three Steps To Being a Good Corporate Citizen

Last Updated Jan 4, 2008 12:11 PM EST

With the New Year comes the inevitable: goals, sometimes known as resolutions.

Here's one that's outside the norm: be a better corporate citizen.

In fact, be a good global corporate citizen. That's the call from Klaus Schwab, head of the World Economic Forum and also the Schwab Foundation for Social Entrepreneurship.
He has outlined a new model for corporate citizenship that he has outlined in an article in the latest Foreign Affairs, Global Corporate Citizenship.

The model is three-pronged:

1) companies should work on societal issues by engaging with and involving others, both governmental organization and citizen groups.

2) companies should act as corporate citizens in ways that fit their particular corporate strengths and business model. For instance, Microsoft's Unlimited Potential effort to bring technology to the billions of people worldwide who can't afford computers, or Nestle's decision to use less water in its food production.

3) global corporate citizenship should be good for the long-term health of the business

Why be a good corporate citizen?

Schwab argues that companies already are heavily involved in things that don't directly affect the bottom line:

Companies get involved in the health of workers, the education of employees and their children, and the pensions that sustain them in retirement. Corporations have an impact on everything from air quality to the availability of life-saving drugs. They have become integral to the survival of governments and the political stability of nations and regions.
All these things mean companies get blamed for wrongdoing or failures to act, just as states do. Yet companies want to pretend they don't play such roles in society. Schwab cites a McKinsey survey from 2007 that found that less than half of U.S. senior executives think they should lead discussion of education, health care or foreign policy.

Schwab does not say that companies can handle these problems alone, but that they should actively seek to get involved, as part of doing business.

U.S. companies appear to be failing their citizenship tests. In fact, they seem to give the concept lip service, to the point where a December 2007 report by the Boston College Center for Corporate Citizenship called on companies to 'get real.'

In its third annual "State of Corporate Citizenship in the U.S." report, The Center said that 60 percent of companies say being a good corporate citizen is part of their business strategy. Only 39 percent make corporate citizenship part of their business planning process, and a mere quarter have someone on staff with a corporate citizenship role. Meanwhile, only 36 percent of executives have talked about being a good corporate citizen with employees.

The report also found that while 81 percent of executives support the idea of balancing work and life, less than 46 percent of companies try to create a work/life balance for all rungs of employees, and less than a third offer training or other development for lower-wage employees.

Christopher C. Pinney, the Center's director of executive education, argues that corporate citizenship is the 21st century version of quality control.

A majority of American businesses are ill-prepared to meet global expectation. For example, according to recent studies, 40 percent of U.S. companies that manufacture or import to the EU have not started to prepare for the new European REACH environmental regulations. The costs in terms of fines, lost market share, and damaged reputation could be significant.
With many indicators pointing to an economic slowdown in the U.S., corporate America may also find itself at a political disadvantage as distrust of business and globalization fuel political momentum for protectionism and greater regulation.
So behaving like a corporate delinquent will be bad for business. What's your take? And what kind of citizen is your company?
  • Michael Fitzgerald

    Michael Fitzgerald writes about innovation and other big ideas in business for publications like the New York Times, The Economist, Fast Company, Inc. and CIO. He’s worked as a writer or editor at Red Herring, ZDNet, TechTV and Computerworld, and has received numerous awards as a writer and editor. Most recently, his piece on the hacker collective the l0pht won the 2008 award for best trade piece from the American Society of Journalists and Authors. He was also a 2007 Templeton-Cambridge Journalism Fellow in Science and Religion.