Skip to content

Latest Stories

Top Stories

The future of corporate responsibility is company peer pressure

The future of corporate responsibility is company peer pressure
Getty Images

Long is a senior strategic communications consultant with public, private, and not-for-profit experience. She holds a doctorate in Political Science and a Master of Public Health.

Consumers are demanding corporate responsibility (CR) and companies are responding. It’s an odd demand in that it isn’t about a company’s product or service they want to buy, but about the general behavior of a company from which they may not buy. Companies cannot easily ignore this demand if their bottom lines and reputations depend on consumers. This caveat is important: consumers’ CR demand has serious pull, but only over business-to-consumer companies (B2C) that depend on them. Business-to-business companies (B2B), which depend on other companies, do not feel the same pull from this demand. When the sheer number and growth of B2B companies is considered, it is clear that CR will never reach its full potential unless it reaches these companies.

Regulations would be an obvious means to supplement consumers’ limited B2B reach, but CR regulations affecting B2B companies have been slow to pass and cannot follow B2B companies’ exchanges across borders.

Another means would be for one company to put a demand on another company or other companies. The trick is that companies will only make CR demands on other companies, and other companies will only respond to those demands, if they have a good reason. This good reason leads right back to consumer demand. If consumer demand can push B2C companies to adopt CR reforms – even behemoths like Gap or Google – then consumers demand can also push B2C companies to push B2B companies to adopt CR reforms.

Sign up for The Fulcrum newsletter

Importantly, B2C companies can best influence B2B companies with which they do business. Even large B2C companies depend on many companies to produce whatever they sell. These companies make up their value chains. Coca-Cola’s value chain includes ingredient companies for sugar. Consumers can demand Coca-Cola adopt CR behavior but not Coca-Cola’s foreign sugar suppliers. Consumers therefore demand Coca-Cola adopt CR standards and work only with suppliers that meet those same standards. If irresponsible suppliers pop-up in Coca-Cola’s value chains, such as sugar companies involved in land grabs, consumers will directly punish Coca-Cola by buying from PepsiCo or joining boycotts until Coca-Cola reactively “corrects” the problem. To proactively limit consumer punishment, Coca-Cola proactively pledges not to buy from suppliers involved in land grabs.

Consumers’ demand for large B2C companies to ensure CR in their value chains is becoming the norm. This norm grew from the post-Cold War offshoring boom of the 1990s. As more production moved offshore, the less American consumers could identify who or what was involved in the things they bought. Their limited knowledge was brought home by the series of value chain scandals beginning with the infamous Nike sweatshop exposés. Student protesters reacted to Nike’s exploitation of workers in substandard foreign factories out of American regulators’ reach. Their reaction created a new generation of consumer activism in America’s long boycott history that increasingly holds B2C companies ethically responsible for their value chains’ behavior. Some even look to countries like France as a CR future as having made this responsibility a legal one.

Although this all sounds good on paper, several weaknesses limit B2C companies’ CR impact in their value chains.

The first weakness is related to the “how” question: how can B2C companies ensure CR in their value chains – especially complex value chains containing thousands of B2B companies? The most effective way a company can make another company adopt certain CR standards is by including those standards in contracts. Contracts pass responsibility from supplier to supplier like a virus. But B2C companies have contracts with their direct suppliers, meaning they must rely on direct suppliers to pass the standards to their own suppliers and so on through the value chain. Merck passes CR through its value chains of nearly 60,000+ members by adding its Responsible Sourcing Principles to direct supplier contracts and requiring those suppliers to apply the Principles in their own supplier contracts. CR standards must be passed by contracts all the way to the companies sourcing raw materials. If one layer fails, consumers may hold Merck responsible.

B2C companies may not be able to ensure all suppliers pass CR standards to the next layer of suppliers. Sometimes this is a matter of not wanting to do so. As an Oxfam representative said of sugar-related land grabs: “companies don’t want to dig under the surface of this. They don’t want to know.” Sometimes this is a matter of not being able to track the CR standards through every layer of supplier contracts. Take Turkish beet sugar. Turkish farms are small and getting smaller due to inheritance laws. B2C companies do not buy from these small farms but from middlemen that deal with regions of farms. These middlemen’s sourcing practices are not easily followed, nor are the farming practices of each producer clearly documented.

B2C companies may also run into situations in which suppliers refuse to accept CR – or any other – standards. They can find another supplier, but there are cases in which there are no other adequate options. Consider Qualcomm, which held a monopoly over smartphone chips that enabled it to set its own terms over Apple. But even dominant chip companies are dependent on others, like the Dutch company ASML that makes the machinery necessary to make advanced chips or Chinese rare earths suppliers.

The second weakness is the approach’s potential crossover with “abuse of dominance.” Large B2C companies that dominate their supply chains may be better able to push their B2B suppliers to adopt certain behavior. DeBeers, which controlled the world’s rough diamond trade, is a past example of this dominance. But dominance can become abusive, as European Commission reviews found regarding DeBeers. We must ask if coercion between companies should be actively promoted, even if it is to achieve positive reforms. If so, we then need to ask how to keep coercion to “positive” purposes? Regarding Ferrero’s sourcing of Turkish hazelnuts. Ferrero maintains a Ferrero Farming Values project in Turkey to address agricultural problems such as child labor. It requires participating farmers to sign a charter on responsible practices. But do the farmers always know what they are signing, and – given those farmers’ own challenges – can they always abide by the charter? The pressure to sign may be an act of dominance, even if the behavior required by the charter is overwhelmingly good.

These weaknesses do not mean this B2C approach is not valuable. They mean that more meaningful debate is needed to find how best other uses of consumer demand, with government regulations, may compensate for these weaknesses. Examples may be found in the final Corporate Sustainability Due Diligence Directive – which creates CR requirements on companies’ value chains – if or once it is applied alongside more targeted selection of B2C companies to maximize B2B/value chain reach.

Read More

Blurred image of an orchestra
Melpomenem/Getty Images

The ideal democracy: An orchestra in harmony

Frazier is an assistant professor at the Crump College of Law at St. Thomas University. Starting this summer, he will serve as a Tarbell fellow.

In the symphony of our democracy, we can find a compelling analogy with an orchestra. The interplay of musicians trained in different instruments, each contributing to the grand musical tapestry, offers lessons for our democratic system. As we navigate the complexities of governance, let us draw inspiration from the orchestra's structure, dynamics and philosophy.

Keep ReadingShow less
David French

New York Times columnist David French was removed from the agenda of a faith-basd gathering because we was too "divisive."

Macmillan Publishers

Is canceling David French good for civic life?

Harwood is president and founder of The Harwood Institute. This is the latest entry in his series based on the "Enough. Time to Build.” campaign, which calls on community leaders and active citizens to step forward and build together.

On June 10-14, the Presbyterian Church in America held its annual denominational assembly in Richmond, Va. The PCA created considerable national buzz in the lead-up when it abruptly canceled a panel discussion featuring David French, the highly regarded author and New York Times columnist.

The panel carried the innocuous-sounding title, “How to Be Supportive of Your Pastor and Church Leaders in a Polarized Political Year.” The reason for canceling it? French, himself a long-time PCA member, was deemed too “divisive.” This despite being a well-known, self-identified “conservative” and PCA adherent. Ironically, the loudest and most divisive voices won the day.

Keep ReadingShow less
Fannie Lou Hamer

Fannie Lou Hamer testifies at the Democratic National Convention in 1964.

Bettmann/Getty Images

60 years later, it's time to restart the Freedom Summer

Johnson is a United Methodist pastor, the author of "Holding Up Your Corner: Talking About Race in Your Community" and program director for the Bridge Alliance, which houses The Fulcrum.

Sixty years have passed since Freedom Summer, that pivotal season of 1964 when hundreds of young activists descended upon an unforgiving landscape, driven by a fierce determination to shatter the chains of racial oppression. As our nation teeters on the precipice of another transformative moment, the echoes of that fateful summer reverberate across the years, reminding us that freedom remains an unfinished work.

At the heart of this struggle stood Fannie Lou Hamer, a sharecropper's daughter whose voice thundered like a prophet's in the wilderness, signaling injustice. Her story is one of unyielding defiance, of a spirit that the brutal lash of bigotry could not break. When Hamer testified before the Democratic National Convention in 1964, her words, laced with the pain of beatings and the fire of righteous indignation, laid bare the festering wound of racial terror that had long plagued our nation. Her resilience in the face of such adversity is a testament to the power of the human spirit.

Keep ReadingShow less
Kamala Harris waiving as she exits an airplane

If President Joe Biden steps aside and endorses Vice President Kamala Harris, her position could be strengthened by a ranked-choice vote among convention delegates.

Anadolu/Getty Images

How best to prepare for a brokered convention

Richie is co-founder and senior advisor of FairVote.

As the political world hangs on whether Joe Biden continues his presidential campaign, an obvious question is how the Democratic Party might pick a new nominee. Its options are limited, given the primary season is long past and the Aug. 19 convention is only weeks away. But they are worth getting right for this year and future presidential cycles.

Suppose Biden endorses Vice President Kamala Harris and asks his delegates to follow his lead. She’s vetted, has close relationships across the party, and could inherit the Biden-Harris campaign and its cash reserves without a hitch. As Rep. Jim Clyburn (D-S.C.) suggested, however, Harris would benefit from a mini-primary among delegates before the convention – either concluding at the virtual roll call that is already planned or at the in-person convention.

Keep ReadingShow less