The foreign policy of global business: collaboration between business, government and NGOs on social issues

Historian Thomas Macauley put it well. “It is evident that many great and useful objects can be attained in this world only by cooperation.” International relations (IR) used to be about diplomacy between states, conducted in secret at the top level beneath the chandeliers of the Foreign Office. There is still an element of that, but as Fareed Zakaria has said, “power is shifting away from nation states up, down and sideways”. The internet has fused media, politics and economics to the point where it is virtually impossible to change one of these areas without impacting the other.

Dialogue and collaboration

In other words, we live in an interdependent and interconnected world where command and control has, to a large extent, been replaced by two-way communication and radical engagement, using a variety of virtual media, globally. As a result, many actors are now involved with foreign policy influence, partly reflected in an increase in partnering between business, government and NGOs, especially in emerging countries on social and environmental issues. A good recent example of this was the collaboration between mayors, state governors, philanthropists and business leaders in the US, united in opposition to President Trump pulling out of the Paris Climate Change Accords.

IR theorists have long argued that in a more transparent and networked world, the involvement of business and civil society, not just NGOs, but academia, think-tanks, individuals with smart phones and pressure groups in public policy is inevitable. Issues such as smart cities, poverty reduction, healthcare, education, water management, especially in support of the sustainable development goals are sometimes led by the World Business Council for Sustainable Development. This makes sense given that some companies (Ford) have budgets larger than some countries (Denmark). In fact, of the 175 largest nation-states and private firms, 112 are corporations, in some cases often resembling governments.

State as strategic enabler

According to the USC Center on Public Diplomacy, “public diplomacy must accomplish what traditional governments can no longer be expected to accomplish (or are no longer willing to fund).” With power relations more diffused, boundaries between institutions blurred and between countries eroded, the state has become more of a ‘strategic enabler’, part of a broader web of ‘soft power’. This is where business provides its capabilities and capital in support of economic and social development, especially in emerging countries, in exchange for stable regulatory frameworks and market access. The ‘chessboard’ view of 190 competing states remains accurate much of the time, but there is another ‘networked web’ view, less of sovereign power and more of connection across boundaries, as Anne-Marie Slaughter refers to it (The Chess-Board and the Web, 2017).

A good example is Mastercard’s Center for Inclusive Growth, which connects microenterprise entrepreneurs to vital networks, such as financial service networks, social networks and human capital development networks.  Although it is early days and much research needs to be done, not least in ASEAN, many multinationals are taking responsibility for environmental and human rights conditions in their global supply-chains, signing on to a growing network of private-public partnerships and multilateral standards organisations. More and more businesses understand that in the web world, the state of health, education, opportunity, environmental conservation and security in the communities where they manufacture and market is as much their problem as the government’s. Companies such as Vodafone and Standard Chartered Bank, which operate in emerging regions, such as Africa, India and Asia, have strategic staff, sometimes called ‘corporate diplomats’, who coordinate public relations, digital media, public affairs and social responsibility programmes, globally, regionally and locally, often involving multi-stakeholder dialogues on key issues, sponsorship activities and community support.

Adding economic and social value

Within the context of the so-called ‘crisis of capitalism’, large, international companies have begun to redefine success in terms of positive impact both for them and society, where shared value is essential and there is increasing collaboration between government, business and NGOs on sustainability issues. In India, only a few years ago, this author was always asked by companies entering the market, which was the most appropriate NGO to team up with in the state which would host their operation. In Africa, where this author also worked, companies like Microsoft and Exxon Mobil would liaise with Health and Education ministers as well as local community officials and NGOs on local community projects. Coca Cola has won awards for its efforts to become water neutral focusing on reduction, recycling and replenishment in its bottling plants. Shell realised that it needed to involve a wider group of stakeholders launching its ‘Stress Nexus Conversation’ around not just energy, its core business, but the interconnected water and food issues.

Harvard Business School theorists Porter and Kramer have argued in their seminal research that for profit-oriented businesses, it is in their self-interest to take the lead in enabling business and society to cooperate for mutual interest, what they termed ‘shared value’. Unilever is a classic example of a large international company attempting to balance the interests of all its stakeholders, adopting a long-term perspective beyond short-term ‘shareholder primacy’. Indeed its CEO Paul Polman said: “We should focus on our capital, jobs, skills, ideas and taxes that contribute, rather than what we can extract”. In Indonesia and other markets, the company has been independently audited by Oxfam for what it and its supply-chain puts in rather than what it takes out of those countries where it manufactures and markets.

Integrated external engagement

“Integrated external engagement with government, business and civil society is a competitive necessity for most MNCs,” management consultancy McKinsey and Co. noted in 2016, transforming box-ticking social responsibility into the business model of some corporations and an element of competitive advantage. Indeed the same consultancy is now arguing that more institutional investors are recognising environmental, social and governance factors as drivers of economic value.

There is some way to go and companies are slow off the mark, (there is a debate to be had around the growing power of the information titans such as Facebook and Google, just as there was with the financial institutions in the 1980s overstepping the mark), but increasingly stakeholder engagement is increasingly becoming de rigeur for large corporations operating especially in emerging countries and regions. We are witnessing the creation of a new culture of collaboration, which is having a tremendous impact on the field of both international relations, public policy and business studies.