Strange bedfellows

Companies as activists

May 22nd 2008

From The Economist print edition

Original URL

Activists and companies can move from confrontation to co-operation

Illustration by Satoshi Kambayashi

LAST month Tom Katzenmeyer, vice-president of investor relations at Limited Brands, met representatives of the government of the Canadian province of Alberta. Limited Brands is an American apparel firm with sales of $10.1 billion last year; its best-known division is Victoria's Secret, which sells lingerie. And what was the topic of discussion? The firm's worries over threatened caribou habitats.

This may not seem to have much to do with Mr Katzenmeyer's job, but Limited Brands is one of several firms giving a new twist to the idea of corporate social responsibility by putting money and effort into causes previously championed by activist groups. Sometimes they are even working with campaigners whom they had once fought to a standstill.

In April Kingfisher (the owner of B&Q and other home-improvement brands) and IKEA, the world's largest furniture-maker, joined forces with Rainforest Alliance and WWF to promote forest certification in China by the Forest Stewardship Council, which certifies wood products according to its environmental standards. Soon afterwards Marriott International, a hotel operator, teamed up with Conservation International and the Brazilian state of Amazonas to protect a big area of Amazon rainforest. This will enable Marriott's guests to offset the greenhouse-gas emissions associated with their hotel stays. Last year big companies including General Motors, Rio Tinto and ConocoPhillips got together with environmental groups, including Environmental Defense and the World Resources Institute, to form the US Climate Action Partnership, which called upon the American government to order reductions in greenhouse-gas emissions.

For its part, Limited Brands had been on the receiving end of a campaign in 2004 by ForestEthics, an advocacy group, which called on it to print its 400m catalogues a year on paper from more sustainable sources. The campaign included demonstrations against Victoria's Secret and ads featuring chainsaw-wielding, lingerie-clad models. Mr Katzenmeyer, who says the campaign was “sophisticated and very well done”, agreed to speak to the group, and quickly realised that it knew what it was talking about. The company enlisted ForestEthics to draw up guidelines for sourcing paper, and the two have continued to work together.

Wal-Mart, the world's biggest retailer, set up an ambitious programme in 2005 with the long-term aim of becoming a zero-waste, renewably powered enterprise. Much of the groundwork was done with help from environmentalists, including Adam Werbach, a former president of the Sierra Club. At the start of this year the firm, which says it sold 137m compact fluorescent lightbulbs in 2007, said it would take further steps to help consumers go green. The store has also begun to ask the same of suppliers. “Wal-Mart moves markets and Wal-Mart makes markets,” says Aron Cramer, the head of Business for Social Responsibility, a consultancy.

Still, consumers could be forgiven for taking these projects with a grain of salt. A survey by Greener World Media, a consultancy, found that although companies made plenty of announcements in 2007, real environmental progress was hard to spot. But firms are keen to form partnerships with environmental groups precisely to avoid being accused of “greenwashing”. Besides providing expertise, activists can lend credibility to a company's environmental programmes. Whether activists are “selling out” when they deal with big firms is the subject of much debate. Mr Werbach was at first roundly criticised for working with Wal-Mart, and in March the Sierra Club's endorsement of a “green” range from Clorox, a maker of cleaning products, raised the ire of many of its members.

Yet alliances between companies and activists are not as strange as they might seem. For bosses planning long-term capital investments, says Michael Lenox, an expert on corporate sustainability at Duke University, “uncertainty is more damaging than regulation.” This puts bosses in the same boat as activists: both want regulators to hurry up and set the rules. “We can't solve these big global challenges without business engagement,” says Mr Cramer, “and business can't operate without solving these problems. So there is philosophical alignment.”

Even so, there is a limit to how much voluntary action can achieve, says James Speth, dean of Yale's School of Forestry and Environmental Studies. In a new book, “The Bridge at the Edge of the World”, he argues that environmental externalities are an unavoidable feature of capitalism, and that bosses are trapped in a system that requires them to act unsustainably when they have the chance. “In the end,” he says, “a responsible company is one that is required to be responsible by law.” But until regulators act, companies may find that teaming up with activists is the best hedge against uncertainty.

Copyright © The Economist Newspaper Limited 2008

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