IT is not hard to find an activist group willing to tell big business it does a poor job of handling society's expectations. To find this view privately shared by a high proportion of business executives is rather more surprising.
As many as 70 per cent of managers believe there is room for improvement in the way large companies anticipate social pressure and criticism, according to a survey to be published recently in The McKinsey Quarterly. Only 3.0 per cent of the 4,238 executives questioned in 116 countries think companies in their sector are doing a good job of this.
Big companies appear to be focusing on the wrong tactics, says Lenny Mendonca, a senior partner at McKinsey, who led the online survey of subscribers to the journal. Executives say the tactics most often used are public relations, lobbying of government and regulators, and speeches and other public activities on corporate responsibility by the chief executive.
While nearly half of executives say companies frequently use the media and public relations to manage social and political challenges, only 35 per cent consider this to be one of the most effective tactics. There is a similar mismatch between the 48 per cent who report that business in their sector lobbies government and regulators, and the 25 per cent who regard this as effective.
Tactics that executives regard as more effective, but far less frequently used, all relate to "doing" corporate responsibility, rather than just talking about it. They include transparency about the risks of products and processes, implementation of policies on ethics, human rights and the environment and the involvement of stakeholders such as non governmental organisations.
Only one tactic is both used and regarded as effective in virtually equal measure: the creation of industry coalitions to develop joint responses to socio-political challenges.
Such-coalitions are being built in the mining, electronics, toy and jewellery industries, among others.
"There's a range of tools people believe they could use and they probably need to use multiple ones to be more effective," says Mr Mendonca. But why do so many executives find themselves at odds with what their companies are doing in response to social pressure when they should be in a position to influence things?
"This is hard and it's a complicated area to get an integrated response on," Mr Mendonca replies. "Many executives, even the CEO, don't have experience in it until they get into the heat of the action. Where this ends up being managed is often two levels down in the organisation, for example in the public relations group, and it ends up being a narrower response than it probably should be. Hence the frustration, because it feels like a reactive and tactical response, rather than a strategic one."
All this has to be set in the context of a widespread conversion to the idea that business has a wider role in society. Eighty-four per cent of respondents agree that high returns to shareholders should be combined with "contributions to the broader public good", such as providing decent jobs or protecting the environment.
"Unquestionably, the global business community has embraced the idea that it plays a wider role in society," says Mr Mendonca.
This belief is held most strongly in India, where 90 per cent of executives endorse it. China, by contrast, has the highest proportion of executives -- 25 per cent -- who believe large companies should focus solely on generating the highest possible returns to investors, while staying within the law.
"They're more in the 'wild west' of entrepreneurialism, focusing on the profit opportunity right in front of them," says Mr Mendonca.
The findings also suggest some fifth columnists lurk inside companies, since a surprising 16 per of executives overall say large companies make a negative contribution to the public good.
McKinsey asked executives which social and environmental issues would most affect shareholder value, for good or bad, over the next five years. Job losses and offshoring stand out by a long way.
Managers see most of these challenges - including climate change, data privacy and pension and health care benefits - as posing far greater risks than opportunities. But a few issues are seen more as opportunities than risks, including the growing demand for more ethical, healthier and safer products.
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