2005 Global Report: Citizens of the world

Corporate social responsibility is an increasingly critical part of global comms.

Corporate social responsibility is an increasingly critical part of global comms.

Six years ago, Nissan was on the brink of bankruptcy. The automaker's remarkable turnaround, led by CEO Carlos Ghosn, has become one of those legendary corporate stories to be henceforth recounted in books and business-school lectures.

Now the company is set on answering not just to the balance sheet, but to its stakeholders on its performance as a citizen of the world. To that end, Nissan set up its first corporate social responsibility function last April under the watch of Simon Sproule, VP of global communications, sustainability, and IR. "CSR allows us another level of interaction in the business, particularly in the area of business strategy," Sproule says of the role of communications in this function. "We are contributing to the discussion about the future of the company."

Sproule explains that during the company's financial crisis it had few resources to devote to CSR thinking ? or even corporate philanthropy "Now we are looking to return back to society," he says. "We're looking at how companies are going to evolve over the years."

Nissan is not alone in taking up the CSR challenge. More and more global companies are considering or have recently formalized their CSR initiatives. It is one sign of the times for international corporations operating today that they cannot ignore this trend, nor can it be isolated from operations and other business functions. In order to be truly meaningful, CSR has to be layered into everything, from labor relations to plant operations. It's not about doing good;it's about doing business.

Amid this growing opportunity, global companies are facing myriad challenges, from a media network without rules or borders, debates over how to best structure communications teams around the world, the convergence of political and commercial issues, the use of agencies and integration of marketing disciplines, to the ongoing mission to build and preserve corporate reputation. Ripples that might have been contained within a location or region are now radiated outward in minutes. The world is now a very small place at the center of global conglomerates.

Approaches to citizenship

The CSR push is manifesting itself in a number of ways, including in the appointment of senior leadership to oversee the burgeoning function and the production of CSR reports. Jack Leslie, chairman of Weber Shandwick, says there are two basic approaches that corporations take: One is the way that many US companies thought about it in the early days ? essentially as a function of corporate philanthropy. While that perception is changing, it is not totally out of the mix yet. Several companies still point to their charitable efforts as their primary outlets of CSR.

FedEx, conversely, sees community relations and philanthropy as merely the precursor to a fully fledged CSR infrastructure that the company is beginning to embark upon now. "It is absolutely important as part of the expansion strategy," says Bill Margaritis, corporateVP, worldwide communications and IR. "We are going down that road. The challenge I see is that, if you don't have a common protocol that people can rally around and embrace, you are going to have a misunderstanding or debate about what is right or wrong."

In truth, the definition of CSR, and the ways in which an approach to it play out in companies, is often unique to the organization itself, measured according to individual objectives and not always discernable to the public. But Leslie says that what was traditionally a "European" approach is becoming the defining wisdom overall. As a function of its increasing centralization, CSR is being seen more holistically. "These companies are looking much more deeply into the way the company conducts its business across the board, from senior management to the shop floor."

While the "road" is one that is still being formulated, some companies,like General Electric, are proving themselves leaders. The company embodies the spirit of the second approach to CSR that Leslie alludes to: the way that European companies have primarily integrated it into their operations. "[GE] is the most dramatic example," says Chris Deri, SVP of Edelman's CSR practice. "The other angle for GE is that they say that, because of all this, it is part of our business imperative to be a voice for change and action by other businesses and by government to address these issues as appropriate."

Gary Sheffer, executive director of communications and public affairs at GE, explains that there is a dual structure internally. "We have a head of corporate citizenship, who helps develop umbrella policies, working through our SVP for public affairs," he says. Corporate public affairs works closely with CSR representatives in Europe and Asia. But the other aspect, he says, is that many of the decision-making and CSR programs are executed at the local level. One key factor in the formalization of the function has been the creation of the company's first CSR report, the contents of which extend beyond environmental issues into worker health and safety, interaction with governments and regulatory bodies, and legal and accounting compliance.

From the time it launched its patient assistance program to coincide with its breakthrough leukemia drug Gleevec, Novartis has been linked with corporate citizenship initiatives. "Companies must realize this is not a trend. It is reality, and we must take it seriously and do what's right in the world" says Bob Pearson, head of global pharma communications. The company also signed on forthe UN's global human rights compact and produces a report on its CSR efforts that covers all areas, including corporate governance, business conduct, health and safety, and the environment.

Why CSR now?

There is no simple explanation for why CSR is coming to the fore in so many companies. On a practical level, the European Union has begun to develop regulations around CSR. The lessons that were being learned at the EU's rejection of the GE/Honeywell merger in 2001 are now being translated into action. American companies operating in regions around the world are now fully aware that they have more to contend with than the US government. "What the EU does starts to set the de facto standards for how I have to operate my business," says Deri. "The fact is that we're having to do that not just to have a social license to operate, but also a legal license to operate."

Paul Taaffe, CEO of Hill & Knowlton, says that controlling the supply chain is another reason for the surge. "Most large companies have vulnerabilities in their supply chains, so [they] are increasingly asking for governance or citizenship policies as part of the tender process," he says, adding that the firm itself is sometimes expected to present these on RFPs. He also points out that employees today are more demanding that their companies meet certain standards of citizenship. "If you want the talent, this is a price of entry."

The overarching goal in integrating CSR into business objectives is to combat, in a meaningful and measurable way, the stigma against global corporations, the perception that most, if not all, are agents of greed and destruction, rather than sustainability and social justice. This is not a short-term goal, nor is it necessarily a publicly disclosed pursuit. But, increasingly, communications is an integral part of the process. Not all efforts in this vein stem from US-based companies. Some foreignowned companies have issues in the US related to citizenship and employment.

As the implications behind the acquisitions of US companies by corporations based in China continues to play out in the media and the boardrooms, some organizations already have been at the center of a US social and economic debate. Tata Consultancy Services, a global IT consulting company and a division of Tata Group, based in Mumbai, India, found itself in just that situation over the issues of labor outsourcing and offshoring, which was a heated issue before the last presidential election and continues to be a hot-button topic, particularly on the state level.

"You've got to balance the rational arguments with the emotional arguments," says John Lenzen, VP of marketing and communications for Tata Consultancy in the US. "Rational, that this is really good for business. Emotional is that people are losing their jobs potentially or it causes social change."

To counter the negative perception of the practice, Tata is active in organizations that support the business model, such as the National Association of Software and Service Companies (Nascom), aiming "to educate the market on why this is good for business," Lenzen says. "We're prepared with proactive messaging that shows the business model to make companies more productive, taking the money they are saving to drive growth in other areas."

But CSR also plays a vital role, says Lenzen, particularly as it is an extension of entrenched attitudes that Tata Group has long held. Though it might not be well-known in the US, Tata Group is a huge conglomerate, comprising 91 operating companies. A part of the profits each company delivers to its parent is apportioned to a charitable trust. Historically, Indian conglomerates have been committed to bolstering community resources where government fell short. Lenzen says that attitude is being pushed out into geographies around the world. "We really try to look for opportunities to support the community and give back to the markets we do business in, like opening up training and development centers here," he says. Moreover, the company is reinforcing a commitment to local hiring in its own right, as part of its culture. "As a global company, we've realized we've got to have a global footprint, not just in office space, but in people."

Structuring for comms and CSR

Much depends not only on a company's attitude toward CSR, but also on the structure and authority of its global communications team. Like Nissan, for example, that can mean appointing individuals to head up the function. In many cases, the CSR leader might not have a team working with him or her, but will be, as Deri puts it, "a catalyst internally." But he adds that finding the right person to do this, one who won't be marginalized by the business and who can actually operate as a powerful change agent in the company, is a difficult challenge. "If they can do that," he says, "they can gain the credibility to have an actual management function built under, around,and above them."

Leslie says that, along with greater numbers of CSR officers, more focus is being paid to global strategy by clients. "With our larger global clients, they are much more focused now on realigning their own operations to develop global strategy," Leslie says. "Clients, just like agencies, have tended to be siloed. And agencies are scrambling to deal with that so we can do a better job of crossborder stuff and integration of disciplines. It is getting to the point where the clients are pushing the agencies, rather than the other way around," a trend he says is positive.

In many cases, a powerful CSR program, such as the one GE has implemented, also will be closely aligned with the communications function. But this is not merely a matter of telling the story to external audiences. In fact, some companies will eschew any promoting of what is for many still an internally focused and business-results-driven function. It is a matter of ensuring that actions and words are in concert, and also that regional and local empowerment is not just an ideal, but a reality.

"I am a big believer that structure does matter," says Anne McCarthy, SVP of global communications, SAP. "At the end of the day, you have people who can draft off the energy of others if they aren't accountable. When your structure isn't good, you spend a lot of time on internal calls rather than external. You spend too much time on the plumbing."

SAP's comms team has a complex structure that McCarthy calls a "client server model." All communications resources are an extension of headquarters, with Herbert Heitmann at the top. Eight of the direct reports to him, including McCarthy, are each assigned a line of business also aligned to a particular board member. McCarthy, for example,is part of the global communications team. Her US office, near Philadelphia, has around 25 people, some of whom report to her, some to global functions like investor relations or analyst relations."Our people have learned to operate in a virtual environment really quickly," she says. "What is required for a structure like ours to work is processes and tools."

Strategic structure is also critical. At GE, the corporate PR team provides overall direction for messaging, corporate spokesmanship, and major initiatives, says Sheffer."That corporate team interacts with the PR staff in our six businesses and with PR staff in regions including Europe, Middle East and Africa, China, India, Japan [and others]," he explains. "The business PR team reports in to their business leaders, the country/region PR people report in to their national executive and to [CMO] Beth Comstock."

Marketing strategy is developed through the "commercial council," led by CEO Jeff Immelt and co-chaired by Comstock and consumer finance CEO Dave Nissan. Sheffer explains that the council serves as a "test bed for new ideas and sharing best practices" in four key areas, including delivering customer value, organizing and leading for growth, leveraging "one GE through enterprise selling efforts," and creating growth as a process via its "imagination breakthrough" projects.

FedEx is organized through four layers. First is the corporate layer,including crisis management, corporate employee communications, and directing messages from the chairman throughout the organization and beyond. Subsequent layers including operating company, regional, and country-specific. Common tools and common objectives help the team synchronize efforts on a global scale. "We take an integrated workplace-to-marketplace philosophy and take an integrated look at employee and external communications across the entire network," Margaritis says. That means, too, that not everything can or should be dictated by corporate. "It can't be all top down. It has to be top down and bottom up."

Looking ahead

Companies like these have had years to refine their PR teams so that layering in CSR has structural support. Other organizations, those in the midst of significant change, like Schering-Plough, which launched a restructuring plan in 2003,one in which PR would play a critical role, are taking note. "Communications wasn't emphasized previously," says Jeff Winton, group VP, global communications. The new structure of the team focuses on "centers of excellence," focusing on expertise across areas of business, rather than on the development of generalists who would dip into different functions. While Schering-Plough does not have a dedicated CSR person,it continues to develop, even as the company continues on its path to improved business performance.

As a company that has come out of the other side of that kind of restructuring, Nissan is now setting its sights on excellence as a global citizen, not just because it's the right thing to do, but because it is critical for the the business. Sproule was responsible for evaluating the CSR efforts to date and pitched the establishment of a dedicated CSR team and strategy. "We want to achieve some small victories to start with, to establish the credibility and importance of the function," he says. "The days of random acts of kindness all over the world, determined by the local president or managing director of that market, are over. On a global level, writing a check and having a cheesy picture taken does not work. We need to have the global citizenship going back to the brand."

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