Global Corporate Citizenship

Working With Governments and Civil Society

Klaus Schwab

From Foreign Affairs, January/February 2008

Summary:  Global corporate citizenship means that companies must not only be engaged with stakeholders but be stakeholders themselves alongside governments and civil society. Since companies depend on global development, which in turn relies on stability and increased prosperity, it is in their direct interest to help improve the state of the world.

KLAUS SCHWAB is Executive Chair of the World Economic Forum.

Companies that practice global corporate citizenship do so either through thought leadership, that is, by providing the knowledge and technology essential to addressing a particular global problem, or through concrete action, that is, through the execution of a coordinated plan -- or they do both. The Gleneagles Dialogue on Climate Change, Clean Energy, and Sustainability, a partnership led by governments in the G-8 (the group of highly industrialized states) and the G-20 (the group of developing countries with a special interest in agriculture) and involving the world's biggest energy-producing and energy-consuming countries, is an example of companies practicing global corporate citizenship through thought leadership. Microsoft's Unlimited Potential initiative, which aims to bring the benefits of technology to five billion people yet to experience the opportunities that computers offer, is a notable action-oriented example. Microsoft's project is a multi-stakeholder effort to bridge the global digital divide by fostering innovation in business and education and raising the skill levels of individuals to improve their employment prospects and the growth of enterprises. Yet another action-oriented program is the World Economic Forum's Global Education Initiative, which assembles partners from business, government, and civil society to support critical reforms in education. The success of initial programs in Egypt, Jordan, and the Indian state of Rajasthan has inspired the forum to form an alliance with UNESCO in developing a joint program, Partnerships for Education, which is meant to promote multi-stakeholder approaches within the global education community with the goal of achieving education for all.

Global corporate citizenship is an extension of the stakeholder concept and involves the corporation acting as a stakeholder in global society, together with government and civil society. Global corporate citizenship can be considered a long-term investment. Since companies depend on global development, which in turn relies on stability and increased prosperity, it is in their direct interest to help improve the state of the world.

When a company creates a coordinated strategy for corporate engagement in society, it is likely to practice different types of engagement at the same time. And a particular act by an enterprise may not fit just one of the concepts. Nestlé voluntarily takes measures to reduce the water it uses in its operations. Since these measures are intended to benefit the water supply and the water-management needs of the communities in which the company operates, they qualify as acts of corporate social responsibility. As Nestlé engages with governments and NGOs to reduce water use in a broader way, it also offers an example of global corporate citizenship. If the company gave free water to a community, it would be engaging in corporate philanthropy. And if it sold recycled water in biodegradable bottles, that would be an act of corporate social entrepreneurship.

THE RIGHT MINDSET

Enterprises should proactively mobilize a range of partners to effectively address global challenges. Lamentably, however, many business leaders are reluctant to accept that role. A study conducted by the global consulting group McKinsey & Company in 2007 found that fewer than half of the senior executives surveyed in the United States believed that they or their peers should take the lead in shaping the debate on major issues such as education, health care, and foreign policy. Only one-seventh of the respondents believed that they were playing that role, and the majority of them said that they were motivated primarily by personal reasons and were acting as private citizens.

There are not only motivational but also practical reasons why business leaders shy away from social engagement. The proliferation of Web sites on the Internet and new media channels such as blogs and the rise of shareholder activism may prompt some business leaders to refrain from thinking beyond the next financial quarter. The "short-termism" these developments promote could lead some CEOs to assume that engaging in society is not worthwhile because the value of corporate engagement is typically realized only in the medium or long term. Moreover, fast-changing conditions in the market may result in "zapping," or indiscriminate decision-making, in the same way that political leaders might zigzag on a policy in response to poll results.

Short-termism and zapping, as well as the growing challenges thrown up by the often painful economic transformations of globalization, can blur corporate vision. They may lead to paralytic management or a kind of corporate attention deficit disorder, whereby companies lose focus on the big picture. In such cases, companies may lose their motivation or willingness to engage in society. Corporate leaders may also be overwhelmed by the sheer magnitude and complexity of global challenges and the expectations of the public for them to assume partial responsibility for all the deficiencies of the global system.

This mindset must be changed. Corporations must engage on global issues while understanding that the business community cannot on its own solve global problems such as poverty, poor education, and inadequate health care. Governments and multilateral organizations cannot be discharged from their responsibilities to deliver such public goods. "Corporations are not responsible for all the world's problems, nor do they have the resources to solve them all," Michael Porter, a Harvard Business School professor, and Mark Kramer, the managing director of FSG Social Impact Advisors, wrote in the Harvard Business Review in December 2006. "Each company can identify the particular set of societal problems that it is best equipped to help resolve and from which it can gain the greatest competitive benefit," Porter and Kramer added. "When a well-run business applies its vast resources, expertise and management talent to problems that it understands and in which it has a stake, it can have a greater impact on social good than any other institution or philanthropic organization."

The examples of Microsoft's information technology skills training and Nestlé's water management, and many others as well, offer several conclusions about the practice of global corporate citizenship. First, global corporate citizenship must be a multi-stakeholder endeavor. The ultimate responsibility for addressing global issues lies with states and international organizations. Many governments recognize their limitations and are eagerly promoting public-private partnerships. Corporations should put aside any reservations they may have about partnering with governments and civil society as long as the initiatives in which they want to participate can be run properly and efficiently.