Why sustainability should include political activity

Professor Tom Lyon in the California Management Review

Feb 19, 2019
Corporate social responsibility (CSR) and sustainability initiatives have gone mainstream, but they are missing something important: They ignore corporations’ political actions, including lobbying and campaign funding, which can drastically alter corporations’ environmental and social impact. In some cases, companies cynically engage in the strategy of “talking green while lobbying brown.” Corporations report on social and environmental sustainability metrics but typically not on political ones, which can allow them to get away with irresponsible lobbying activity.

In “CSR Needs CPR: Corporate Sustainability and Politics,” published in California Management Review, authors Thomas P. Lyon et al. argue that corporations should be as transparent about their corporate political responsibility (CPR) as they are about their environmental and social responsibility. Assessments of corporations’ social and environmental performance should include their support for (or opposition to) public policies that affect sustainability, they argue.

The Landscape

Some parts of civil society are starting to lean in this direction. Through the We Are Still In movement, a coalition of U.S. business, education and local government leaders voiced their support for upholding the U.S. commitments to the Paris Agreement on climate change. In the social arena, Apple CEO Tim Cook publicly opposed a religious freedom law that critics warned would allow discrimination against same-sex couples. And after President Trump’s widely criticized response to the neo-Nazis in Charlottesville, Va., who caused the death of an innocent young woman, numerous CEOs resigned from the President’s Manufacturing Council.

Still, most companies do not provide information about their political activity. “It is understandable that companies prefer to keep their political activities secret, and that they are wary of backlash when their involvement in the public arena is exposed,” the researchers wrote. In fact, “New research shows that firms that have faced a social movement boycott shift their political action away from campaign contributions and towards more covert forms such as lobbying or CEO donations.”

Also, some companies appear to be using their sustainability initiatives as cover for their political efforts to block change. For example, Rhode Island Sen. Sheldon Whitehouse has written about the oil industry: “Given the industry’s massive conflict of interest, there is every reason to believe they are playing a double game: trying to buy a little credibility with these public comments while using all their quiet lobbying muscle to crush any threat of bipartisan action on the carbon pricing they claim to espouse.” Lyon and his team argue that such secrecy is problematic, and “This sort of two-faced strategy makes a mockery of ‘corporate social responsibility’ and turns it into a public relations gimmick.”

Metrics for political activity

The metrics used to evaluate corporate sustainability ignore the ways businesses shape public policy. But that is beginning to change. A new addition to the GRI Sustainability Reporting Standards framework is standard 415: “The purpose of this disclosure is to identify an organization’s support for political causes. This disclosure can provide an indication of the extent to which an organization’s political contributions are in line with its stated policies, goals, or other public positions.” It specifies lobbying and contributions to political parties, politicians and causes, and it also notes that such contributions can present corruption risks.

Other organizations have moved in this direction as well. The Organization for Economic Cooperation and Development has issued guidelines for transparency and integrity in lobbying. These developments “suggest we are at the cusp of a new wave of demands for political accountability,” the researchers wrote.

What companies can do to embrace transparency on political activity

The researchers offered three suggestions:

  1. Fully disclose your corporate political activity. “Dark money and lobbying are unpopular with the public and with civil society actors, and the pressure for political disclosure is unlikely to abate,” the authors wrote.
  2. Align your political activity with your public pronouncement and CSR efforts. If you publicly support gay rights, don’t support a political candidate who opposes same-sex marriage.
  3. Support public policies that will enable the private sector to better pursue sustainability efforts and commitments. Companies can support policies that allow them to act more responsibly without putting themselves at a competitive disadvantage. “[W]e expect firms (especially those that wish to be seen as leaders) to support public policies that are in their enlightened, long-run self-interest,” the researchers wrote.

The concepts of sustainability should be broadened to include a more holistic understanding of how a company affects the social and natural world. “[A]s demands for political transparency grow, it will become increasingly difficult for companies to execute a strategy that involves contradictions between virtuous public statements and self-serving lobbying and other political activities,” the researchers wrote.