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Are NGOs having too much influence on corporate sustainability strategy?

This is an interesting question. In the past you’d hear this question only from right wing think tanks and strange industry associations.But recently I’ve heard investors asking this question.

It used to be that sustainable and responsible investor (SRI) groups were in line with NGOs on many, if not most, ethical and sustainable related issues.

“NGOs in suits” has been a description of some in SRI over the years. A decade or more ago, that was a more right than wrong stereotype.

Today, things are very different. Big investors are taking a closer interest in sustainability. Blackrock has an impact investing initiative. Bank of America just announced a ‘less coal’ investing policy.

That welcome development aside, the question “Are NGOs having too much influence on corporate sustainability strategy?” is one that I’m hearing more often these days.

Companies often make policy announcements in response to campaigner pressure. Campaigners have been a big driver of change in companies. They are not always entirely accurate, but generally have a point to make.

Large firms, particularly those with vulnerable brands or high margin B2B Customers, have responded to them. Perhaps they were going to create their policies anyway. But often the NGOs have been the catalysts.

Today though, companies are falling over themselves in certain areas to make big bold policy commitments that they often don’t know how they will deliver. Deforestation is the most high profile example, carbon emissions a long standing other.

This is of course helpful for overall planetary sustainability and, it’s argued, good for the companies in the longer term.

But some investors are now raising this important question of undue influence as companies take positions on issues from diversity to palm oil to free prior and informed consent for supply chain communities, across their value chains.

What do they mean by this? My understanding is that they are concerned that companies, often reactive in their concern for brand reputation, are taking steps that are not always as material as areas investors think are the most important.

A good example might be palm oil. From the perspective of some investors, should a company buying only say 500 tonnes a year be trying to go beyond RSPO standards as some NGOs demand, or  focusing on more relevant issues that can have a bigger impact on both sustainability and long term investor returns?

Of course, the answer depends on whom you ask. Campaigners might say yes, all big brands have to be encouraged to lead beyond compliance, or we risk losing momentum.

An SRI investor might equally point out that the time and effort taken to do that is best used for other benefit (energy efficiency perhaps) which could have a greater net positive sustainability impact and is also in the interests of shareholders.

Even big companies can’t do everything, they might well argue, so priorities matter.

We’ll be debating this particular point at this upcoming conference in London at the end of June.

Debaters discussing this will include John Sauven, executive director, Greenpeace UK, Cindy Rose, head of research, responsible investing, Aberdeen Asset Management, Rachel Wilshaw, ethical trade manager, private sector team, Oxfam GB and Dr Andreas G F Hoepner, associate professor of finance, director of enterprise, ICMA Centre, Henley Business School. Find out more, here. 

1 Comment

  1. Anne Perkasa

    I wouldn't say it's been a deliberate strategy by businesses, but environmental watchdogs like Greenpeace are being divided and conquered. We're rapidly reaching the point when all large users of forestry products will have tight wording in their policies, and that means the NGOs will have to police how such policies are being implemented by getting themselves on the ground to investigate these companies' supply chains (i.e. by investigating the sub-sub-suppliers of the sub-suppliers of the suppliers, which is immensely difficult in often hostile, heavily forested countries). Unfortunately but understandably, the NGOs have been taking the path of least resistance and are now operating only in regions willing to accept their input. It seems they are currently clinging on like leeches to companies in Indonesia (a region with a relatively green government) to fine-tune their policies and self-policing efforts while larger, more hostile regions hack down the Earth's forests unchallenged, doubtless to supply a company with a beautifully worded policy. The watchdogs are being forced to concentrate on where they can operate and not where they should. It no longer seems like "activism" to me. A B c D < Let's attack c.