Companies must be responsible; can they be Company Citizens?

I’m pleased to feature a GUEST BLOG from John Tizard, a fellow consultant with vast experience of the public, private and voluntary sectors.

Tom Levitt is a zealous disciple for the cause of responsible business and for businesses creating public good. In his new book, ‘The Company Citizen – good for business, planet, nation and community’, (Routledge 2017) it is apparent that his zeal has not diminished.

Indeed, his passion for the subject (as well as his knowledge of it) leaps out from every page.

In my view, Levitt rightly argues that businesses (be they large, small, local or multinational) have an absolute responsibility to the societies within which they operate, and to the wider public interest. However, there is a long litany of companies that have failed communities, society, their staff and even themselves. Ones that have had poor governance; ones led by people more concerned with amassing personal wealth rather than the public good; ones that are more concerned with short term profit maximisation at the expense of long terms sustainability and social responsibility.

Can businesses self-regulate? Can they adopt a responsible approach? Can they be ‘Company Citizens’? Does contemporary capitalism and consequential business practice drive irresponsible short termism and selfishness? Tom Levitt is of the view that more and more are committed to being responsible and recognising their wider social, environmental and employer responsibilities; and the opportunities that such approaches can create.

As Levitt evidences, some recognise these opportunities and are already taking appropriate action. Many large corporates have invested in this agenda but let’s not forget the many thousands of small companies that simply play a vital and positive role in their local communities. They don’t need glossy brochures or corporate departments to do this. It is simply part of their DNA.

In ‘The Company Citizen’, Levitt describes the attributes of a good ‘company citizen’ and cites numerous examples of companies that have shown leadership in one or more of the behaviours listed above but also argues strongly that it is in the interests of businesses to go further – much further.

Levitt makes the case for moving on from the traditional concept of ‘corporate social responsibility’ (CSR), where companies write a cheque to charity and/or encourage their staff to donate money and/or time to charities and community activities. He also bursts the cynical myth that CSR can be used as an excuse or cover for poor and unethical business practices.

Whilst philanthropy has a role to play, Levitt says that it can often be too donor focused. He quotes Martin Luther King as saying, “Philanthropy is commendable, but it must not cause the philanthropist to overlook the circumstances of economic injustice, which make the philanthropy necessary”.

Levitt argues that businesses should commit to finding practical solutions to societal, environmental and economic problems. I particularly liked the example of Manchester

United FC (maybe because I am a supporter!) taking responsibility for its supply chain. On discovering that some of its footballs were being produced in factories where workers had little choice other than to bring their children to work with them, this leading football club as a business supported the establishment of creches at these factories. The book has many other examples of responsible supply management and companies going out of their way to solve external (but still linked to their business) problems, including ensuring their own procurement and contracting practices support SMEs, charities and the social sector.

Levitt is very strong in arguing that voluntary action by companies of all sizes and types is more likely to secure sustainable behavioural change than regulation. Yet we know that there are too many rogue companies.

There is evidence in many policy and practice areas that changing laws alters behaviours and more dramatically than nudging or peer pressure albeit that it can also lead to minimalist compliance rather than enthusiastic action.

Of course, whilst there are many companies that will recognise the benefits of being good ‘company citizens’, inevitably there will always be some rogue businesses and business leaders who don’t even meet moderate standards of behaviour, and some who actually act criminally. For these companies, Government must regulate to set minimum standards and be prepared to enforce them rigorously. It should align its public procurement with this agenda and drive good practice through publicly owned companies.

Levitt highlights examples of where companies have challenged ‘bad government’. For example, many US companies are not simply rolling over and accepting President Trump’s immigration and climate change policies. They are taking practical actions, which they believe align with the public interest as well as with their business interests. Now we see companies distancing themselves from the NRA in the aftermath of the recent US school killings.

Social activists can play in putting pressure on companies to change and to refine their behaviours. Groups as diverse as Occupy, Greenpeace through to consumer groups and local community groups have demonstrated that such pressure can be effective. This is core to the democratic process; and progressive companies should support and welcome such action.

Of course, social activism of this kind can also be strengthened when it aligns with trade union activism. I wonder if Levitt does not stress the importance of trade unions because of the massive decline in union membership in the private sector. And I personally wonder if an additional element of being a good ‘company citizen’ should be to encourage and facilitate union membership, and to involve unions and staff in all core company decision making.

What is certain is that to secure the significant advance that that Levitt proposes, it will be essential for investors, shareholders and owners to embrace the concept of ‘company citizenship’. Levitt describes: where this has happened; why it has happened; and the resultant benefits. And he makes a strong case for demonstrating that shareholder activism together with social action, government encouragement and consumer pressure could lead to significant movement for ‘company citizenship’.

Anyone who reads this book will fail to be challenged and impressed by Levitt’s call for businesses to shift the paradigm and act as ‘company citizens’ because this is in their best interest. This is a powerful manifesto. And whilst it is pleasingly passionate, it usefully draws on numerous case studies and offers practical advice for companies, and for government.

Levitt has set out a manifesto for responsible business and because it is a manifesto we can understand why he has not highlighted bad behaviours and poor practice as a different style of book might have done.

Having read the book three critical questions spring to mind: