Corporate Citizenship Sustainable Brands Fundamentals

Corporate Citizenship as a Force for Good

By Taylor Gray, Ph.D. on November, 10 2020

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Taylor Gray, Ph.D.

The world is a better place when companies are good corporate citizens. I remain focused on developing meaningful and actionable insights from empirical data in pursuit of a better world.

We have developed Motive from a fundamental belief that the world is a better place when companies are good corporate citizens and that consumer demand is the most important force in driving companies to become better corporate citizens (a worldview we know as Democratic Capitalism).

Change is critically important to making the world a better place; human society is, and has always been, a project of change. Other forces, such as political legislation and regulation, community engagement and development, and international governance agencies can, and do, contribute to making the world a better place, but none of these are as well-structured, as well-resourced, and as well-incentivized to catalyze and to adapt to change at scale and as quickly as is the corporation. At a structural and legal scale, the corporation has been purposefully designed to introduce and manage change within a perpetually changing environment--as these are the core premises of innovation and market development.

As consumers ourselves, we find this perspective quite empowering. Change is critical to society’s progress and corporate citizenship--or, how a company is governed within a perpetually evolving business and society relationship--is a fundamental driver of change.

"The corporation is a vehicle for change but not an agent of change."

 
Corporate Citizenship, Consumer Power, and Change

The corporation is such a powerful force in modern society that it is often framed as being a member of society, but this convenient phrase glosses over a critically important fact: the corporation is not a member of society but rather a structure of, and hence for, society. The corporation is but a legal structure designed to operate as a vehicle coordinating the desires and intentions of its agents--that is, the people making decisions within, and for, the company--but the company itself has no agency. You and I could incorporate a new company in a matter of hours and a few hundred dollars in regulatory fees, but this corporation, and all the allusions to power and consequence this term invokes, remains but an idle name on a government registry until you and I act through it. In this sense, the corporation is a vehicle for change but not an agent of change. 

In the real world, we—the consumers—are the ultimate agents of the corporation. Every time we engage with a corporation we are effectively motivating this structure to act. A company can be guided by its employees, its executives, its shareholders, and its political stakeholders, but if it is not guided by its consumers then it quite quickly ceases to matter, or even exist. Of all the stakeholders of a corporation, none are as fundamentally important as are the consumers--we may not make the decisions within a corporation but we certainly set the agenda for which decisions need to be made.

 

Agency and Citizenship in Action

The prominence of consumers in shaping corporate citizenship--and even the importance of corporate citizenship within society’s progress--is quite evident in the example of climate action and environmental responsibility. Consider that a majority of American adults now say that climate change is affecting their local communities and more needs to be done to properly address this developing situation.

At a governmental level, the response to this societal demand has been underwhelming. Not only has the USA withdrawn from the Paris Agreement of the UNFCCC, but most other nations, all still remaining within the agreement framework, have already fallen so far short in their commitments that meaningful climate action is but yet another distant vision. National governments, ever fearful of costs, partisan compromises, and free-riders, have simply proven unable and/or unwilling to act on the commitments which majority elements of respective societies want and which scientific consensus deems necessary.

 

Even with most governments currently injecting unprecedented sums of money into their respective economies under the guise of COVID-19 pandemic rescue and recovery efforts, the prospect of a ‘green’ recovery, or even just one that would move nations closer to their Paris Agreement objectives, appears unattainable. Across 22 of the world’s largest economies, only four countries have been able to design and deploy economic recovery packages which also provide a net environmental benefit.

"Companies are more directly incentivized to respond to individual consumers’ interests and demands than governments are incentivized to respond to each and every interest and demand of the electorate."

Yet while most governments underwhelm, some companies are going above and beyond legislated requirements to meet consumer demands--including demands for meaningful action on climate and environmental responsibility. Over 1,300 companies, representing over $24 trillion in market capitalization, have joined the We Mean Business coalition wherein each member commits to measurable actions and reports on progress in a transparent and regular manner. To date, the actions already taken toward these commitments surpass those taken by respective and national governments within the Paris Agreement.

 

The We Mean Business coalition is but one of many forms of collective action by companies (here is an interactive list of 100 business coalitions operating across the world and committed to climate change and sustainable development). Highlighting the importance of corporate citizenship, the United Nations, the facilitator of the Paris Agreement, may have struggled over the last three decades to unite national governments toward meaningful action, but over this same timeframe they have succeeded, through the Global Compact and the Sustainable Development Goals, to unite companies the world over toward much more meaningful action.

 

 

Incentivizing Corporate Citizenship

This is not to say that all companies are more responsive than governments but it is true that companies are more directly incentivized to respond to individual consumers’ interests and demands than governments are incentivized to respond to each and every interest and demand of the electorate. Within a free market democracy, consumers are the electorate, and the electorate are consumers. Corporate citizenship is the culture and structure of how companies are managed to respond to these societal interests, concerns, challenges, and demands.

Corporate citizenship is not a guarantee of a better world, but it is a force which shows greater promise and potential of leading to a better world, and it is a force which answers first and foremost to consumer demand.

 


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