The key to corporate diplomacy

Listening to the demands of multiple audiences is the first step to healthy partnerships with your stakeholders.


Corporate diplomacy: what is it and why do it? Let us take as our starting-point the definition given by Witold Henisz talking about his new Wharton book on the subject:

Corporate diplomacy is the senior-level capability to build and maintain relationships with external stakeholders and deliver on the greatest needs or the greatest objectives of those stakeholders in a way that delivers shareholder value.

(Photo by Pedro Lima on Unsplash)

This sounds like a familiar enough win-win approach but the difference is that it starts with the objectives of the stakeholder. Often business leaders are so focussed on their own goals that they do not start from the bigger picture. I have learnt from working for government in British embassies around the world and in two multinationals (Unilever and Anglo American) that taking the time to understand the underlying motivation of stakeholders makes a major difference.

In each case, the temptation is to think that you (and what you want) are what matters whereas for others this is at best a distraction… unless it then happens to emerge in the context of what they themselves want to achieve. Let me set out some concrete examples from my current job at Anglo American.

The recent campaign for stricter international legislation on transparency in the extractive sector persuaded G7 governments of their case for enforced detailed disclosure adding the bonus that if the profit from the host countries’ natural resources could be more equitably and openly distributed locally, then less overseas development assistance would be needed in the future. This would create a win-win for all sides (except rightly for any parties benefiting unfairly), overall governance would be improved, foreign direct investment would replace overseas development assistance and the fight against poverty would be given a sustainable boost.

As a company we have always been in favour of tax transparency, we publish tax fact-sheets and we have some striking examples of good governance of natural resources. De Beers and the Government of Botswana for example have over 45 years successfully managed a joint venture to develop the country’s rich diamond resources with a significant degree of profits staying in-country which has turned Botswana from one of Africa’s poorest nations to one of the richest.

Clearly, openness about equity and revenue income does not of itself guarantee equitable social outcomes but it is an important first indicator in the process of delivering good governance of natural resources. Almost all diamonds mined by De Beers around the world are now collected and sold in Botswana. This was previously done in London, illustrating the active underlying agenda of the Government of Botswana (which carries a 15 per cent shareholding in De Beers globally in partnership with Anglo American, who owns the remainder).

Transparency and trust

For this partnership to continue to work, we have to be mindful of the government’s underlying motivation. Shareholder value in this case of course is important for the Government of Botswana as they own a majority of shares. More often companies however will not be operating in joint ventures with governments but will still fall back on the line of protecting shareholder value when, to the government or community concerned, it has no relevance. From their perspective, if we appear to refuse to consider their longer-term objectives then it undermines the sense of partnership and thus puts at risk our wider licence to operate.

To succeed we need transparency, communication and trust. This we recognised some 10 years ago with the formation of the Extractive Industries Transparency Initiative (EITI) which sought to bring together a trio of mutual accountability between government, business and civil society in the countries where the resource originated. However it lacked the right sort of political traction and, being voluntary, not enough countries wanted to sign up. For many years none of Anglo American’s countries of operation were signatories and so all our disclosures were unilateral on our part.

Then came the campaign for legislation making disclosure mandatory and demanding a new level of detail. The initial western corporate response was to point out that we already had high standards of accountability and an existing system of disclosure via the EITI and that the need for legislation was debatable, especially if it ended up putting a burden on the “accountable” companies while leaving the field open to less scrupulous or regulated ones. Many also felt that we published significant amounts of data about the tax payments that we made in our host countries so the charge of tax evasion via transfer (mis)-pricing could already be addressed under our existing disclosures.

“Good engagement is about admitting that not all is as perfect as you might like it to be, that there are some hard challenges out there that only an open partnership will be able to solve.”

At one level, this was just normal democratic and regulatory politics at work; in corporate diplomacy terms we had to try and navigate between the nominal aim of the campaign (transparency) and the underlying aim (“fair share”). It also gave us an opportunity to establish a dialogue with some of the NGOs and academics involved to ask the question “what would success look like for them” (assuming they got the legislation they wanted)? Did they have goals and outcomes beyond just exposing bad practice? Could we jointly go beyond the question of “how much tax do you pay?“ into the more strategic questions about companies’ wider development footprint and the degree to which the private sector can help government deliver social programmes, in part with the money raised.

A more positive engagement

We approached this through various independently brokered workshops deliberately aiming at the wider vision and trying to avoid too much focus on the battle between parties’ individual tactical positions. This was easier said than done as the US oil and gas companies were then taking legal action against the Dodd Frank Act which was the American legal instrument in parallel to the EU Transparency Directive. Indeed not all of the participants lost their suspicions of “the other side”. But for those prepared to work with the grain, it gave an important and more positive sense of context.

Our tax team in Anglo American are already collecting new data which, though an onerous and costly exercise, should usefully capture the range of development-related spend that we generate in the countries and communities that we operate.

It should help in the recognition of the role that business can play in fighting poverty eg the UK aid ministry Department for International Development set up a section specifically to look at development partnerships with the extractive sector. It will also give us some collective momentum to help ask the question of some of our host countries e.g. South Africa whether they might re-consider signing up to EITI as this in turn would raise the profile around the revenue generated by mining and encourage civil society to engage in a more positive way.

Listening to demands

Another example of an area where existing practice is facing a push for more mandatory requirements is in the field of human rights where there are new directives or bills coming through e.g. on conflict minerals, modern-day slavery and non-financial reporting. The wider issue had already been put on the map through the UN Guiding Principles for Business and Human Rights tabled by John Ruggie in 2011 and endorsed by the UN Human Rights Council but again there was a feeling among some countries that this needed to be reinforced by a legally binding treaty. Whether this will pass remains to be seen but from the corporate diplomacy side it is important to show that there can also be dialogue and progress outside of a legal framework.

For the extractive sector there has also been a long-standing security-related human rights platform via the Voluntary Principles on Security and Human Rights to which Anglo American has been signatory and for which we duly filled in our annual returns. When however the tragedy of Marikana happened on our doorstep in South Africa in August 2012, with the police opening fire on demonstrators near the Lonmin platinum mine killing 34, we and others in the industry had to ask ourselves whether we really had the best policies and practices in place and what we needed to do better to help prevent anything similar happening again.

Drawing on our partnership with the NGO and co-member of the Voluntary Principles, International Alert, we agreed on a gap analysis between the Voluntary Principles and the reality on the ground and to carry out workshops with our teams there as to how we might address those gaps. In line with the push for national Human Rights Action-Plans driven by among others the UK government, we also decided to adopt and publish a stand-alone human rights policy for the whole company globally to raise the profile of the issue for stakeholders and for our operations on the ground.

Both of the cases above illustrate a number of lessons:

• Listen to the demands of your stakeholders, and try not to be too defensive while reasonably making points about relative cost/benefit

• Do not be afraid to sign up for new commitments but equally do not assume that signing up will automatically protect you from criticism or from changing the way you do things; accept that the level of expectation moves on

• Genuine engagement around the underlying goal of the initiative is more important than just paying your dues and filing your returns; opening up to discussion with a third-party and looking for ways to improve starts the right process of trust, co-design and delivery and can then turn a potentially negative or compliance issue into an opportunity for partnership

Arguments and counter-arguments

So why don’t organisations proactively engage their wider stakeholder groups before the latter start pressing for legal enforcement? I would offer three potential reasons:

You risk losing control of the debate: companies often feel safer when they can define the terms of the debate and then demonstrate their response to it from the non-contested comfort of their Sustainable Development report. Hard questions from a different and sometimes hostile perspective are not always welcome.

In practice however the debate then moves on without you, the NGOs get away with assuming the worst, governments and the public believe it, questions harden into accusations and the threshold of proof required to stand up any counter-claims goes well beyond any commitments in principle and possibly even beyond evidence of performance on the ground.

Legal or commercial exposure: good engagement is about admitting that not all is as perfect as you might like it to be , that there are some hard challenges out there that only an open partnership will be able to solve. But putting the baseline data e.g. from a mine-site audit into the hands of independent third parties raises fears of potential liabilities (including over protection of individuals’ data) or of commercially sensitive information finding its way to competitors.

To get this balance right, you need a legal team who are clear about the line between technical compliance issues and those of a more moral or political nature, accepting that you can’t solve the latter by using the legalistic approach (or team) as you would on the former. You also need a commercial or marketing team who see advantage in positioning the business positively from the wider vantage-point of society at large.

Resources: you don’t have the time, people or money to do this: engaging stakeholders takes time and heeding their concerns potentially creates extra short-term cost to the company as you may have to change some plans. Clearly this can have longer-term benefits in terms of wider acceptance of your activities but it doesn’t always play well against the relentless short-term round of quarter-by-quarter performance targets.

The counter-argument is that the regulatory environment is increasingly driven by Hearts and Minds-type campaigns. We may find it frustrating that neutral science and technical arguments are not necessarily the arbiter of decisions that affect us but we have to find ways of reaching out to the non-technical audience and those who influence the wider climate of opinion. Much of that will be about not assuming that we own the terrain and the terms of engagement. We have to be part of the debate rather than its object. And, without losing sight of our business targets, we have to align our agenda with theirs, rather than theirs with ours.

Richard Morgan

Richard Morgan is head of government relations at Anglo American London. Before joining Anglo American in October 2010, Richard  was head of public diplomacy at the British Foreign Office from 2008. Prior to that, he was seconded from the Foreign Office to Unilever as their head of public affairs for Africa, Middle East and Turkey from 2005 to 2008. Richard began his career in the Foreign Office in London in 1984. He was posted to the British embassies in Tokyo (1986-1990), South Africa (1995-2000) and Paris (2000-2004). In between he was in the Foreign Office in London from 1990 to 1995 working in the Middle East and North Africa Department and the communications/press team.