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Pressure to Change: How Do Companies Respond to Environmental or Social Activists?

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by Chad Navis Tuesday, January 22, 2013
Managers are accustomed to responding quickly to competition from other companies in their industry. But industry activists—organizations that object to certain social or environmental practices in a particular industry and use tactics such as press statements, protests, and boycotts to pressure firms to change—can pose a sudden threat from outside the industry. These threats may arise unexpectedly and often demand an immediate response, catching managers off guard. For example, chain restaurants such as The Cheesecake Factory and Chili’s have been targets of consumer groups concerned about the impact of high-calorie foods on our nation’s obesity rates. Environmental organizations such as Greenpeace, in seeking to promote sustainable fishing practices, have pressured Trader Joe’s, Whole Foods, Target, and ALDI to alter the way they source seafood.

How and when do companies respond to external pressures by activist campaigns? Do they adopt permanent changes to key sourcing or production practices? Or do they make marginal adjustments or simply issue statements promising to change? Prior research on this subject suggests that companies respond to activist campaigns to the extent that managers perceive the campaign may have a financial cost for the firm. In a forthcoming Academy of Management Review article, my co-authors and I offer a more complete explanation of the different ways that companies respond to industry activists.

We suggest that responses vary depending on a number of factors, including how managers interpret the threat. For example, when Greenpeace criticized Timberland for causing deforestation in Brazil by failing to control its leather suppliers, Timberland managers viewed this negative publicity as a threat to the company’s identity as an environmentally responsible corporate citizen. “Our logo is a tree, for crying out loud,” said Timberland CEO Jeff Swartz. Senior leaders immediately engaged Timberland’s suppliers and Greenpeace to derive a solution, and within two months had fully satisfied the concerns raised in the campaign.

In other cases, a company targeted by an activist group may portray the contested practice as a generic way of doing business that is common to the entire industry. In this way, managers shift the burden from the individual company to a broader array of industry members, diluting the impact of the threat. For instance, when PETA criticized McDonald’s for causing animal cruelty by failing to control the breeding and slaughter conditions at its chicken suppliers, McDonald’s managers explained that its chicken suppliers followed standard industry practices and would have difficulty changing. PETA later added Burger King, KFC, and Wendy’s to its target list, which shifted the focus of the campaign to the industry as a whole, rather than on a single target.

Now may be a good time to ask yourself, “How do activists view my company and my industry?” Our research offers insights that may be useful in navigating the power dynamics between environmental and social organizations and the companies they target.

15 Apr, 15

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