Should Companies Engage with Anti-business NGOs?

The public case for engagement of the critics of business is twofold.

First it is claimed that engagement will help re-engender trust in the business sector.  Trust in business and many of society's key institutions has declined.  On the other hand trust in non-government organisations (NGOs) is high.

And so, the claim goes, in order to recover public trust businesses should adopt NGOs as stakeholders -- adopting their values, objectives, and of course fund them.

Another argument is that the engagement and partnerships will be "good for business" and will be good for shareholder value.

Both arguments are however, seriously flawed.

While many of the anti-business NGO have built-up trusted brand names, their brands are built largely on false and untested claims.

Few of the NGOs clamouring to be stakeholders are anything more than tightly held clubs of activists.

While NGOs like to portray themselves as instruments of "people power", this is largely an illusion.  By falsely claiming to represent people, they are actually undermining democracy.

They also like to claim to be forces for better governance.  Yet recent studies such as a one by the One World Trust, a UK NGO, illustrate that NGOs have poorer standards of governance and accountability, then the business and international organisations they seek to "reform".

One could argue that this lack of transparency lies at the centre of their credibility.  While many people have heard of NGO brands like Oxfam, Greenpeace and WWF, few actually know much about how these organisations operate and perform.  Unlike government and business, NGOs are not subject to sustained scrutiny of their accounts, priorities and actions.  As this scrutiny inevitably falls upon the sector one should expect levels of trust to decline.

Few NGOs who target business empathise with the businesses with which they seek to engage.  They bring no technical expertise, no knowledge of markets, no expertise in management or regulation and possess a disdain for capitalism.  What's more, many of their demands are contrary to the best interests of the business' traditional stakeholders with whom business have contractual relationships with, such as shareholders, suppliers, customers and the like.

Of course, not all NGOs that target business are anti-business per se;  large numbers are just rent-seekers, who have jumped on a bandwagon that promises money and a career.

The power of NGOs comes from their power to embarrass, their ability to generate media and target brand names.  Their power comes from the NGOs ability to create risk.

So how do companies deal with these new self-appointed stakeholders?

Engagement is being held up as an answer.  It is impossible to give a definitive answer as to whether companies should or should not engage.  But it is fair to say that companies are right be cautious.

The world has moved on from the days of the anti-globalisation demonstrations in Seattle.  We are now confronted by a world at war against terror.  Much to the chagrin of campaigners, most NGO campaigns have lost their potency.

Governments are also becoming far more aware about the threat that NGOs pose to their sovereignty and political power.  For all the rhetoric about corporations ruling the world, it is governments who possess real power and who jealously guard it from rivals.  A very real risk of business engagement with some NGOs is its potential to undermine a firm's government relations strategy.

A consequence of both these developments is that the NGO sector can expect a contraction in the "space" that it operates in.

As to the decision of whether to engage or not with NGOs, perhaps the most interesting development has taken place within NGOs themselves.  All but the most radical NGOs regard engagement as part of their strategy.

This subtle but important distinction has major implications for business.  The mere fact that NGOs have come to expect engagement is an important change in the dynamics.  It means that corporates have a tool at their disposal to demand more accountable and transparent behaviour in exchange for engagement.

The truth is that, these days, engagement matters far more important to NGOs than business and corporate executives should never forget this.  Managers should treat engagement as a privilege for activists and not an automatic "right".