Business: Beyond Compliance and Back to Basics?
Demands that corporations communicate and impact the social sphere came to a head in 2018 and persisted through multiple crises such as the 2020 George Floyd protests, the 2022 overturning of Roe vs. Wade and Russia’s 2022 invasion of Ukraine. Separately, environmental and social risks have taken on a critical role in companies’ risk management frameworks, but also our fractured politics. Alison Taylor’s Higher Ground (2024) tackles the dilemma highlighted by economist Milton Friedman in 1970. Are companies practicing “pure and unadulterated socialism” by speaking out on social issues? If not, when can companies speak out on said issues in a way that stays true to their business models and builds community trust?
Taylor calls companies back from the jargon that has surrounded ESG and compliance. They should return to the basics of a company mission based on practicality and human rights. At the same time, she pushes back on the public’s hope that corporations can serve as a substitute for the hard work of political self-government.
Chapter 1 details the grand shifts from a 20th century focus on image control and protection against libel suits to an era where consumers “crowdsourc[e] opinions on where to work and what to buy, and then skeptically compar[e] them to the corporate narrative in question (20).” Citing the Dakota Access Pipeline and Parkland School Shooting protests, Taylor emphasizes that the traditional relationship between the profit, non-profit, and public sectors have irrevocably changed en route to a shattering of traditional risk management frameworks.
To embrace a fully partisan position poses a no-win situation for employers. Chapter 2 presents this simple lesson in a series of myths and paradoxes. Though companies should engage stakeholders, and have since at least 2019, the term is hard to define, and risks forcing a company to back a minority position. Taylor especially takes Environmental, Social, and Governance (ESG) ratings to task for claiming to always generate better returns (they do not), lumping unrelated factors together, and “missing the point (32).” Similarly, seeing risk management as legal compliance will not save businesses from the contradictory web of global regulations, nor will traditional business ethics, with its focus on avoiding litigation.Businesses should influence policy in an ethical way that also relates to their core business mission.
Taylor quickly moves through other counterintuitive claims to buttress the above arguments. Too much transparency makes companies overly cautious to do the right thing, focusing on individual employee actions does not improve ethics, and establishing ethical structures is superior to simply creating a ‘tone at the top.’
Chapter 3 encourages companies to shift from seeing stakeholders as “threats to corporate value” to seeking a “practical understanding of your company’s impact (49).” Taylor discourages stakeholder engagement without an understanding of a company’s specific impact on a community. Companies may instead want to make specific promises, forestall a crisis, get in front of critiques, innovate, or partner with the community. Taylor suggests leveraging civil society expertise to alleviate the burden on community time and resources while ensuring incorporation of community input (52). Taylor suggests the establishment of an advisory board with a specific charge and mission to provide an outside perspective.
Chapter 4 suggests that just as stakeholder engagement should align with a company’s specific impact, the social and environmental factors a company discloses should be material to its business operations. This includes “risks…opportunities” and “ethical imperatives (70).” Sustainability must be a strategic choice, not a communications challenge, or worse, a diversion from worse practices. This means assessing relevant business issues and the risks they pose in one comprehensive framework. Companies should also consider the likelihood of future campaigns around the impacts of the business’s core activities. After consulting with stakeholders, Taylor advises businesses to prioritize those issues most important to both stakeholders and business success (80). General Motors’ climate pledges, its shift toward electric vehicles, and its collaboration with Engine No. 1 serves as a prime example of effective strategy setting and execution.
Chapter 5 deals with the thorny issue of corruption. Taylor suggests that treating anti-corruption, like ethics in general, as a compliance issue proves ineffective. Instead, companies should emphasize quality and create an internal culture which then projects an external reputation which will dissuade government officials from attempting to bribe the company. Partnerships within countries, such as the Center for International Private Enterprise in Thailand are key. Said organizations give employees on the ground both the infrastructure to resist corruption but also the safety to discuss why such modes of doing business seem inevitable in the first place.
Chapter 6 proposes a shift away from vague ESG metrics to instead return to the UN Guiding Principles on Business and Human Rights (UNGPs), which call for a “responsibility to respect” human rights through the prevention and mitigation of harm. Such a focus acknowledges competing rights, are universal, unite separate environmental and social concerns, and do not focus on corporate priorities, but human impact. Taylor suggests consulting the International Bill of Rights and International Labor Organization (ILO) Core Conventions, engaging affected stakeholders. Companies can then prioritize based on impact (e.g. scope, scale, and remediability), and managing impacts, including by withdrawing from a country with serious human rights violations and securing access healthcare (including abortion) for employees. I myself saw the value of combining environmental and human rights when working with clients Northwestern Argentina to address health and indigenous consultation matters raised by an Inter-American Development Bank-backed project.
Chapter 7 takes aim at corporations’ increasing involvement in the political sphere. Taylor criticizes CEOs like Paul Polman who encouraged statements on a wide range of policy issues such as Ohio’s death penalty. Taylor uses this chapter to constructively brainstorm how a company might get its own policy house in order before opening itself up to charges of sustainability hypocrisy. If not, companies risk deviating from their original business purpose and exerting undue influence on the political process itself. Companies can best help the political sphere by shoring up campaign finance laws, stopping donations that tilt the playing field, being transparent about political donations, and only advising on policies directly related to their expertise.
Chapter 8 takes on radical transparency and surveillance in the workplace. Taylor argues the former discourages frank admissions from companies fearing punishment from activists. Surveillance can hurt productivity by devaluing experience, destroying trust, and encouraging blind rule-following. Taylor encourages the building up of internal trust, early stakeholder engagement, and less surveillance in the work place to change the culture, not just focus on disclosures. Chapter 10 also focuses on changing business cultures from the bottom-up as well as top-down. This includes creating credible whistleblower systems and promoting a diversity of thought on corporate boards to avoid the groupthink that often grips even the most outspoken minds in those settings.
Chapter 11 deals with the thorny issue of legal compliance. While acknowledging the need for “clear rules, including accountability (195)”, Taylor calls on companies and advocates to reject Zero Tolerance frameworks and “prioritize some values over others and some groups and individuals over others (197).” This means carefully tailoring an employee’s training to their role within the organization to prevent “sludge.” It also means encouraging creativity and, like in successful anti-corruption efforts, engagement with gray areas.
Chapter 12 largely applies the lessons of Chapter 7 to company speech. A company should not ban partisan speech of its employees on social media, but it should also refrain from issuing statements that could generate resentment from internal company stakeholders of differing political persuasions. Instead, a company should either address political issues in private or create a culture of open debate, such as the Allstate-backed Better Arguments Initiative. Barring a neutral stance, a company can speak out if the issues directly relate to its values, the security of its employees, are aligned with internal operational changes, and its core business. Taylor helpfully includes if all-yes-then-go checklist to close the chapter (219).
Taylor’s book wraps up with a tale of two companies: One, Starbucks, has a positive overall sustainability record but has been hobbled by its defensiveness on labor rights. Chobani, on the other hand, has focused more keenly on fair trade, its rural market, and social mobility for refugees. This focus has allowed it to prioritize human rights, clearly communicate its business purpose, and transcend political polarization on the immigration hot-potato.
Taylor clearly demonstrates some issues corporations of all industries should speak out about. And the book’s “civility” solution to businesses’ reputational conundrum may or may not be too simple a solution in an era of past and potential insurrections. Nevertheless, Taylor makes a compelling case for simplifying company engagement in an era of profligate and evermore complex reporting frameworks.
