NGOs target big business

Domini Stuart looks at the increase of activism and considers the implications it may have for companies and boards in the future. 

Once, government was the primary target of social and environmental activism. Today, it is more likely to be business. 

“In recent years, business has become very powerful compared with democratically-elected governments,” says David Ritter MAICD, CEO of Greenpeace Australia Pacific. “Non-government organisations (NGOs) like us have been called on to try to address that power differential.”

Recent protests against ANZ’s policy of lending to the fossil fuel industry and Santos’ plans to drill for coal seam gas in New South Wales have put activism back in the spotlight. Judy Motion, professor of communication in environmental humanities at the University of New South Wales, has identified two key reasons for increasing public and media interest in such activities.

“The first is an overarching democratic concern about how decisions are made in society,” she says. “The second is a concern about particular initiatives that are viewed as contravening social or environmental justice. In research I have conducted, it is clear that notions of social and environmental justice underpin the way in which many Australians think about how society should be governed. There is a very strong narrative about ‘fair play’ that seems to be mobilised to rally support.”

Activism may also escalate when there is a political climate or government that appears to be actively ignoring social and environmental concerns.

“In Australia, there is clearly concern about climate change and the way the government is seen to be managing the issue,” Motion continues. “This then has a flow-on effect to organisations that are being blamed for contributing to climate change. When government is seen to be failing in its duty, citizens take to the streets or lock the gates. It is important for organisations to understand that NGOs and activists do not create the concern, they harness it to mobilise the public.”

An adversarial climate

Climate change has put coal mining at the centre of some of the most heated disputes. In one corner are the prominent Australians, including Prime Minister Tony Abbott, who believe that coal is fundamental to Australia’s prosperity for the foreseeable future.

“There is some evidence that scaremongering associated with climate change is not supported by the data – that the worst case scenarios are not emerging,” says Julie Garland McLellan FAICD, a board adviser and director of Bounty Coal.

She continues: “Also, modern coal-fired power stations are very different from the ones we were building as recently as 20 years ago. Then, the average efficiency of the best coal-fired power stations was about 30 per cent whereas, today, that is up to 40 per cent. My view is that we should be putting more effort into developing the technology that would take that efficiency up to 60 or 70 per cent rather than wasting money, time and effort on ways to stop getting it out of the ground.”

In the opposite corner are those who believe that coal’s time has come and gone.

“The UN has said that the coal industry needs to leave most existing reserves in the ground,” says Ritter. “The World Bank, the International Energy Agency, every prestigious major scientific body on earth and, in formal terms, every government, have all accepted that there is a high level of risk associated with climate change.”

Jittery investors

The trend away from coal is giving some investors the jitters. Historically, the resources sector has been cyclical but, as coal prices continue to hover around a five-year low, some are questioning whether this is less the low-point of a natural cycle than the start of a structural decline.

“The thing I find most interesting is that these investment issues are becoming more mainstream,” says Justin Di Lollo, a director of lobbying firm Hawker Britton and practice director, government relations, of the STW Group of communications companies. “They are moving out of the field of ‘I object to the coal industry therefore I’m going to take my super out of that coal company’ to ‘I’m worried about my retirement savings and things aren’t looking good for this industry so I’m going to put them somewhere that looks safer’.”

Larger investors are also increasingly conscious of the need to protect their reputation. Di Lollo sees this and broader moves towards sustainability in loan investment patterns as a very potent combination.

“It is also a very tricky area for their boards to navigate,” he says. “Directors don’t want to miss out on a whole sector of potentially profitable investments, but they must bear in mind that projects with a social or environmental backlash could cause their own investors to take flight.”

Garland McLellan is frustrated that boards are limited in the information they can provide to potential investors. “If you could spell out exactly what you’re going to do, how you’re going to do it and why it’s a good idea, they’d be able to make much more informed investment decisions. Theoretically, we should be able to achieve that through integrated reporting but, in Australia, it’s actually a very dangerous thing to do,” she says.

“The ASX is very concerned by anything resembling a forward-looking statement that you can’t prove is based on verified facts and future performance never is. Director liability laws mean you’re always open to challenge from shareholders, particularly if you’re telling them that a potentially better long-term outcome will come at a price in the short term.”

Money talks

Australia is continuing to approve and develop some of the biggest coalmines in the world, so the jury is out so far on the widespread impact of activism.

“It’s less than 10 years since I lobbied for approval of what was then the country’s largest mine and since then, two others have overtaken it in size. Money talks, and there’s still plenty of money to be made out of fossil fuels,” says Di Lollo.

“A very pragmatic board might set a reputational limit and turn down everything above that. They might even knock off one big project very publicly in the hope of sneaking through a few smaller ones while the NGOs are focusing elsewhere. The difference is that, a few years ago, they would simply have said: ‘If we can make money out of that fracking, we’ll do it’”, Di Lollo adds.

Massive reach

With digital technology and social media at their disposal, NGOs can now have a huge impact on brands in a very short period of time. For example, the video produced recently by Greenpeace in a bid to persuade the Lego toy company to break its links with Shell, received around six million hits, and the accompanying petition attracted over a million signatures.

Garland McLellan is not impressed by the tactics. She says: “NGOs are now reaching a generation of people who have been educated to think in sound bites,” she says. “They latch on to what appear to be green or social principles without questioning them or following them through to their logical conclusion.”

She is also concerned about a more general misuse of power. “I’ve seen activists behave dishonestly, be defamatory and take action with the sole intention of harming organisations which are acting within the law and in the best interests of their shareholders,” she continues. “My personal experience of this was the BHP annual general meeting when activists threw a smelly dead fish at [former chair] Brian Loton and claimed it was from the Fly River in Papua New Guinea. It wasn’t, but they got their headlines and it damaged our shareholders’ interests.”

Warrick Jordan, national forest campaigner at the Wilderness Society Australia, says that NGOs are often forced to operate without having the same access to information as governments and companies and must use the best information available.

“But if we were anything less than scrupulously honest and credible we would quickly lose the trust of the media, supporters and allies we depend on to survive,” he says.

He also believes that boards need to accept responsibility for the long-term health of their organisation as well as short-term returns. “That means interacting with public concern and politics in order to protect their brand and attract long-term investment,” he continues.

Staying in touch

Motion recommends that boards with any risk of exposure engage consistently with both stakeholders and NGOs. “Activists don’t give up and they don’t go away,” she says. “I believe that listening is a company’s most powerful tool.”

Ritter’s background includes commercial law and, during the six years he spent representing Aboriginal native title claimants, many mining companies told him that they did not know what they should do.

“My advice then was the same as it is now – pick up the phone and find out,” he says. “Greenpeace is independent in that we don’t accept funding from governments or businesses, but we have had alliances with everyone from McDonalds to Bunnings Warehouse. We are very prepared to work with businesses in all kinds of constructive ways, and that means encouraging responsible companies as much as taking on the irresponsible ones.”

The cultural divide is an obvious challenge to communication. “The first step is to agree on the facts,” says Jordan. “The ideal is to identify a win-win situation but, where that doesn’t seem possible, both sides should make an effort to walk in each other’s shoes. There are bound to be some misunderstandings along the way and you might well attract criticism from your own side for talking to the ‘enemy’ but, if everyone has agreed to some clear objectives, it is possible to achieve mutually satisfying outcomes.”

Ritter points to a positive frame of reference. “There’s an awful lot of market advantage to be had by being the first mover on sustainability and human rights issues,” he says. “I’ve had any number of conversations with senior executives who said they were pleased to be doing the right thing but that they’d also found it was really good for business.”

How to negotiate with NGOS 

Julie Garland McLellan, director of Bounty Coal

• Be scrupulously honest; if NGOs catch you being dishonest, you’ve lost the war. 
• Engage with your stakeholders to ensure that your host communities, staff, suppliers, customers, shareholders and regulators are all happy. 
• Marshall your shareholders’ resources for the purposes they were granted to you, which is getting your operations up and running and making sure that they run sustainably into the future.  
• Remember that, when you are on a board, you are not there to set the world to rights. You are there to make a success of the company for your shareholders.

David Ritter, CEO of Greenpeace

• Stay informed about the genuine risk of stranded assets and failed investments as the world begins to take strong action on climate change.  
• Familiarise yourself with industry standards relating to environmental sustainability, human rights and other issues. 
• Scan for the issues that may confront your company in the future. Tomorrow’s risk might not be evident from what NGOs are campaigning on today but might be evident in academic literature or among the wider activist community. 
• Remember that there can be commercial benefit in doing the right thing.