Corporations have risen to be among the most influential and visible institutions of our day. Along with this influence have come expectations and a greater level of scrutiny than perhaps at any time in the past. In response to these expectations, three principal aspects of corporate responsibility deserve our focus:
First is corporate governance. It’s the bare minimum of what a company must do to earn the public’s trust. I believe that the most critical element of ethical corporate behavior is a values-driven organizational commitment. And the longer that commitment is present, the more likely it is to be ingrained in a company’s culture, and the more effective it’s likely to be as a deterrent to the unethical.
Next is community support. The best way to meet public expectations is not just to give money, but to give it well. And giving needs to be about doing good, not just getting credit. As we look at the $35 million in annual food and financial support that Kraft gives to the community, we want to do more than provide a meal or write a check. We try to be catalytic, to identify and solve structural problems that stand in the way of greater effectiveness. We look for sustainable solutions that can increase the long-term capabilities of individuals and organizations.
The final piece is societal issues. The newest, biggest, most demanding, and ultimately most significant aspect of corporate responsibility is the expectation for companies to address a wide range of key societal issues.
It used to be that companies like Kraft were held accountable for only their own direct conduct. But now the notion of accountability has expanded. It extends upstream, back through the supply chain, as well as downstream, across consumer usage and disposal of our products. It covers not just financial or economic performance but also social and environmental impacts. Biotechnology and sustainable agriculture are two issues where the food industry is being asked to play a wider role.
How should companies respond to expectations like these?
First, companies must recognize the need and, ultimately, the benefit of what we might call societal alignment. Companies that are seriously out of touch with societal expectations will find themselves under mounting economic, social, and political pressure. Companies that are well aligned will enjoy growing support in these same three spheres. That’s what led to Kraft’s announcement in July of a series of global initiatives to address the rise in obesity. We’re focusing our efforts on product nutrition, marketing practices, consumer information, and policy advocacy.
Second, companies should engage in candid dialogue with individuals and groups with points of view different from their own—what many people call “stakeholder engagement.” Dialogue, especially with a company’s critics, can help you see aspects of an issue you might not otherwise see. It can help you identify who is constructive and who’s not, or whether there’s common ground the different sides can reach. And the relationships you build can also be useful in gaining external buy-in for the approach you’re taking.
Third, companies should consider the cost of engaging these kinds of issues vs the potentially much greater cost of not engaging. A lot depends on the specific issues a company or industry faces, but almost always there is significant cost involved in addressing them, especially in the short run. That cost will certainly include the expense of the corporate responsibility process itself—the creation of standards, the monitoring, measuring, and reporting. But it may also come in the form of lower revenue, higher operating expenses, or added capital as they change business practices or commit to continuous improvement of what they’ve chosen to measure. But in the end, the greatest cost of all may be the cost of doing nothing.
Some companies may be lucky and never face significant corporate responsibility issues. Their reputations will remain intact, and they will live happily ever after. Most of us, though, will find that the world will bring challenges to our door. We will be in a much better position to deal with them if our governance is strong, we’ve supported the community, and we have a record of engagement on key societal issues. A few of us will face genuine crises. And when our hair is on fire, we will do anything, pay any price, to put it out. How much better would it be to have already engaged and prevented the crisis from happening in the first place?
There’s so much in life we don’t know. But of this I’m virtually certain—doing the right thing is always the smart thing.
Betsy Holden is Co-CEO of Kraft Foods Inc. and President and Chief Executive Officer of Kraft Foods North America, Three Lakes Dr., Northfield, IL 60093. This article is based on her presentation at the Chief Food Officials program “Partnership for Growth,” at the IFT Annual Meeting + Food Expo®, Chicago, Ill., July 13, 2003.