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"Companies need to step up collectively for common goods and against corporate capture of the state"

Elizabeth Doty is the director of the Corporate Political Responsibility Task Force (CPRT) at the University of Michigan’s Erb Institute. Thomas Lyon is the Dow Professor of Sustainable Science, Technology and Commerce at Michigan’s Ross School of Business. He is the author of ‘CSR needs CPR: Corporate Sustainability and Politics’ and the editor of a book on CPR forthcoming with Cambridge University Press. We spoke to them about their conception of CPR and the differences between approaches to the topic in the United States and Europe.

What reasons are there for using the term CPR and how can it be defined?

Lyon: I first began thinking about the ideas around CPR in the context of a gathering of the Alliance for Research on Corporate Sustainability (ARCS) in France in 2016. We tried to come up with examples of corporations leading systemic change for sustainability, but we mostly found instances of companies using their political influence as a way to block systemic change. This realization led us to argue that stakeholders who care about CSR must also monitor companies’ political activities. We then formulated three central planks for political engagement: responsibility, accountability, and transparency. The upshot from all this was a joint article in the California Management Review of 2018, ‘CSR Needs CPR: Corporate Sustainability and Politics.’

Tell us a bit about your work at the Corporate Political Responsibility Taskforce (CPRT), which has formulated the Erb Principles for CPR. What are they and how were they created?

Doty: I was originally more of a practitioner, having worked as a consultant helping companies to keep their commitments. Tom and I founded the CPRT in 2021 and discovered many companies were concerned about stakeholder pressure regarding their political activity. The CPR Taskforce has two missions: to help companies align their political influences with their commitments—on sustainability and other topics—and to make CPR a widely accepted norm.

To fulfill this mission, we then began working with a small group of c-suite member executives to develop a comprehensive framework to operationalize this idea of corporate political responsibility. We wanted to include all avenues of corporate political influence, including lobbying, political spending, internal and external communications, and so on. In particular, we felt that companies still pay too little attention to the effects of their own actions. We have therefore kept in sight the ways in which companies unintentionally contribute to creating problems in society and political systems and how they can in turn help to alleviate them.

Our first deliverable in this CPR framework are the Erb Principles for Corporate Political Responsibility. The first, is the principle of legitimacy—this includes the guardrails that companies must abide by to prevent a corporate crowding out of the state and civil society. Members of both sides of the party-political spectrum tend to agree on this. The second principle is accountability, which really focuses on whether your political activities are aligned with your stated commitments—say, to sustainability, stakeholders, and even the business. This is the arena that stakeholders are concerned about with greenwashing, where companies say one thing, but privately lobby for the opposite. You then get to the principle of responsibility, which is about the responsibility not to undermine, but to strengthen the societal systems you draw upon. Finally, there is the principle of transparency, which helps to build trust and to enable genuine choices for stakeholders. Several companies, such as Danone and IBM, are already acting in a transparent manner while many remain opaque. Now we are working to get companies to publicly endorse these principles.

What are the main differences in the way CPR is conceived and practiced in the US and Europe? How is responsibility understood, respectively, and what does it entail?

Lyon: There is a great deal of skepticism towards the involvement of business in politics in the United States. Critics justifiably point to the corporate capture of some policy areas—one example would be the influence of the fossil-fuel industry on climate change legislation. Some academics would say that corporations should simply do no harm with their political activity. But I would go further and say that companies need to step up and advocate collectively for public policy that protects common goods and against corporate capture of the state. It would seem that Europe has more safeguarding measures against such risks.

Doty: Building on that, I would say that there is largely a difference in sequence and emphasis. We do call for the provision of public goods and genuine participation in public discourse. However, to address the problem of capture and doing no harm, we have to get over the collective action problem. This means, companies with a CPR stance need to encourage their peers to act responsibly, curtailing undue influence on matters of regulation that would align market incentives with the broader public interest. Also, money in politics is a distinctive problem here in the US and some companies spend heavily, in ways that facilitate corporate capture and represents the number one cause of public distrust in government. Unfortunately, over time, both of these harm the economic environment for business.

Is there a way to go beyond the issues of the day, to strengthening key societal systems? For example, could CPR help to buttress American democracy against rising polarization?

Lyon: Polarization presents a great problem to companies since there can be big swings from one administration to the next. Long-term investments in some key areas such as the energy transition can become quite challenging in this environment. Business accordingly has much to gain from a less polarized environment, but the collective action problem persists and there is a need for a collective body to lead the charge. The US Chamber of Commerce would be one candidate though its reputation has been compromised by many years of advocacy for “crony capitalism.” The Business Roundtable might be another one. In any case, there has to be some sort of collective action on this front.

Doty: We are seeing glimpses of trade associations pursuing policies that focus on the common good and aligning market incentives with the public interest—the way the free enterprise system is envisioned to work. The food industry has seen a positive shift in this regard, as have the consumer goods and tire industries. And yes, avoiding excessive oscillation is the main concern here, along with fragmented regulations that differ from state to state.

Would it be possible to include political sustainability in ESG by extending the existing governance component in an outward direction?

Lyon: The Erb Institute has developed a new executive education course where this topic has come up. I agree that governance would be the best place for political factors to enter the corporate governance equation. The forthcoming EU disclosure requirements will be a good step in this direction. We are seeing a lot of resistance to the term ESG in the United States, and it may well disappear, but the concerns it addresses will remain pressing.

American concepts of CPR focus largely on a company’s external action. But what are some things corporations can do internally to strengthen democracy?

Doty: Companies are devoting a lot more time to understanding their employees’ views on current societal issues, and that has led to many of the actions companies take in the public sphere. They have also invested in supporting employees and the communities where they operate in active civic participation. For example, some Fortune 50 companies have undertaken efforts in this direction by running get-out-the-vote campaigns. Others have created educational bridge-building or deliberative programs. The insurance firm Allstate and the Aspen Institute have started The Better Arguments Project which seeks to improve civic debating culture. There are Interfaith America, a project trying to mobilize religious diversity for the common good, and the Convergence Center for Policy Resolution supported by the Chamber of Commerce, to name just a few. One thing companies need to watch for with these efforts is being explicit about guardrails to demonstrate their neutrality, as outlined in the principle of legitimacy. Even get-out-the vote efforts can be viewed as partisan, otherwise.

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