BUS604: Innovation and Sustainability

Once a business has an understanding of how government affects their operations and profitability, it can formulate strategies for how best to interact with government. There are three general types of business responses to the public policy environment - reactive, interactive, and proactive.

Reactive responses involve responding to government policy after it happens. An interactive response involves engaging with government policymakers and actors (including the media) to try to influence public policy to serve the interests of the business. A proactive response approach entails acting to influence policies, anticipating changes in public policy, and trying to enhance competitive positioning by correctly anticipating changes in policy. For most businesses, a combination of the interactive and proactive approaches is the best approach.

In meeting challenges from nongovernmental organizations (NGOs) and the media, businesses may respond in a variety of ways, including the following:

• Confrontation. It may aggressively attack either the message or the messenger, and in extreme cases, business has felt justified to sue its critics for libel.
• Participation. Business may develop coalitions or partnerships with NGOs, as McDonald's did with the Environmental Defense Fund (EDF; see the following discussion) or as Home Depot did with the Rainforest Alliance (see the following sidebar).
• Anticipation. Business may adopt issues management programs to forecast emerging issues and to adjust or change business practices in advance of the passage of stringent laws or regulations.

When business is in a reactive response mode, it most often engages in confrontation of its adversaries. When it assumes an interactive response mode, it participates in dialogues with NGOs and the media and develops partnerships or coalitions to advance new policies and programs. When business behaves in a proactive manner, it anticipates future pressures and policy changes and adjusts its own internal corporate policies and practices before it is forced to do so. While a reactive stance may sometimes work, it often only delays needing to engage in a more interactive or proactive way. An interactive or proactive approach is usually a better way to meet political and societal challenges while also protecting the reputation of the firm.

Sidebar

Home Depot and Rainforest Action Network: From Combative to Collaborative Relationship

Home Depot's relationship with the Rainforest Action Network (RAN) on the issue of preserving old-growth forest began as combative and reactive but wound up being collaborative and interactive. After discussions with RAN, Home Depot agreed to sell only lumber that was certified as grown from sustainable forests.

Tactics That Businesses Use to Influence Government

Businesses often engage in a variety of tactics to influence government policy. This includes lobbying, political contributions, and interest group politics.

Business Lobbying

Businesses lobby in different ways. This can include lobbying of Congress and state legislatures and executive branch agencies directly through its own government relations specialists, through an industry trade association, through consultants, or through a combination of all those avenues. Businesses may also engage in indirect or grassroots lobbying by appealing to its own employees, stakeholders, or the general public to make their views known to policymakers. In order to build a broad grassroots constituency, business may manage "issue advertising" campaigns on top-priority issues, or purchase issue ads in media outlets that target public policymakers or Washington insiders.

Business lobbying has a strong influence on public policies. There are more than 1,500 private companies in the United States with public affairs offices in Washington, DC, and more than 75 percent of large firms employ private lobbyists to make their case for policies that can benefit them. This includes more than 42,000 registered lobbyists in state capitals across the nation.

Business may engage in reactive defensive lobbying (defending its own freedom from government regulation) or interactive lobbying (partnering with interest groups on policies that the firm can benefit from). Businesses can also choose to engage in social lobbying, examples of which include chemical companies with the best environmental track record joining environmental NGOs in lobbying for an increased budget for the Environmental Protection Agency (EPA) and retailers wanting to address consumer concerns joining interest groups in pressuring the Consumer Product Safety Commission to adopt more stringent product safety standards. Corporations showing a willingness to join such public interest coalitions can gain reputational rewards from NGOs, the media, and public policymakers.

Energy Company Lobbying

In 2010. energy companies spent more than $2.5 billion to lobby members of the US Congress, according to the Center for Responsive Politics. While oil, gas, and utility companies spent most of that money, renewable energy lobbying efforts were also sizable.

Political Contributions

Businesses also use campaign contributions to support their position and to try to influence public policies that can help them increase profits. Seven of the ten largest corporations in the world are oil companies, based on revenues. Their access to funds for lobbying and campaign contributions gives them a significant voice in the political system and on policies that can impact sustainable businesses.

There are a range of avenues a company might use in making political contributions. The most transparent and legitimate is that of forming a political action committee (PAC) to which voluntary contributions of employees are amassed and then given in legally limited amounts to selected candidates. Not surprisingly, larger firms in regulated industries, or in industries exposed to greater risk from changing public policies, such as oil companies in 2010 during and after the British Petroleum (BP) Gulf of Mexico oil crisis, use PACs more often than other firms. Beyond contributing directly to political candidates, firms can also advertise on ballot measure campaigns, and those contributions can come from corporate assets and are subject to no legal limitations.

A 2010 US Supreme Court decision, Citizens United v. Federal Election Commission ruled that the government could not ban independent political spending by corporations, as well as labor unions and other organizations, in candidate elections. This has led to a rise of what have become known as "super PACS". In the 2012 Republican presidential primary, about two dozen individuals, couples, or corporations gave $1 million or more to Republican super PACs to try to influence the primary election.

Interest Group Participation

Business response can include participation in interest group politics. Interest groups play a key role in all democratic systems of government. However, as an interest group is a group of individuals organized to seek public policy influence, there is tremendous diversity within interest groups. Business is just one of many interest group sectors trying to influence public policy (see the discussion previously mentioned). Businesses will encounter interest groups that may support or conflict with their position on an issue.