Stages of Corporate Citizenship: A Developmental...

Stages of Corporate Citizenship:

A Developmental Framework

by Philip Mirvis, Ph.D. and Bradley K. Googins, Ph.D.

A Center for Corporate Citizenship at Boston College Monograph

THE CENTER FOR CORPORATE CITIZENSHIP AT BOSTON COLLEGE • www .bc .edu/corporatec i t izenship

To the Reader:

This monograph is intended for executives who findthemselves on the front line of balancing the expecta-tions of stakeholders – such as shareholders, employ-ees, communities, governments, and activists – withthe management of a successful business. While thereare many terms used to describe this, such as corpo-rate citizenship, corporate responsibility, sustainabilityor the triple bottom line, there are few mechanismsthat allow you to gauge the status of your company. Webelieve this monograph and the developmental frame-work it presents is such a tool.

The Center for Corporate Citizenship at Boston Collegedefines the essence of citizenship as how a companydelivers on its core values in a way that:

• Minimizes harm• Maximizes benefit• Is accountable and responsive to key stakeholders• Supports strong financial results

There is no one-size-fits-all model of corporate citizen-ship. Each company must identify the values and prac-tices that anchor its business strategy and then man-age appropriate to specific dynamics related to thecompany’s history , industry , workforce, and otheraspects of its competitive environment. This mono-graph provides a perspective that allows you to deter-mine where your company fits in the current landscapeand provides guidance to plot a future course. We pro-vide tangible examples and case studies to illustratedistinct dimensions of citizenship within a company ata specific point in time.

We encourage you to determine the stage that bestdescribes the current status of your company . Doesthis match the expectations of your top executives,employees, and key stakeholders? Perhaps along somedimensions and not others. With this developmentframework you can take the mystery out of your corpo-rate citizenship and control the future course of yourcompany.

This monograph series is supported by General Motors

The text paper for this report is printed on 100%recycled, chlorine- and acid-free paper; cover is30% recycled paper

A R E S E A R C H C E N T E R A T B O S T O N C O L L E G E • T h e W a l l a c e E . C a r r o l l S c h o o l o f M a n a g e m e n t • 1

Not all of these initiatives are suitable for every compa-ny. How then is an executive to know what to act onnow, or assuming the company is already knee-deep inmany initiatives, what is the optimal set of initiatives forthe company and its stakeholders? A company shouldassess the appropriate and effective actions it shouldtake regarding transparency , governance, communityeconomic development, work-family balance, environ-mental sustainability , human rights protection, andethical investor relationships. A company should askwhether there a connection between risk management,corporate branding, stakeholder engagement, suppliercertification, cause-related marketing, and employeediversity? Should there be?

Research by The C enter for C orporate Citizenship atBoston College suggests that the balance between con-fusion and coherence of ten depends on what stage acompany is in relative to its development of corporatecitizenship.1 Relative neophytes, for instance, often lackunderstanding of the many aspects of corporate citizen-ship and have neither the expertise nor the machineryto respond to so many diverse interests and demands.Their chief challenges are to put citizenship f irmly onthe corporate agenda, get better informed about theconcerns of stakeholders, and take sensible initial steps.At the other extreme are companies that have alreadymade a signif icant investment in citizenship. In this

case, the CEO is typically leading the firm’s position onsocial and environmental issues, and the board is fullyinformed. To move forward these companies might tryto connect citizenship to core business strategy and toemployees through a “live the brand” campaign likethose at IBM and Novo Nordisk or by establishing citi -zenship objectives for line managers, as Dupont andUBS have done.

To understand the relevance of corporate citizenshipfor a company , much depends on what the companyhas accomplished to date and how far it intends to carryits commitment. Through a random sample ofAmerican businesses, The C enter has found thatroughly 10 percent of company leaders do not under-stand corporate citizenship. 2 On the other end of thespectrum, not quite as many firms have integrated pro-grams and are setting new standards of performance.Among the majority in between, there is a wide rangeof companies in transition whose knowledge, attitudes,structures, and practices represent different degrees ofunderstanding of and sophistication about citizenship.

Recognizing the stage in which a company is operatingand understanding the challenges created by advancingcitizenship, will help clarify for executives a sense ofwhere things stand, frame strategic choices aboutwhere to go, aid in setting benchmarks and goals, andperhaps speed movement forward.

Business leaders throughout the world are making corporate citizenship a key priority for their compa-

nies. Some are updating policies and revising programs; others are forming citizenship steering com-

mittees, measuring their environmental and social performance, and issuing public reports. Select

firms are striving to align staff functions responsible for citizenship and move responsibility—and

accountability—into lines of business. And a vanguard is trying to create a market for citizenship and

offer products and services that aim explicitly to both make money and make a better world.

Introduction

Stages of Corporate Citizenship:

A Developmental Framework

2 • THE CENTER FOR CORPORATE CITIZENSHIP AT BOSTON COLLEGE • www.bc.edu/corporatecitizenship

Stages of Corporate Citizenship: A Developmental Framework

Stages of DevelopmentWhat does it mean that a company is at a particular stageof corporate citizenship? The general idea, found in thestudy of children, groups, and systems of all types,including business organizations, is that there are dis-tinct patterns of activity at different points of develop-ment.3 Typically, these activities become more complexand sophisticated as development progresses and there-fore capacities to respond to environmental challengesincrease in kind. Jean Piaget’s developmental theory, forexample, examines how children progress throughstages that entail more complex thinking and finer judg-ments about negotiating the social world outside ofthemselves. Similarly, groups mature along a develop-mental path as they confront emotional and task chal-lenges that require more socially sensitive interactionand sophisticated problem solving.

Larry Greiner, in his ground-breaking study of organi-zational growth found that companies also developmore complex ways of doing things at different stagesof growth.4 Organizations, over time, f ind more direc-tion af ter their creative start-up phase. Infrastructureand systems then take on more responsibilities, fol-lowed by working through challenges of over-controland red tape with better coordination and later pro-gressing to collaboration across work units and levels.

Stages of Corporate Citizenship: Many ModelsThere are a number of models involving the stages ofcorporate citizenship. On a macro-scale, for example,scholars have tracked changing conceptions of the roleof business in society as advanced by business leaders,governments, academics, and multi-sector associa-tions.5 They document how increasingly elaborate andinclusive def initions of social responsibility , environ-mental protection, and corporate ethics and governancehave developed over recent decades and resulted in anenlarged role of business in society. Others have lookedinto the spread of these ideas into industry and societyin the form of social and professional movements. 6

At the level of the f irm, Post and Altman have shownhow environmental policies progressively broaden anddeepen as companies encounter more demandingexpectations and build their capability to meet them. 7

In turn, Zadek’s case study of N ike’s response to chal-

lenges in its supply chain highlights stages in the devel-opment of attitudes about social responsibilities incompanies and in corporate responsiveness to socialissues.8 Both of these studies emphasize the role oforganizational learning as company responsibilitiesbecome more complex at successive stages of develop-ment, action requirements are more demanding, andthe organizational structures, processes, and systemsused to manage citizenship are more elaborate andcomprehensive.

Factors in Development of CitizenshipHundreds of citizenship practitioners have rated theircompanies along the dimensions of this stage modeldeveloped by The C enter for C orporate Citizenship atBoston C ollege. Af ter considering the options, mostfind that their businesses are not at any single stage ofcitizenship: in some aspects their f irms are integrated,in others innovative, and in still others just getting start-ed. This means that the dimensions we have outlinedare not invariant. C ompanies are apt to be ahead insome dimensions and behind on others. One observerpointed out, for instance, that there are companies thatwin citizenship awards based on their social reports buthave seemingly mastered only the reporting aspects.Others, by comparison, may be proactive in their pro-grams but lagging in transparency.

These kinds of variation are found in developmentalmodels of all types. After all, development is shaped bythe interaction of a unique entity such as a person,group, organization, or social phenomena and its dis-tinct environment such as material, social, or political.

Development of CitizenshipIn our research, The C enter has examined the genera-tive logic and mechanisms that drive the developmentof citizenship within companies. We consider the devel-opment of citizenship as a stage-by-stage process inwhich a combination of internal capabilities applied toenvironmental challenges propels development for-ward in a more or less “normal ” or normative logic. I nGreiner’s terms, organizational development is punctu-ated by a series of predictable crises that trigger respons-es that move the organization forward. The triggeringmechanisms are of ten the tensions between currentpractices and the problems they produce that demand


Stage 1: Stage 2: Stage 3: Stage 4: Stage 5: Elementary Engaged Innovative Integrated Transforming

Citizenship Jobs, Profits Philanthropy, Stakeholder Sustainability or Change Concept & Taxes Environmental Management Triple Bottom Line the Game

Protection

Strategic Intent Legal License Business Case Value Market Creation Compliance to Operate Proposition or Social Change

Leadership Lip Service, Supporter, Steward, Champion, Visionary, AheadOut of Touch In the Loop On Top of It In Front of It of the Pack

Structure Marginal: Functional Cross-Functional Organizational Mainstream:Staff Driven Ownership Coordination Alignment Business Driven

Issues Defensive Reactive, Responsive, Pro-Active, DefiningManagement Policies Programs Systems

Stakeholder Unilateral Interactive Mutual Partnership Multi-Relationships Influence Alliance Organization

Transparency Flank Public Public Assurance Full DisclosureProtection Relations Reporting

STAGES OF CORPORATE CITIZENSHIP

Dim

ensi

ons

a new response from a f irm. For instance, creativity—the entrepreneurial f ire in companies—also generatesconfusion and a loss of focus that may stall growth. Thisposes a “ crisis of leadership ” that must be resolved toallow a stage of orderly growth and direction to result,often under new leadership and more formal structures.A later tension between delegation and its conse-quences, sub-optimization and inter-group conflict, trig-gers a “crisis of control” and movement toward coordi-nation. And so on. In development language, compa-nies in effect master these challenges by devising pro-gressively more effective and elaborate responses.

The Center’s model is also normative in that it posits aseries of more or less sequential stages in the develop-ment of corporate citizenship. H ere, too, the triggersfor movement are internal and external challenges thatcall for a fresh response. These challenges, as we shallsee, center initially on a firm’s credibility as a corporatecitizen, then its capacities to meet expectations, the

coherence of its many subsequent efforts, and, f inally,its commitment to institutionalize citizenship in itsbusiness strategies and culture.

Movement along a single development path is not fixednor is attaining a penultimate “end state” a logical con-clusion.9 This means that the arc of corporate citizen-ship within a f irm is shaped by the socio-economic,environmental, and institutional forces impinging onthe enterprise. This effect is well documented by DavidVogel’s analysis of the “market for virtue” where hefinds considerable variability in the business case forcitizenship across firms and industries and thus limitsits marketplace rewards.10 Notwithstanding, a compa-ny’s response to these forces also varies based on theattitudes and outlooks of its leaders, the design andmanagement of its citizenship agenda, and firm-specif-ic learning. 11 Thus, there are “ companies with a con-science” that have a more expansive citizenship prof ileand firms that create a market for good works. 12

Here we consider how pro-acti ve acompany is on myriad citizenship issuesand how responsive it is in terms of poli-cies, programs, and performance.

Stakeholder Relationships:How does a companyengage its stakeholders?

The sixth dimension of citizenshipconcerns a company’s relationshipwith its stakeholders. A wide range oftrends, from increased socialactivism by shareholders to an expo-nential increase in the number ofnongovernmental organizations(NGOs) around the world, has driv-en wholesale changes in the wayscompanies communicate with andengage their stakeholders.

Here we look at this development interms of the increasing openness anddepth of such relationships.

Transparency: How open is a corporation about itsfinancial, social, and

environmental performance?

Upwards of 80 percent of F ortune500 companies now use their websites to address social and environ-mental issues and roughly half of thecompanies today issue a publicreport on their activities.4

From a developmental perspective, ourinterest is in when and how companiesadopt transparent practices and howmuch they disclose.

Citizenship Concept: How is citizenship defined?How comprehensive is it?

Definitions of corporate citizenshipare many and varied. The C enter’sconcept considers the total actions ofa company and applies social contract principles such that a com-pany’s actions minimize harm, maxi-mize benefit, are accountable andresponsive to stakeholders, and sup-port financial results.

From a developmental perspective ourinterest focuses on how comprehensiveand inclusive a company regards its rolein society and less on how a companydefines its specific citizenship activities.

Strategic Intent: What isthe purpose of citizenship?

A second dimension concernsthe strategic intent of a company:What is it trying to achieve with citi-zenship? N.C. Smith observes thatfew companies embrace a strictlymoral commitment to citizenship;often considering reputational risksand benefits, and a business case fortheir efforts. 1 The Center’s researchfinds increasing interest in an “inside-out” framework to guide actions andinvestments. This is a key indicator ofthe relative importance of citizenshipto the corporate agenda.

Regardless of the terms and frameworkused, we focus on the extent that citi-zenship is embedded in a company’sstrategies, products and services, cul-ture, and ways of doing business.

DIMENSIONS OF CITIZENSHIP


To track the developmental path of citizenship in companies, we focus on seven dimen-sions of citizenship that vary at each stage:

1

2

6

7

1Smith, N. C. “Corporate Social Responsibility: Whether or How?” California Management Review. 45/4 (2003): 52-76.

2See Responding to the Leadership Challenge: Findings of a CEO Survey on Global C orporate Citizenship. (Geneva: World Economic Forum, 2002). The

Changing Role of Business in Society: A Global CEO Survey . (New York: The Conference Board, International Business Leaders Forum, Asian Institute of

Management and Instituto Ethos, 2002).

3See Post, J. E. and Griffin, J. J. The State of Corporate Public Affairs: Final Report . (Boston: Boston University School of Management and F oundation

for Public Affairs, 1966); State of Corporate Public Affairs Survey. (Washington: Center for Public Affairs Management, 2002); Mahon, J. J. and

Waddock, S. A. “Strategic Issues Management: An Integration of Issue Life C ycle Perspectives.” Business & Society, 31/1 (1992): 19-32.

4On web sites, see Bhattacharya, C. B. and Sen, S. “Doing Better at Doing Good: When, Why , and How Consumers Respond to Corporate Social Initiatives.”

California Management Review. 47/1 (2004): 9-24; Social Reporting Fact Sheet. (Boston: Center for Corporate Citizenship at Boston College, 2004).

Leadership: Do top leaderssupport citizenship? Dothey lead the effort?

Visible, active, top level leadershipappears on every industry and execu-tive survey as the top factor for drivingcitizenship within a corporation.2

This third dimension addresses howinformed top leaders are about citizen-ship, how much leadership they show ,and to what extent they “walk the talk.”

Structure: How are respon-sibilities for citizenshipmanaged?

The fourth dimension concerns themanagement of citizenship through-out an enterprise. A three-year in-depth study by The C enter involvingeight companies found that manyprogressed from managing citizen-ship from functional “islands” tocross-functional committees and afew had begun to achieve integrationthrough a combination of structures,processes, and systems.

We look at this development in terms ofthe movement of citizenship from amarginal position to its managementas a mainstream business activity.

Issues Management: Howdoes a company deal withissues that arise?

Scholars have mapped the evolutionof the public affairs office in corpora-tions and stages in the managementof public issues.3

3

4

5

Stage 1: ElementaryCitizenship Concept: Jobs, profits & taxes

Strategic Intent: Compliance

Leadership: Lip service; out of touch

Structure: Marginal; staff driven

Issues Management: Defensiveness

Stakeholder relationships: Unilateral

Transparency: Flank protection

In this base stage, citizenship activity is episodic and itsprograms are undeveloped. The reasons are usuallystraightforward: scant awareness of what corporate citi-zenship is all about, uninterested or indifferent topmanagement, and limited or one-way interactions withexternal stakeholders, particularly in the social andenvironmental sectors.

The mindset in these companies, reflected in policiesand practices, of ten centers narrowly on compliancewith laws and industry standards. Handling matters ofcompliance in these f irms is usually assigned to thefunctional heads of departments such as humanresources, legal, investor relations, public relations, andcommunity affairs. The focus is simply on obeying thelaw and protecting the f irm’s reputation and conse-quently, in many cases, the company appears to take adefensive stance toward outside pressures. In the early

1990s N ike exempli-fied this stage in itsdealings with laboractivists.

It is not fair to labelleaders of companiesat this stage as back-ward or to see theircitizenship efforts asnecessarily suspect.Some believe on prin-ciple, like economistMilton Friedman, thata company’s obliga-tions to society are to“make a prof it, paytaxes, and providejobs.”13 Others, par-ticularly those head-ing smaller and mid-

The Stages of Citizenship

The model presented here is normative in that it offersa series of more or less sequential stages in the devel-opment of corporate citizenship along seven dimen-sions. Each phase is illustrated with examples of corpo-rate practice. Please note, however, we are not implyingthat the companies cited operate currently at that stage;rather we report practices that, at the time cited, areillustrative of citizenship at a specif ic developmentstage. A closer inspection of any company cited willreveal instances where it has a leading edge practice insome dimensions but is less developed in others. Thisshould not be surprising. Af ter all, development is sel-dom uniform, as can be witnessed in a child’s whosephysical, mental, and emotional growth typically devel-op at different rates. In the same way, the developmentof corporate capabilities is uneven. Of ten influencingthe development of citizenship are f irm-specific forcesin society, industry dynamics, and other environmentalinfluences, not to mention leadership and a company’sculture. Nevertheless, the normative pattern of activityat each stage has an internal consistency that can beuseful in gauging where a company is in the develop-ment of its citizenship thrust and where it mightchoose to develop further.

STAGE 1



DEVELOPMENTAL CHALLENGES THAT TRIGGER MOVEMENTOF CORPORATE CITIZENSHIP

Transforming

Integrated

Innovative

Engaged

Elementary Credibility

Capacity

Coherence

Commitment

STAGE 2

STAGE 3

STAGE 4

STAGE 5



size businesses, comply willingly with employmentand health, safety , and environmental regulations buthave neither the resources nor the wherewithal to domuch more for their employees, communities, or soci-ety writ large.

Former General Electric CEO J ack Welch is an exem-plar of this F riedman view. “A CEO’s primary socialresponsibility is to assure the f inancial success of thecompany,” he says. “Only a healthy , winning companyhas the resources and capability to do the rightthing.”14 GE’s f inancial success over the past twodecades is unquestioned. However, the company’s rep-utation suffered toward the end of W elch’s tenurewhen it was revealed that one of its business units haddischarged tons of the toxic chemical PCB into theHudson River. When challenged, Welch was defensiveand pointed out that GE had fully complied with thenexisting environmental protection laws.

This illustrates one of the triggers that move a compa-ny forward into a new stage of citizenship. W elch’sstance was out of touch with changing expectations ofcorporate responsibility . W elch’s successor , J effreyImmelt, reversed this course by accepting at least par-tial financial responsibility for the cleanup and there-after elevated citizenship on the company’s agenda.

Challenge: Gain Credibility. It’s clear that societyexpects more from companies today—particularly larg-er businesses. A recent survey of public opinion foundonly 10 percent of adults subscribed to Friedman’s nar-row view of corporate responsibility . A follow-up pollfound more than 80 percent agreed that “larger compa-nies should do more than give money to solve socialproblems.”15

These prevailing expectations challenge a f irm at thisbasic stage of citizenship. The difficulties that Nike andShell experienced in the 1990s illustrate how merecompliance with legal and industry standards threatensthe credibility of a company when it proves unable orunwilling to respond to new expectations. S uch chal-lenges are most potent when, as in these cases, theytake the form of a crisis and threaten a highly visiblefirm’s reputation or competitive status.

Interestingly, most U.S. business leaders today under-stand these changing expectations and have taken stepsto further develop a citizenship agenda. The C enter’s2003 survey of business leaders, for example, foundthat 75 percent believe that the public expects them toexceed laws to make sure products are reliable and safeand 58 percent said the public expects them to exceedlaws to protect the environment. M ore broadly, three-fourths say that the public has a right to expect good cit-izenship from companies. 16 Such awareness, inside acompany, reveals a readiness to make the transitionfrom a basic law-abiding stance to initial engagementwith broader realms of corporate citizenship.

Stage 2: EngagedCitizenship Concept: Philanthropy, environmental

protection

Strategic Intent: License to operate

Leadership: Supporter, in the loop

Structure: Functional ownership

Issues Management: Reactive, policies

Stakeholder relationships: Interactive

Transparency: Public relations

At this second stage, top management of ten wakes upto society’s increasing expectations and begins toadopt a new outlook on the company’s role andresponsibilities. Dupont had this awakening in 1989when new CEO Edward Woolard declared that thecompany would move from simply complying withenvironmental laws to winning the public’s trust. 17

Chiquita, a late-riser by comparison, got its wake upcall in 1998 when it was attacked by the media andNGOs with allegations related to the f irm’s woefulemployment practices in Central and South America.The company subsequently interviewed hundreds ofemployees, revised its statement of core values, andadopted a new code of conduct that articulated itssocial responsibilities.

There are a number of signs that mark the transition tothe Engaged Stage of corporate citizenship. S imonZadeck, for instance, points out that at this stage com-panies often adopt a policy-based approach to mitigatethe likelihood of litigation and risks to reputation. 18



The policies typically draf ted call on the company toexceed the law with respect to employment and health,safety, and environmental practices. Furthermore, com-munity, environmental, and social issues are typicallystudied and gain more visibility and attention withinthe firm. Top leaders, who may have been out of touchwith these matters, begin to take an interest and moni-tor what is going on. Staff units, formerly lef t to theirown devices, are now tasked with owning corporate-wide policies and expected to perform to higher stan-dards. The leaders of these functions are expected tobecome better informed about developments in theirindustry and among their competitors.

Still, companies at this developmental stage tend to bereactive to emerging social and environmental issues—as was the case with Chiquita, N estlé (regarding infantformula), and more recently , Home Depot (regardingthe sale of lumber cut from protected forests). Outsideprofessionals or consultants with specialized knowl-edge and experience of ten have to be brought in toenhance functional know-how . These experts of tenintroduce new concepts and performance standardsabout issues such as protecting human rights in over-seas operations, gaining ISO 14000 certif ication foreco-friendly technologies, ensuring transparency infinancial disclosures, or becoming a more family-friendly employer.

Throughout this stage, many companies undertakemore extended, two-way communication with stake-holders—talking with, rather than just at, communitygroups, socially responsible investment bodies, andNGOs. Employees may gain insight on company prac-tices overall or on issues involving, for example, theneeds of working parents, ethnic minorities, or gays.

Challenge: Build Capacity. At this developmental point,staff units are often overwhelmed by engagements withstakeholders and are seldom equipped to respond tonew issues, opportunities and threats. This gap, inturn, triggers a phase of innovation where senior exec-utives become more deeply involved, staff launch moreextensive programs, and f irms reach out to stakehold-ers and become more open about their activities. Acompany simply needs more capacity to address thespectrum of new and varied interests and needs.

The Anglo-Dutch oil company Shell illustrated this during itsresponse in the mid-90s following the challenge by environ-mentalists to the proposed sinking of its Brent Spar platformand by social activists to the arrest by the Nigerian governmentof a community leader who had protested the company’s treat-ment of the indigenous Ogoni tribe and homeland. 1 Shell’sscenario-planning process had not anticipated such threats;and its then-current Business Principles proved woefully inade-quate to guide a response to the issues which resulted in con-tradictory responses from country managers, various corporategroups, and Shell’s committee of managing directors.

Shell thereupon created a crisis management group of all rele-vant interests in the company to address the immediate issues.Later, a cross-functional, multi-business team was formed tostudy the larger issues of Shell’s role in society, engage externalstakeholders, and set new socially and environmentally respon-sible business principles. The strategic intent, characteristic ofthis stage, was to protect Shell’s reputation and preserve thecompany’s “license to operate” around the globe.

Over the next several years Shell’s citizenship efforts broad-ened. In 1999, as the Shell Group began to innovate, it deviseda sustainable development management framework thataddressed economic development, wealth creation, climatechange, and engagement with society . It also established acouncil of key staff and line executives to oversee its implemen-tation. In 1998 Shell was also one of the first large, public com-panies to issue a report on its social and environmental per-formance, People and Profits.

But there’s a cautionary note here, too. Shell’s efforts tostrengthen its social and environmental capabilities were notmatched by developments in transparency and ethics. Knowingmisstatements of its oil reserves and failings in environmentalreparation in Nigeria have since harmed Shell’s reputation andlicense to operate. The Group’s latest move, to create a singleCEO position, is another attempt to deal with a changing land-scape.

1For a description of Shell’s response, see Mirvis, P. H.

Transformation at Shell: Commerce and citizenship. Business andSociety Review, 105-1, (2000): 63-84.

SHELL

Engaged Stage



Stage 3: InnovativeCitizenship Concept: Stakeholder management

Strategic Intent: Business case

Leadership: Steward, on top of it

Structure: Cross-functional coordination

Issues Management: Responsive, programs

Stakeholder relationships: Mutual influence

Transparency: Public reporting

During this stage of development a company movesforward in two ways: 1) broadening its agenda byembracing a more comprehensive concept of citizen-ship and 2) deepening its involvement as a top leaderand assuming more of a stewardship role. H igh levelsof innovation and learning mark this stage. One sparkis usually increased consultation with a diversity ofstakeholders that involve more open, two-way commu-

nication and mutual influence. Another feature is con-tact with leading-edge companies and experts throughforums, conferences, and professional meetings.

As companies evolve through the Innovative Stage,they typically grapple with creating the business casefor citizenship.19 Research among companies in TheCenter’s Executive F orum research project suggest,however, that the criteria and metrics tend to be func-tionalized at this stage. Managers responsible for socialagendas, for example, cite benefits for recruiting, reten-tion, and reputation; those on the environmental frontcite factors of risk and life-cycle costs; and those on thefinancial side stress matters of exposure and access tocapital. Meanwhile, senior leaders, taking an enterpriseperspective, point to the strength and value of the cor-porate brand.20

We have found that myriad corporate citizenship-relat-ed programs are planned, funded, and launched duringthis innovative stage. These typically start in functionalunits and include internal and external input, an analy-sis of needs and opportunities, a plan of action, andproposals on budget and staff, all buttressed by a busi-ness case to sell the benef its to management. Whatwould have been more ad hoc or reactive at an earlierstage now appears to f it a more programmatic andstrategic logic.

Furthermore, companies also begin to monitor theirsocial and environmental performance and publish theresults in public reports. Our research, however, revealsthat most firms at this stage are simply compiling dataprepared by operating units and presenting it with acorporate overlay. Recent financial scandals and subse-quent legislation have led to wholesale changes infinancial transparency and disclosure throughoutindustry. M ore benign pressures come through thesupply chain where f irms are called upon to completequestionnaires about their employment, environmen-tal, and community practices. S urveys from sociallyresponsible investment houses, and from religious,social action, and environmental interests also sharpenattention to what is happening in a company. All of thisinput and exposure, according to G ene Endicott, for-mer director of public affairs and social responsibility atAgilent, “bring a lot of people out of the woodwork” andbecomes a stimulus to action.

BAXTER INTERNATIONAL

One company that progressed into the innovativestage of citizenship early on is the global healthcarecompany Baxter International. In the early 1990s thecompany piloted what would become the UnitedNation-sponsored Global Reporting Initiative bymeasuring and reporting on its economic, environ-mental, and social performance. In 1997 it becameone of the first adopters of the CERES principles toreport on and improve its environmental perform-ance. In the process, Baxter embraced the still-contro-versial idea that the company is responsible to bothstockholders and stakeholders and will be heldaccountable for its performance. This commitmentwas tested in 2001 in Spain when six patients diedduring dialysis treatment—potentially because ofproblems with filters manufactured by a Baxter sub-sidiary. The company responded by recalling the fil-ters, apologizing publicly , taking a $189 million hit,and reducing, at his own request, the CEO’s bonus. 1

1Hammond, K. H. “Harry Kraemer’s Moment of Truth.” FastCompany. 64 (2002): 93.

Innovative Stage



Challenge: Create coherence. The launch of so manynew programs, growing requests for information andexposure, and an increase in dialogue with stakeholdersoften means that “a thousand flowers bloom.” Thisseeds a new developmental crisis: coping with massivedifferentiated activity. The case of P etro-Canada illus-trates this phenomenon. An inventory of existing pro-grams in the company in 2002 revealed that activitywas widespread but siloed and without alignment orstrategic purpose. S ays Hazel Gillespie, PetroCanada’scommunity investment manager, “We all realized thatwe were contributing to the company’s reputation, butwe weren ’t doing it in a coordinated, concentrated,focused, and strategic way.”

Asea Brown Boveri (ABB) was a pioneer in addressingthis kind of chaos in an orderly fashion. The Swissmaker of power and automation technologies estab-lished a sustainability management program in 1992and today has a Stakeholder A dvisory Board composedof the CEO, a sustainability department head, andseven ad hoc advisors. ABB distributes responsibilitiesamong different groups in its global operation.Business ethics, for example, fall under the company’slegal department while human resources is responsiblefor upholding labor principles. In total, nearly 500 peo-

ple in more than f ifty countries have specif ic responsi-bilities for sustainability programs and coordinatethrough working groups and committees. The systemreflects ABB’s viewpoint that citizenship should be,according to M ichael Robertson, former sustainabilityaffairs off icer, “set from the top and driven downthrough the organization by example, leadership, andtop management support.”

Such efforts to systematize, coordinate, and managethis flurry of activity illustrate the developmental ten-sions between differentiation and integration. Theseare attempts to pull together a response to the increas-ing lack of coherence in the citizenship agenda inmany companies. However, these are generally insuf-ficient at this stage for three interrelated reasons.

• corporate staff units don ’t see the necessity andvalue of working together, especially when they feelstretched by their own agendas and a sense of com-petition for scarce resources.

• many line managers don’t see the relevance as theyoften face competing, short-term priorities.

• and most importantly, a comprehensive view of cit-izenship is not linked with corporate strategy orembedded in the company culture.

INTEGRATING CITIZENSHIP: SAMPLE MECHANISMS

Action/company process Corporate exemplars

Board of Directors Level Committee Merck, McDonald's, Nike

Top Executive Steering Committee Shell, BP, Novartis, Group Danone, Henkel

CSR Risk Management Systems South African Breweries, Petro-Canada, Unocal

Stakeholder/Issues Management Matrix AMD, Renault, SC Johnson

Key Performance Indicators/Internal Reviews British Telecom, Novo Nordisk

Life Cycle Value Assessments Suncor, 3M

Triple Bottom Line/Balanced Score Card Thames Water, Novo Nordisk

Employee Sustainability Training Nike, Unilever

Stage 4: Integrated

Citizenship Concept: Sustainability or triple

bottom line

Strategic Intent: Value Proposition

Leadership: Champion, in front of it

Structure: Organizational alignment

Issues Management: Pro-active, systems

Stakeholder relationships: Partnership, alliances

Transparency: Assurance

One of the developmental challenges for companies atthe Integrated Stage is to progress, in G reiner terms,from coordination to collaboration in driving citizen-ship efforts. Select firms are making moves in this direc-tion. Boards of directors are increasingly setting stan-dards and monitoring corporate performance in thesearenas. An analysis of the Dow J ones S ustainabilityIndex reveals that roughly one in f ive of its membercompanies have board-level citizenship committees. 21

Examples of other corporate-wide efforts to integratecitizenship are also growing (see box on page 9). Theseinclude risk management systems, stakeholder consul-tation schemes, sustainability training for managersand employees, issues management frameworks, andthe like.

Companies at this stage take steps to drive citizenshipinto the lines of business. In operational terms, thisinvolves setting targets and key performance indica-tors, and monitoring performance through balancedscorecards. Two exemplary companies in these areasare the U.K.-based beverage company Diageo and 3M:

• Diageo CEO P aul Walsh has created an executivelevel corporate citizenship committee and severaltiers of multi-functional committees to support cit-izenship in the company’s lines of business.

• 3M has adopted a health, safety , and environmentmanagement system with representatives in everybusiness. The company has applied life-cycle man-agement policies to its product development func-tions and requires that all of its manufacturingfacilities obtain ISO 14001 certification.

Both Diageo and 3M have corporate citizenship teamsof internal consultants and business managers whooffer advice and conduct audits in work units.

Social and environmental reporting, once a cutting-edge practice, is no longer exceptional for big compa-nies. Estimates, however , are that only 15 percent ofsuch reports are subject to any external verif ication—which may be the next big step in embedding account-



BP

British Petroleum was another leader in attempting to integrate citizenship from top-to-bottom and throughout itsbusinesses. BP’s integrated agenda begins with a commitment to sustainability that builds on the logic of multi-stakeholder capitalism but joins social, environmental, and economic sustainability to the long-term survival of thefirm.1 Other firms have expressed this kind of holistic conception of citizenship in the form of the triple bottom line.

Such high minded commitments are important, but insufficient in the post-Enron era. Accordingly, BP has put intoplace an integrated governance system that includes a Board-level Ethics and Environmental Assurance Committee,Corporate Directors of Social Policy and Business Ethics, Group-level oversight bodies, corporate and regional coor-dinators, and business unit accountability measurements and audits. Heading all of this machinery is Lord JohnBrowne, CEO, who has been the champion of corporate citizenship in BP and a global spokesman for all of indus-try. BP, then, exemplifies three keys to developments in this phase: 1) Vocal, out-in-front leadership; 2) an inclusivevision of citizenship; and 3) integrative structures, processes, and systems.

1BP Social Report. (2003). www.bp.com. “For us ‘sustainability’ means the capacity to endure as a group by renewing assets, creat -ing and delivering products and services that meet the evolving needs of society , attracting successive generations of employees,contributing to a flourishing environment and retaining the trust and support of customers, shareholders and communities.”

Integrated Stage

A R E S E A R C H C E N T E R A T B O S T O N C O L L E G E • T h e W a l l a c e E . C a r r o l l S c h o o l o f M a n a g e m e n t • 1 1


ability into the business. C ompanies at this stage arealso more apt to disclose their failings as corporate cit-izens. Both BP and Shell, for instance, have disclosedsocial and environmental problems and conducted“warts-and-all” assessments of questioned practices.

Interestingly, our research finds that many of the com-panies that move into the Integrated Stage premisetheir citizenship efforts less on a specific business caseand more on core corporate values.22 Two examples:

• Group Danone, the French multinational, frames itscode of conduct with a value proposition known asthe “Danone W ay.” Its origins date to the protestmovements of the late 1960s when AntoineRiboud, then chairman and CEO of a predecessorcompany, vowed to meet new expectations of work-ers and society. His vow was expressed formally in1974 with a statement setting out a dual commit-ment to business success and social responsibility .Today, this dual commitment is reflected in myriadcriteria of citizenship used by Danone G roup com-panies in self-assessments that are, in turn,reviewed by a high-level steering committee.23

• Novo N ordisk, the Danish pharmaceutical, hasadopted the triple bottom line and uses it to struc-ture its policy bodies and management reviews.It’s specif ic commitment to citizenship isexpressed in a charter of vision, values, and funda-mentals summed up as the “Novo Nordisk Way ofManagement.”24 To further infuse this philosophyinto the culture, during a three-year cycle a groupof 30-40 non-executive facilitators meets withevery work unit and every employee to ensure thatactions and decisions live up to the promise of thecompany’s values. Led by COO Kåre Schultz, thisthrust reinforces the brand message that Novo is a“caring company” and helps to “secure and main-tain 80 years of tradition and integrity.”

Challenge: Deepen Commitment. The value proposi-tion for corporate citizenship reaches its fullest expres-sion when it is visibly integrated into a company’s busi-ness strategy. BP stands out for its strategic commit-ment to environmental sustainability in developmentof future technologies, products, and services. Anotherleader, Interface, the largest commercial carpet manu-facturer in the world, has translated its commitment

into a commercial strategy of renting carpets to corpo-rate clients and then recycling them. The CEO ofInterface says: “We have found a new way to win in themarketplace…one that doesn ’t come at the expense ofour grandchildren or the earth, but at the expense of theinefficient competitor.”25 GE has recently made a boldcommitment to its Ecoimagination initiative thatinvolves a doubling of research spending on environ-mental technologies (to 25 percent of its research budg-et) in anticipation of increasing the revenues fromthese technologies from $1.5 billion in 2004 to $17.9billion in 2010. GE CEO J effrey Immelt, troubled bywhat he terms the “new economics of scarcity,” aims toreinvigorate the company by focusing on the big prob-lems facing society.

The key question a company at this stage has to con-front is how deep is its commitment to citizenship?Such a question is raised when a company is seriouslyconsidering the complexities of sustainability and therelative impact of its efforts versus the social, econom-ic, and environmental problems it encounters in theworld. A select few will identify opportunities in thisand f ind partners willing to co-create new models ofsustainable commerce. C onfronting this questionmoves a company into the T ransforming Stage andplaces citizenship as more central part to the businessmodel. New organizational structures needed to man-age and deliver citizenship are also created.

Stage 5: TransformingCitizenship Concept: Change the game

Strategic Intent: Market creation or social change

Leadership: Visionary, ahead of the pack

Structure: Mainstream; business driven

Issues Management: Defining

Stakeholder relationships: Multi-organizational

Transparency: Full disclosure

At this point, it is premature to specify all of the charac-teristics of this stage of development. H owever, somefeatures of this stage seem clear.

First, f irms that innovate, rather than imitate, at thisstage seem to have a vision of being global citizens andare often led by visible, visionary leaders. Indeed, someof them have become global spokesmen for industry



in this arena, specif ically R ay Anderson, head ofInterface, who appears in the of t anti-business f ilmThe C orporation and J effrey H ollender, CEO ofSeventh Generation and author of recent book on sus-tainable corporate values.26

Second, these f irms seem to take stated corporate val-ues seriously. A 2005 study of CEOs in 20 companiesthat reflect this stage found that they are deeply trou-bled by social and environmental conditions in theworld and motivated by a higher sense of corporatepurpose. Accordingly, a stated value expressed in manyof these companies was the aspiration to make theworld a better place.27

Finally, firms at this stage seldom operate solo in thesocial and environmental realm. They partner exten-sively with other businesses, community groups, andNGOs to address problems, reach new markets, anddevelop local economies. A t Unilever, for instance, weidentified nearly 20 global and more than 1,000 coun-try-based or local partnerships. Not surprisingly, Zadekterms this a “ civil” stage in the growth of corporateresponsibility as it involves cross-industry and multi-sector cooperation in addressing societal ills.28

Ben & Jerry’s, the Body Shop, and P atagonia are com-panies that make social and environmental activism

UNILEVER

Making a business of citizenship is not limited to high-technology companies. Unilever , the Anglo-Dutch marketerof foods and home-and-personal care brands, has been widely noted for its socio-economic investments in emerg-ing markets including the sale in India and parts of Africa of iodized salt that addresses a dietary deficiency amongthe poor, and a campaign on hand-washing in India, where its Lifebuoy soap aims to reduce diarrheal disease. 1 Inboth instances, the company devised new supply-chains to make their products affordable to the poor , developednew distribution channels that turned under-privileged women into village-level entrepreneurs, and partnered withgovernment agencies and NGOs to leverage expertise and legitimate their efforts. This thrust, pioneered in its Indiaoperating company, has spread to water purification (where P&G is also a player) and to children’s nutrition (whereother competitors have initiatives, too).

There is more to this, however, than the immediate bottom line. While C.K. Prahalad makes the case that there is afortune at the “bottom of the pyramid,” the experience of Unilever (and P&G) is that these are long term invest-ments to unlock markets. 2 None of their efforts achieve accustomed hurdle rates of return on capital in the shortterm. Our interviews with some 60 marketing experts, top executives, and citizenship specialists in Unilever , how-ever, revealed broader, strategic motivations for “changing the game.” On the supply side, for instance, they point-ed out that their capacity to grow is threatened by current environmental trends. Hence the global company haslaunched multi-sector sustainability partnerships concerned with agriculture, fish, and water supply. As for demand,they pointed to pandemic problems of both under- and over-nutrition (obesity) that beckon their know-how and thatof their competitors. Finally there is the question, as one executive put it, of “Who are we?” Unilever has embraceda “vitality mission” and its corporate brand promise is to add vitality to life. Yet our interviewees find a gap betweenwho they say they are and what they produce. T oday the company is experimenting with a “vitality check” for itsbrands to certify their use of safe and healthy ingredients and their contribution to environmental and social sus-tainability. Why? “We made a statement of ‘our purpose in being,’” said one business leader . “We can’t go back onit. This is us.”

1See Prahalad, C. K. and A. Hammonds. Serving the world’s poor , profitably. Harvard Business Review, (September, 2004).

2Prahalad, C. K. The Fortune at the Bottom of the Pyramid . (Upper Saddle River, NJ: Wharton School Publishing, 2005).

Transforming Stage

central to their mission and appeal to consumers. Ben& J erry’s credo, for instance, speaks of an economic,product, and social mission and its product manufac-ture, packaging, and marketing all designed for greenconsumers. The cause-related marketing of the BodyShop, the eco-friendly products of P atagonia andSeventh Generation, and the socially responsible invest-ing of T rillium Asset M anagement and other sociallyresponsible investment houses all give credence to themaxim that you can both “do good” and “do well.”

Once at the margins of the marketplace, and franklyridiculed in many managerial circles, these kinds ofpractices and the values that underlay them are makingtheir way into mainstream corporations. Leading phar-maceuticals are giving away or offering discounts to thedeveloping world for drugs to treat river blindness(Abbott), HIV -AIDS (M erck), leprosy (N ovartis), anddiabetes (N ovo N ordisk). C ampaigns by Diageo onresponsible drinking, advertisements by Shell and BPon environmental sustainability , and communityinvestment programs like Cisco System ’s NetworkingAcademy all exemplify this mainstream emphasis.

It’s easy enough to pigeonhole these initiatives underthe labels of strategic philanthropy , cause-related mar-keting, community relations, or employee volun-teerism. But companies moving into this TransformingStage of citizenship have bigger aspiration to, in effect,change the game of business. Their strategic intent isto create new markets by fusing their citizenship andbusiness agenda.

Hewlett Packard, for example, has invested in digitalcommunities in S ao Paulo, Brazil, in villages in Indiaand South Africa, and in inner-city Baltimore to createnew market opportunities and promote communityeconomic development. On the business side of thedeal, HP has partnered with local business leaders,community groups, and NGOs to create web-basedservices for education, healthcare, and agricultureneeds. These efforts, led by the company’s emergingmarket solutions team, aim to give HP “f irst mover”skills, credibility , and advantage in reaching otheremerging markets. On the citizenship side, this is allpart of HP’s “e-inclusion” strategy to reduce the digitaldivide.29



HP has fellow travelers heading in this direction.Micro-chip maker AMD has launched a 50x15 strategywhere it aims to connect 50 percent of the world’s pop-ulation to the internet by 2015. F innish phone manu-facturer Nokia has now reached 100,000 young peoplearound the world with e-learning curricula developedby business partner P earson publishing. Both companies premise these investments on social benefitand future sales. N okia measures and evaluates its programs in 17 countries where it has programs. Its“dashboard” records the number of benef iciaries and gains in their life skills as well as the impact on public opinion, brand reputation, and stakeholderrelationships.

Challenge: A schematic of these f ive stages of citizen-ship and their developmental triggers might seem toimply that perpetual transformation and multi-sectorpartnering is the final stage of development. As valid asthat notion may be, it is only a place-marker becausescholars have not as yet mapped the many possible pat-terns of transformation in companies and in their citi-zenship agenda in these turbulent times. Conceptually,this phase seems to pose yet another tension in compa-nies—prior emphasis on integration and order has togive way to differentiation and a bit of chaos as compa-nies develop inter-organizational alliances and innovatein new socio-economic spheres. This, in turn, raisesquestions about the “business of business” in differentkinds of socio-economies and on stages in the furtherdevelopment of citizenship in its multi-sector form. 30

Factors that shape citizenship

While the model presented here presents a normativepath in the development of citizenship in companies,there are several factors that shape the specific trajecto-ry within a firm. For one, varied forces in society, indus-try dynamics, cross-sector influences, and certainlyleadership and a company’s culture all feature in howcitizenship develops in a specif ic f irm.31 Second, atti-tudes and practices within a company are perforceinfluenced by and contribute to trends in the larger andfast moving f ield of corporate citizenship. 32 The ques-tion at hand is whether there are particular patterns to



the development of citizenship in f irms of differenttypes and that operate in different environments. Here,the research of The Center and of many others point tosome suggestive trends.

Factor: Founding Purpose and TimeMirvis’ hands-on studies of Ben & J erry’s through the1980s, and The Body Shop, Esprit, Smith & H awken,Patagonia, and others, suggest that such firms foundedon principles of citizenship seem to hop over stagesmarked typically by defensiveness and reactivity andinnovate in these areas from birth or early on. 33

Interestingly, the same might be have been said in the1880s of U.K.-based Cadburys and Unilever, and U.S.-based Hershey and Pullman. Does this mean that thestage model does not apply to such f irms?

Yes and no. Plainly in terms of their founders’ outlookand corporate culture, these f irms were rather likeprodigies when it comes to corporate citizenship: high-ly receptive to the environment around them and cre-atively entrepreneurial in response. T o illustrate thepoint, note that at least the modern-day “ cause compa-nies” were founded as the environmental movementwas born, where a growing segment of customers wereinterested in “all natural ” and “ green” products, andwhen heretofore counter-cultural movements began tomove into mainstream niches. The synchronistic f itbetween internal predilections and external conditionscertainly affected the overall trajectory and pace of thedevelopment of citizenship in these f irms.

At the same time, there were gaps in the infrastructureand capabilities of these f irms that raised stage-basedtensions having to do with credibility, capacity, and ulti-mately coherence and commitment. A t Ben & J erry’s,for example, there was extended conflict over the intro-duction of a cause-related product, “P eace Pops,” thatled the founders to revisit and revise their foundingprinciples and ultimately adopt their own version of thetriple bottom line. 34 Environmental damage by TheBody Shop USA, in turn, forced the company to sub-stantially u pgrade i ts e co-management s ystems.35

Finally, poor business results have affected the agendasof these still-progressive businesses. Ben & J erry’s, forinstance, unable to raise enough capital to grow wasacquired by Unilever . And The Body Shop has scaled

back some of its cause-related marketing and theprominence of its social campaigns, particularly innon-U.K. retail stores.

A variety of other factors seem to have a bearing on thepath, pace, and progress of citizenship in f irms. Theseaffect the development of citizenship in a company asthey put specific demands on a firm, influence its readi-ness and reasons to respond, and either aid or impedeits capacities to deliver.

Factor: External Forces There are several socio-economic and -political factorsthat to some extent influence where companies lead indeveloping citizenship and where they might lag. F orinstance, companies that extract natural resources,such as oil and timber companies, are monitored close-ly by NGOs and find themselves more exposed on theirenvironmental performance. Risk management crite-ria naturally dictate that they give greater attention toenvironmental safeguards. N ot surprisingly , theCenter’s annual scan finds that the policies, structures,and metrics in Anglo-A ustralian Rio T into (mining),Dupont (chemicals), and most oil-and-gas companiesare stronger and more elaborate in the environmentalarena than in, say, community affairs. Firms with a sig-nificant supply chain or labor force in developing coun-tries, such as Nike or Intel, attend more closely to work-ing conditions and employment fairness. In turn, com-panies like Unocal or P etro-Canada, whose businessbrings them into contact with indigenous peoples, tendto have sophisticated stakeholder and community con-sultation systems.

Laws and regulations also influence how citizenshipdevelops in companies. M any U.S. banks, subject tocommunity banking provisions, have programs to pro-vide loans and improve economic conditions in low-income communities where they do business.JPMorgan Chase, as one example, has a very wellregarded foundation and community banking arm. Itscommunity investments and volunteer programs arenotable, too. At this time, however, there is no unifyingconcept of citizenship in the company and little hasbeen done to build connections among units and busi-nesses that have citizenship responsibilities.



Finally, the national origins of a company also f igureinto its citizenship agenda—even for global firms. U.S.-based business, for example, has longstanding phil-anthropic tradition and most firms have active commu-nity affairs programs—a product of U.S.-style capital-ism.36 Plus, local civic forces stimulate a company’scharitable bent: through, for instance, membership inthe 5 percent club in Minneapolis (firms that give 5 per-cent or more in pre-tax prof its to charity), or in theBoston Compact (business partnerships with the pub-lic school system). In turn, employee volunteerism islegion in the United States and U.S. f irms overall seemore benefits from local community engagement thando firms based in Europe or Asia.37

By comparison, European-based companies are nottypically as engaged in local communities and theiremployees are less apt to be volunteers; both are afunction of nation-states that assume many moresocial welfare functions than in the United States. Atthe same time, EU bodies such as the BrundtlandCommission have pushed for social reporting whileimportant public f igures, such as the Prince ofWales, have established forums to inculcate socialresponsibility into U.K. businesses. As a result,European firms are more apt to espouse integrativecitizenship concepts, like the triple bottom line, andare well ahead of American f irms in social and envi-ronmental reporting.38

Factor: Strategy and CompetitionStrategic and competitive forces surely influence thedirection and pace of citizenship in companies—increasingly so.39 The Center’s 2003 State of CorporateCitizenship survey found, for instance, that executivesin roughly half of the American companies sampledsay that their business strategy influences their citizen-ship agenda. In the 2005 survey , that f igure droppedslightly to 44 percent.

IBM provides an interesting example. F or many years,the company has been a leading contributor and voicein K-12 education in the United States. W ith globaliza-tion, concern over the digital divide, and noteworthysocial investments and programs by HP, Cisco,Microsoft, and others, IBM needed to re-think its citi-zenship strategy. The result has been the rapid creation

of its “On Demand C ommunity” that currently has12,000 employee volunteers using IBM’s intranet, e-tools, and technology planning expertise to assistschools, community groups, and nonprofits all over theworld. IBM also supports the “Be Blue Every Day” cam-paign designed to reinforce core values and get the cor-porate brand behind employee volunteers.

The Center’s studies highlight industry influences oncitizenship. F or instance, manufacturers put morestress on workplace safety and health than in the serv-ice sector where “family friendliness” is a higher prior-ity. This reflects on both the nature of the workplaceand distinct makeup of the workforce in these two sec-tors. In turn, f irms in the service sector say that con-sumers have more influence on corporate citizenship.By comparison, manufacturing companies assign rela-tively more influence to laws and political pressures.

On these counts, J awahar and McLaughlin make thecase that an organization’s life stage influences who itsstakeholders are and how it responds to them. 40 Thisis a promising line of inquiry that may help explainsome of the differences in citizenship found in compa-nies in different industries and competitive contexts.We have found that large companies (likely to be moremature than smaller ones) report that government andlocal community interests exert far more influence ontheir business decisions and actions than do theircounterparts in small and mid-size companies. Plusthey are twice as likely to say that good citizenship is“expected in our community.” In addition, executives inlarger companies are much more likely than those insmaller ones to agree that business should play anactive role in addressing global climate change, pover-ty, hunger, and human rights. This agenda f its withtheir scale, visibility, and comparative impact on soci-ety. It is also in line with public expectations of bigbusiness.

Interestingly, S andra W addock, extending G reiner’sfive-stage model of organization development, posits asixth stage where mature f irms respond to their morecomplex social, political, economic, and environmentalthreats and opportunities by establishing “extra-organi-zational” forms, such as partnerships with other busi-nesses, governments, and civil society .41 In support ofthis, we find larger U.S. firms are much more apt than



smaller ones to partner with nonprof its and govern-ment. And they are two or three times more likely toinvest in poor communities (via targeted hiring, jobtraining, and facility location decisions) and to pur-chase specif ically from minority- or women-ownedsuppliers.

Factor: Traditions and Culture Some companies, such as J ohnson & J ohnson,Herman Miller, and Timberland seem to have citizen-ship DNA that keeps their values constant in the face ofchanging economic, social, and ecological pressures.J&J, for instance, doesn’t use a plethora of committeesor communications to align citizenship efforts

throughout the enterprise. According to Owen Rankin,head of brand equity and president of J&J’s P ediatricInstitute, it relies on its corporate credo to ensure thatits businesses and people are motivated to “do the rightthing.”

Culture can, of course, also exert a drag on citizenshipactivities. One in 10 business leaders we surveyedreported that a lack of top management support was asignificant barrier to citizenship in their companies.Compare, for instance, Exxon ’s foot-dragging inresponse to the V aldez tanker spill with Shell ’s meaculpa in response to its aforementioned twin calamitiesin Nigeria and the North Sea. Shell’s top leaders at thetime, Cor Herkströtter and M ark Moody-Stuart, faced

WHAT DRIVES COMPANIES TO EMBRACE CORPORATE CITIZENSHIP?Corporate citizenship “drivers” U.S. national survey, 2005

Internal motivators

Traditions and values Reputation/image Business strategy Recruit/retain employees

External pressures

Customers and consumers Expected in community Laws and political pressures

Source: The State of Corporate Citizenship in the U.S.: Business Perspective 2005 Center for Corporate Citizenship at Boston College, U.S. Chamber of Commerce Center for Corporate Citizenship and The Hitachi Foundation.

92% 74% 65% 55%

92% 74% 65%



the crisis squarely and pledged to transform what theycalled an “inward” and “arrogant” corporate giant intoa global citizen.42 Exxon, by comparison, took a defen-sive posture.

Factor: Leadership MattersFinally, company leadership is a crucial factor in its cit-izenship agenda. Our model sees leaders as increasing-ly more informed and involved at each phase of devel-opment, moving from a role as supporter, to steward, tochampion, and to visionary at the T ransforming Stage.Interestingly, Waddock posits that stage of social, emo-tional, and moral development of top executives has alot to do with how far and how fast citizenship pro-gresses in their companies.43

However, results from our Executive F orum researchproject reveal that progress can also be driven frommiddle management and flow upward and out. Infirms such as AMD, P etro-Canada, and Agilent, forexample, the leaders of the community affairs depart-ment, environmental management, and corporatecommunication joined forces first, making the case for“connecting the dots” to senior management, and thencreating cross-functional coordinating committees.Says AMD’s Phil T rowbridge, a F orum member froman environmental, safety, and health function, “I’m notsure if upper , upper management knows about theSustainability A dvisory G roup. W e don ’t necessarilyneed them to know . This is just something we feel isimportant to keep AMD on track.” At Agilent, as anoth-er example, staff heads established a “ community ofpractice” among all interested in advancing corporatecitizenship in the company.

Furthermore, there are cases where citizenship devel-ops from the bottom up in companies. Interestingly ,the World Economic Forum’s 2002 CEO survey identi-fied employees as the key stakeholder exerting pressureand providing incentives for socially responsible behav-ior.44 Unilever’s food business in Asia illustrates howtransformative employee involvement can be. 45

Annual gatherings of 250 Unilever employees, fromevery layer in the business, have opened their eyes tothe needs of poor and rural communities for healthierfoods. After a series of community service programs, in

India and China, pressure came from the bottom up toredefine the company’s business mission and addressthe nutritional needs of the regions. Unilever Asia pres-ident T ex G unning has drawn from this energy tolaunch a children ’s nutrition campaign and partnerwith UNICEF and Indian NGOs for implementation.Said one employee, “W ith the kind of communityinvolvement and mission driven approach that we havein Unilever Foods Asia, it is possible for us to make adifference to our society and still be in business. And itis important for us to be in business because that thatis the only way we will continue to make a difference tosociety.”

Factor: Pull versus Push?Looking to the f ield of practice, there are many otherforces worth noting that pull citizenship forward in acompany. Scandals, crises, and criticism by watchdogsgroup or NGOs are among the most potent. The vari-ous corporate reputation rankings, the Dow J ones sus-tainability index, and the opinions of socially responsi-ble funds also have a bearing on citizenship activity .Legislation, or the threat of it, also exerts a pull. 46

Furthermore, new and emerging issues, expectations,and definitions continuously reshape what it means fora company to be engaged, innovative, and integrativewhen it comes to citizenship. Indeed, many innovativecorporate actions in the 1980s, seemingly ahead oftheir time, seem rather routine today. In addition, pastprogress is no guarantee of continued success. F orinstance, several companies once ahead of the curve oncitizenship are now on the defensive when it comes tofinancial transparency and corporate governance.

As much as these external factors pull citizenship for-ward in a company , we hypothesize that an internalpush is more predictive of sustained progress in afirm. On this point, the C enter’s 2005 survey of U.S.business leaders f inds that although external driverssuch as laws and political pressures, expectations ofcustomers and the community , and benef its to repu-tation all exert influence on a company’s embrace ofcitizenship, a more important driver seems to becompany traditions and values (see box on page 16).



The future: unbounded or limited?

The foregoing may seem to imply that continuousdevelopment of citizenship in an enterprise, albeitscaled and shaped by the firm’s national origins, indus-try, size, strategy, and competitive context, is potentiallyunbounded. It may also suggest that the chief limitingfactors are the imagination of its leaders and progres-siveness of its corporate culture. A competing case hasbeen made, however, that the market for virtue has reallimits and that citizenship only makes sense for “a sub-set of companies, under specific circumstances.”47

There is, of course, a body of literature on the general-ly positive relationship between social and f inancialperformance.48 But there are many counter examplesof companies with good reputations in citizenship whoare being outperformed f inancially by less progressivecompetitors. Of particular relevance, given the develop-ment frame here, is that there are also f irms that havemade a conscious decision, in the face of a businessdownturn, not to aggressively advance their citizenshipagenda and even to regress from a more advance stage(Hewlett Packard).

We have posited here that challenges of credibility ,capacity, coherence, and commitment move f irms todevelop progressively more comprehensive and inte-grated citizenship agendas. S ome might argue thatthese limits to virtue and examples of regression castdoubts on the whole development-of-citizenship logic.On the contrary , we argue, there are countless exam-ples of human and collective development taking a dif-ferent turn when this proves more adaptive and, in par-ticular, when survival is at stake.

In that context, it is our hope that practitioners makeuse of the stage model as they calibrate where theircompanies are today and choose where they ought togo. S ome may favor the decisively cautious, evenregressive thinking featured in a 2005 cover story inThe Economist that challenged the case for corporatesocial responsibility or follow N estlé’s CEO, who inremarks at the Boston College CEO Forum, derided thenotion that business ought to “ give back to society .”49

Others may adopt the emphasis of McKinsey manag-ing director I an Davies who, in a rejoinder to TheEconomist, argued that business should build socialissues into its strategies, as the higher stage practicescited here prescribe. 50 Our bet is that the latter groupof firms will, on the whole, have greater f inancial suc-cess and that its people will derive more meaning fromthe effort.



1Research includes surveys of public opinion and of business lead-ers (The State of Corporate Citizenship in the U.S.: A view from inside2003-2004. (Boston: Center for Corporate Citizenship at BostonCollege, 2004)); a multi-year research forum involving Abbott,AMD, Agilent, JP Morgan Chase, Levi Strauss & C o., Petro-Canada,and Verizon (Integration: Critical link for Corporate Citizenship.(Boston: Center for Corporate Citizenship at Boston College,2005); a measurement forum including IBM, GE, 3M, F edEx,Diageo, Cargill, Manpower, Omron, GM, and Cemex (Putting theCorporate into Corporate Responsibility. London: AccountabilityForum, 2005); and several case studies (for a description, seehttp://www.bc.edu/centers/ccc/Pages/kn_ld.html).

2Mirvis, P. H. and Googins, B. “The Best of the Good.” HarvardBusiness Review. (December, 2004): 20-21. Based on The State ofCorporate Citizenship in the U.S., op cit.

3See Piaget, J. The Psychology of the Child . (New York: John Wiley,1969); Wheelan, S. A. Group Processes: A Developmental Perspective .(Sydney: Allyn & Bacon, 2004).

4Greiner, L. “Evolution and Revolution as Organizations Grow.”Harvard Business Review. (July-August, 1972): 37-46.

5On evolution of the concepts, see Frederick, W.C. “Theories ofCorporate Social Performance,” Business and Society, (Lexington,MA: D.C. Heath, 1987: 142-161); Wood, D.J. “Corporate SocialPerformance Revisited”, Academy of Management Review, 16/4(1991): 171-181; Gladwin, T. N., J. J. Kennelly, and T. S. Krause, T.-S.Shifting paradigms for sustainable development: Implications formanagement theory and research. Academy of ManagementReview, (20/4, 1995): 874-907; and Hart, S. L. “Beyond Greening:Strategies for a Sustainable World.” Harvard Business Review.(January-February, 1997): 66-76

6On diffusion into society and industry, see Elkington, J. Cannibalswith Forks: The Triple-Bottom Line of 21st Century Business. (London:Capstone/John Wiley, 1997); and Shrivastava, P. “Corporate Self-Greenewal: Strategic Responses to Environmentalism”, BusinessStrategy and the Environment, 1/3, (1992): 9-21.

7Post, J. and Altman, B. “Models of C orporate Greening: HowCorporate Social Policy and Organizational Learning InformLeading Edge Environmental Management,” Research in CorporateSocial Performance and Policy, 13, (1992): 3-29.

8Zadek, S. “The Path to Corporate Responsibility.” HarvardBusiness Review. (December, 2004): 125-133.

9Developmental theories typically involve both natural and logicalprocesses. Natural processes, found in most biological stages-of-growth theories, trace the developmental trajectory to the “poten-tials” within an organism or entity. Logical process models stressequally the nature of forces impinging on the organism or entity(different problems pose different challenges) and apply moreoften to the development of ideas, decisions, language and sym-bols. In both cases, however, development is seen as regulated by

an “immanent” or normative program. See Van de Ven, A. H. AndPoole, M. S. “Explaining Development and Change inOrganizations.” Academy of Management Review, 20, (1995): 510-540.

10Vogel, D. The Market for Virtue: The Potential and Limits ofCorporate Responsibility (Washington, D.C.: Brookings InstitutionPress, 2005).

11Theories of planned change and organization learning, by com-parison, trace organization development more so to a cycle of goalsetting, action, and assessment, where problem solving can gener-ate novel and innovative solutions as well as resistance to change.This implies that there can be multiple paths of development andthat the choice of a particular path hinges on the nature of theproblem posed and characteristics of the problem solving entity .See Van de Ven and Poole, op cit.; Adizes, I. Managing CorporateLifecycles. (Englewood Cliffs, NJ: Prentice-Hall, revised 1999).

12Rothman, H and Scott, C. Companies with a Conscience, 3rdEdition (San Francisco, Myers Templeton Publishers, 2004).

13Friedman, M. The social responsibility of business is to increaseits profits. New York Times, September, 13, 1970.

14Welch, J. Jack: Straight From the Gut. (New York: WarnerBusiness Books, 2003).

15Millennium Report. (Toronto: Environics, 1999; 2003).

16The State of Corporate Citizenship in the U.S. op. cit.

17Putting this promise into practice took time and involved missteps. It took over four years, for example, to fully enlist seniormanagement and for DuPont to form an executive-levelEnvironmental Policy Committee; and then another four, and newCEO, to embrace principles of sustainability.

18Zadeck. op. cit.

19For a recent review, see Margolis, J. D. and Walsh, J. P. Peopleand Profits? The Search for a Link between a C ompany's Social andFinancial Performance. (Mahwah, NJ: Lawrence Erlbaum Associates,2001)

20The World Economic Forum’s 2002 Global CEO survey foundthat over 80 percent agree that corporate citizenship is essential to “managing reputation and brand equity.” Responding to theLeadership Challenge: Findings of a CEO Survey on Global C orporateCitizenship. (Geneva: World Economic Forum, 2002).

212003 Sustainability Assessment. (Zurich: Sustainability AssetManagement, 2003).

22Early adopters often embrace innovations based on their logicand appeal to values, rather than evidence or demonstrated success. On this trend in human resource innovations, see Mirvis,P. H. “Human resource management: Leaders, followers and lag-gards.” Academy of Management Executive, (11/2, 1997): 43-56.

Endnotes



23The web site include 130 questions—that range from food safetyand human resource policies to the environment and relationshipswith suppliers—that Group companies are asked to complete toassess their own performance. www.danone.com.

24This charter is integrated into the company culture throughextensive management and employee training, a monthly newslet-ter, and an innovative “live the brand” campaign whereby allemployees are expected to spend at least one day every year with someone connected to Novo’s mission to treat diabetes—either apatient, family member who cares for them, or health care profes-sional. Employees are expected to then prepare a report of obser-vations and suggestions for improving the way the company does business.

25Quoted in Beyond the Numbers, (KPMG: 2004).

26Hollender, J. What Matters Most. (New York: Basic Books,2003).

27Cox, K. Leadership for Global Sustainability. (DoctoralDissertation. Benedictine College, 2005); Also see Hollender, J.“What Matters Most: Corporate Values and Social Responsibility.”California Management Review. 46/4 (2004): 111-119

28Zadek, op cit.

29Dunn, D. and K. Yamashita. “Microcapitalism and theMegacorporation.” Harvard Business Review, (August, 2003).

30For one model of intersectoral stages, see Business andCommunity Development: Aligning Corporate Performance withCommunity Economic Development to Achieve Win-Win Impacts .(Boston: Center for Corporate Citizenship at Boston College,2002).

31For a useful review on the mechanisms of influence, see V an deVen, A. and Hargrave, T. J. “Social, Technical, and InstitutionalChange.” In Van de Ven, A. and Poole, M. S. H andbook ofOrganizational Change and Innovation. (New York: OxfordUniversity Press, 2004): 259-303.

32Institutional theory distinguishes between coercive, normative,and mimetic (imitative) pressures. See Powell, W. A. andDiMaggio, P. J. (eds.). The New Institutionalism in OrganizationalAnalysis. (Chicago: University of Chicago Press, 1991). The link todevelopmental theory is that organizations may be more or lessattentive and able to respond to these institutional forces at differ-ent stages of development.

33Mirvis, P. H. “Environmentalism in Progressive Businesses.”Journal of Organizational Change Management , 7/4, (1994): 82-100.

34See Mirvis, P.H. Ben & Jerry’s: “Team development intervention(A and B).” In A. Glassman and T. Cummings (eds.) Cases inOrganization Development. (Homewood, IL: Irwin, 1991).

35Entine, J. “The Stranger than Truth Story of the Body Shop.” InKilled: Great Journalism Too Hot to Print. (New York: Nation Books,June, 2004).

36Some contend that this a function of the distinct stakeholder envi-ronment in the U.S. See, for example, Brammer, S. and Pavelin, S.“Corporate Community Contributions in the United Kingdom andUnited States. Journal of Business Ethics . 56/1 (2005): 15-26.

37On components of corporate value statements in U.S.,European, and Asian companies and relative emphasis given toenvironmental and social performance, see Kelly, C., P. Kocourek,N. McGaw, and J. Samuelson, Deriving Value from Corporate Values,(Washington DC: The Aspen Institute and Booz Allen Hamilton,2005).

38Some 68 percent of large companies in Western Europe versus41 percent in the U. S. report triple bottom line information. SocialReporting Fact Sheet. op. cit.; “Toward Transparency: Progress onGlobal Sustainability Reporting 2004.” www.corporateregister.com.

39See Vogel, D. The Market for Virtue: The Potential and Limits ofCorporate Responsibility (Washington, DC: Brookings InstitutionPress, 2005).

40Jawahar, I. M. and Mclaughlin, Gary L. “Toward A DescriptiveStakeholder Theory: An Organizational Life Cycle Approach.”Academy of Management Review, 26/3 (2001): 397-415.

41Waddock, S. Leading Corporate Citizens: Visions, values, valueadded. New York: McGraw-Hill Irwin, 2002.

42See Mirvis, (2000), op. cit.

43Waddock, (2002), op. cit.

44Responding to the Leadership Challenge (2002), op cit.

45Ayas, K. and P. H. Mirvis, “Bringing Mission to Life: C orporateInspiration from Visiting Communities in India.” Reflections, (5/10,2004): 1-12.

46Companies that are based in or do business in Europe now haveto comply with many more laws around employment, environmen-tal protection, and even community welfare than do U.S. domesticcorporations. Interestingly, surveys show that U.S. companies,even those most developed in this arena, are near unanimous intheir belief that “corporate citizenship should be completely volun-tary—no laws should govern it.”

47Vogel, D. “The Low Value of Virtue.” Harvard Business Review,(June, 2005).

48See Orlitzky, M., Schmidt, F. L. and Rynes, S. L. “C orporateSocial and Financial Performance: A Meta-analysis.” OrganizationStudies. 24/3 (2003): 403–441; Margolis and Walsh, op. cit.

49“Survey: Corporate Social Responsibility.” The Economist.(January 20, 2005); Brabeck-Letmans, P. from speech to ChiefExecutives’ Club of Boston (March 8, 2005).

50Davies, I. “The Biggest Contract.” The Economist. (May 26, 2005)

A R E S E A R C H C E N T E R A T B O S T O N C O L L E G E • T h e W a l l a c e E . C a r r o l l S c h o o l o f M a n a g e m e n t


Bradley K. Googins, Ph.D. is Executive Director of The Centerfor Corporate Citizenship at Boston C ollege and holds theposition of Associate Professor of Organizational Studies,the Carroll School of Management at Boston College.

He sits on the review boards of The Journal of C orporateCitizenship and the New Academy Review and is the authorof several books and monographs. He serves on the boardsof Bright Horizons, Inc., Corporate Voices, and the Brazilianresearch and education center Uni-Ethos. Before joining TheCenter in 1997, Dr . Googins founded The C enter for W orkand Family at Boston University and was also a NationalKellogg Fellow.

Dr. Googins holds a Ph.D. in Social Policy from The HellerGraduate School at Brandeis University , a M.S.W. in socialwork, community organization and social planning, fromBoston College, and a B.A. in philosophy and sociology fromBoston College.

The Center for Corporate Citizenship at Boston College, a membership-based researchorganization, is committed to helping business leverage its social, economic and human assets to ensureboth its success and a more just and sustainable world. As a leading resource on corporate citizenship, TheCenter works with global corporations to help them def ine, plan and operationalize their corporate citizen-ship. Through the power of research, executive education and the insights of its 350 corporate members, TheCenter creates knowledge, value and demand for corporate citizenship.

The Center offers publications including a newsletter, research reports, and white papers; executive educa-tion, including a Certificate program; events that include an annual conference, roundtables and regionalmeetings; and a corporate membership program.

www.bc.edu/corporatecitizenship

Authors

Copyright 2006. The Center for Corporate Citizenship at Boston College. All rights reserved.

Philip Mirvis, Ph.D. is an organizational psychologist whoseresearch and private practice concerns large-scale organiza-tional change, the character of the workforce and workplace,and the role of business in society. A consultant to business-es in the U.S., Europe, and Asia, he has authored eightbooks on his studies including The Cynical Americans (socialtrends), Building the Competitive Workforce (human capital),and Joining Forces (the human side of mergers). His mostrecent is a business transformation story , To the Desert andBack. Mirvis is a research fellow of the W ork/FamilyRoundtable, The Center for Corporate Citizenship at BostonCollege, and Corporate Branding Initiative, a board memberof the F oundation for C ommunity Encouragement, and atrustee of the Society for Organization Learning.

Dr. Mirvis has a B.A. from Y ale University and a Ph.D. inOrganizational Psychology from the University of Michigan.He has taught at Boston University and been visiting facultyat Jiao T ong University , Shanghai, China and the LondonBusiness School. His writings on citizenship have appearedin Harvard Business Review, Journal of Business & Society , andCalifornia Management Review (in press) , among others.


A Research Report and Tool Kit by The Center for Corporate Citizenship at Boston College • 2004

The Center for Corporate Citizenship at Boston College • 55 Lee Road • Chestnut Hill, MA 02467-3942

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A Monograph by The Center for Corporate Citizenship at Boston College • 2006

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