When the risk managers in companies look at their radar screens these days to arm themselves for the greatest dangers of the New Year, the warning lights shine: The impending climate catastrophe, new corona mutations and geopolitical conflicts are the greatest risks.
However, one of the biggest challenges for companies in 2022 will be how top managers deal with the growing pressure from customers, employees and shareholders to react to major global risks. The political consultancy Eurasia-Group even sees this as one of the ten top risks for 2022 and warns that international corporations could get between the fronts of a social culture war.
The imminent Winter Olympics in China, the US mid-term elections and the World Cup in Qatar are just three of many global endurance tests for what management gurus have been calling Corporate Social Responsibility (CSR) since the 1950s. “Multinational companies will have to spend more time and money to avoid ecological, cultural, social and political minefields,” predict the political advisors of the Eurasia Group.
Although companies have long since embraced the fight against climate change under the ESG label, the fronts are still on the move, as the latest EU decision to declare nuclear power an environmental angel shows. It becomes even more difficult, especially for the German top managers, when it comes to dealing with dictatorships in China and Russia.
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According to the wishes of customers, employees and investors, CEOs should also take a position today on topics such as diversity in the workplace, forced and child labor, environmentally and human rights-compliant supply chains and freedom of expression. The massive criticism from civil rights activists of Tesla, which is now presenting its highly polished e-cars in China’s Xinjiang Province, which is suspected of forced labor and human rights violations, is just the latest example of this.
Keeping your balance is difficult
“Society is increasingly becoming a company’s most important stakeholder,” says former Siemens boss Joe Kaeser. Today no manager can afford to ignore the different and often contradicting demands with Milton Friedman’s legendary and false reference that “the business of business is business”. The sanction options of “society” are far too great for that today and range from calls for boycotts by customers to dismissals of talented employees to investment strikes by institutional investors.
How difficult it is to keep the right balance in the social culture war is shown by the reactions of American corporations after the attack on democracy in the USA a year ago. Although numerous companies and associations promised after the violent assault on the Capitol to turn off the money to those MPs who spread Trump’s lie about the stolen election, a total of 717 companies and lobby groups donated more than, according to the citizens’ initiative “Citizen for Responsibility and Ethics in Washington” $ 18 million to members of Congress who still do not recognize Joe Biden’s election victory. There are also such illustrious names as Boeing, Pfizer, GM and Ford.
Behind this is obviously the at first glance understandable calculation of the companies, in the event of a possible election victory of Trump’s Republicans in the mid-term elections in November, to do good business also among the new rulers in Congress. However, the limits of such a weighing of interests are reached when it comes to systemic risks for democracy, as in the USA.
Prevent a cold coup by Trump supporters
The intellectual fathers of the market economy from Hayek to Eucken have repeatedly reminded of the interdependence of economic and political systems: a healthy democracy is a prerequisite for a functioning market economy. That is why it is so important for US companies to support President Biden’s planned electoral reform to prevent a cold coup by Trump supporters after the next presidential election in 2024.
Supporters of then President Donald Trump during the protests on January 6, 2021 on their way to the seat of Congress with USA and Trump flags.
(Photo: obs)
This is not only a good compass for the coming year for American managers. In the systemic competition with China and Russia, business leaders in Germany and Europe must also keep in mind that in the end it is the democratic “society that gives them the license to do business” (Kaeser).
Public advocacy for democracy is not only a moral imperative for managers, it is also economically sound. It’s about which political system can cope with the disruptive transformations of our time with the slightest upheaval. If history gives us a clue, then democracy will stay ahead of the curve in the future too.
More: Biden fears another attack on democracy.