Facing-Off in Public

August, 2003

by David P. Baron

Environmentalists hijacked Coke's polar bear ad campaign to fight global warming, a strategic maneuver in the battle between social activists and big business.

In the summer of 2000, with the world gearing up for the Sydney Olympics, Greenpeace launched a boycott against Coca-Cola. Coke, an Olympic sponsor, used hydrofluorocarbons, or HFCs, as refrigerant in its dispensing machines—gases that Greenpeace said contributed to global warming. Greenpeace Australia produced a downloadable poster under the caption "Enjoy Climate Change" depicting Coke's family of polar bears worriedly sitting on a melting ice cap. It urged the public to download the posters and paste them on Coke machines.

Bowing to increasing public pressure, Coca-Cola announced that it would eliminate the use of HFCs in refrigeration by the 2004 Athens Olympics.

Greenpeace's decision to target Coke is an example of a campaign strategy that has become increasingly common over the last decade. It reflects a growing reliance by activists on private politics to effect corporate change. New York Times columnist Thomas Friedman, writing in 2001 about an international boycott against Exxon Mobil for its refusal to address global warming, characterized the movement as "globalization activism." He quoted Paul Gilding, the former head of Greenpeace, who explained, "The smart activists are now saying, 'ok, you want to play markets—let's play.'"

Smart environmentalists "don't waste time throwing stones or lobbying governments," Friedman wrote. "That takes forever and can easily be counter-lobbied by corporations. No, no, no. They start with consumers at the pump, get them to pressure the gas stations, get the station owners to pressure the companies, and the companies to pressure governments."

An activist's decision to take on a company and a firm's response constitutes strategic competition. Boycotts are one of the primary weapons in the activists' arsenal. They often are reinforced by demonstrations, public chastisement, or criticism of a firm's leaders.

Several studies have measured the stock price performance of companies that were boycott targets. The empirical evidence is largely inconclusive. Moreover, the boycotts we remember are generally the ones that worked. If data were available on all attempts, it would probably show that most boycotts fail. However, just as one cannot infer the importance of the veto by examining the small percent of bills vetoed by the president, one cannot infer the significance of private politics from the number of campaigns initiated. Congress anticipates the president's veto and modifies bills accordingly; many firms attempt to proactively adopt policies that reduce the likelihood of becoming targets.

A useful step in thinking proactively is to put yourself in the activists' position. The first thing activists need to do before launching a boycott is to assess the saliency of their issues. Can the message be clearly articulated in a straightforward way? Is it a morally compelling argument? Will it likely engender public support? Is the issue capable of attracting the media's attention?

Once the issue is identified, the key for any activist is to assess, and then select, a target. A company that makes consumer products, such as Coca-Cola, is susceptible because consumers, if motivated to do so, can switch to competing products. (Companies that make nonconsumer products—like machine tools, which are sold to other businesses—are not as vulnerable.) A company could be particularly vulnerable if consumers' switching costs are low, as is the case with soft drinks.

Activists also need to take a hard look at the firm's operations. Does the firm truly produce negative externalities—such as pollution or global warming? Does it have an image that can be exploited? Or is the firm a good corporate citizen?

Firms, when faced with a boycott, need to understand the activist groups, their agendas, and concerns. Companies must also quickly ascertain the extent of public support for activist agendas. Where is the issue in its life cycle, and how rapidly is it progressing? Are government officials likely to get involved? Are sympathetic individuals likely to act? Determining the most effective strategy requires understanding the nature and strength of activists and interest groups, the concerns that motivate them, the likelihood of media coverage, how much damage they might cause, how central the issue is to their agenda, and whether they are led by professionals or amateurs. Professionals are more difficult to co-opt, but they may be more practical. With limited resources, activists and interest groups may abandon an issue when winning appears unlikely.

Some companies seek to avoid becoming targets by positioning themselves as "socially responsible." That strategy, as we shall see, is not without risk. Other firms, sensing that the activists may hit on an issue with potential for strong public backing, seek to preempt a boycott by bargaining with activists.

When activists miscalculate their strategic approach, their boycotts tend to falter, squandering valuable organizational resources and credibility. When companies mishandle their nonmarket strategies, they may have to pay a steep, if unanticipated, price.

When Boycotts Work
Greenpeace vs. Shell UK

In the summer of 1994, Greenpeace learned that Shell UK was planning to dispose of Brent Spar—a 453-foot-high cylindrical oil storage facility weighing about 14,500 tons—in the North Sea. Greenpeace, founded in 1971, was by that time the world's largest environmental group with about 3.1 million contributors and a budget of about $140 million.

The Brent Spar issue seemed to be a solid choice for Greenpeace. It was relatively easy to grasp (Shell was dumping its "garbage" in the North Sea) and morally suspect (deep-sea dumping was bad for the environment). "The average citizen thinks, 'Here I am dutifully recycling my garbage, and there comes big business and simply dumps its trash into the ocean,'" Harald Zindler, head of campaigns for Greenpeace Germany, said in a case study of the controversy.

The issue also fit with Greenpeace's more general strategic approach. "We try to keep it simple," said Steve D'Esposito, an American who was executive director of Greenpeace International. "One, we raise environmental awareness. Two, we want to push the world toward solutions, using the most egregious examples."

Shell UK turned out to be an excellent target. It sold branded gasoline worldwide, and consumers could switch to another brand without any significant cost increase. The company turned out to have a cautious and reticent approach to dealing with public issues. Greenpeace's approach was quite different. "The whole point is to confront; we try to get in the way," said D'Esposito. "Confrontation is critical to get coverage in the press or to reach the public some other way."

On April 30, 1995, Greenpeace activists landed on Brent Spar by boat. The group was expelled by Shell, but German television broadcast extensive coverage of soaked activists throughout the three-week occupation. In response to the media coverage, expressions of outrage and protest grew in Germany and the Netherlands—satisfying a key element of private politics: public support. On May 22, the worker representatives on Shell Germany's supervisory board expressed "concern and outrage" at Shell's decision to "turn the sea into a trash pit."

Under pressure, executives of Shell Germany met with Jochen Lorfelder of Greenpeace. The chairman of Shell Germany said that studies indicated deep-sea disposal was the best alternative for the environment. "But Joe Six-Pack won't understand your technical details," Lorfelder shot back. "All he knows is that if he dumps his can in a lake, he gets fined. So he can't understand how Shell can do this."

In June, Shell's German sales dropped 20 to 30 percent-in some areas, 40 percent. The mayor of Leipzig banned Shell gas in city vehicles. Boycotts spread to the Netherlands and Denmark. Shell resorted to high-powered water cannons to keep a Greenpeace helicopter from approaching Brent Spar — providing graphic television images. On June 19, German economics minister Guenther Rexrodt announced his ministry would join the boycott.

For its part, Shell's response was uncoordinated and unfocused, so the German public received inconsistent messages from the company. Although Shell Germany suggested the project could be halted, Shell UK refused to stop towing Brent Spar toward the dumpsite.

The pressure continued to build, and the firm chose perhaps the most direct way to resolve the issue: It gave in to activist demands. Shell UK announced that it would abandon plans to sink the Brent Spar. Instead it would attempt to dismantle the platform on land.

When Boycotts Fail
PUSH vs. Anheuser-Busch

The Rev. Jesse Jackson, founder of Operation push, had what seemed at first blush to be a powerful issue: economic equality for black Americans. In 1982, Jackson sought an economic reciprocity agreement with Anheuser-Busch, the St. Louis-based beer company. Blacks consumed 15 percent of Anheuser-Busch's output, Jackson reasoned, and therefore 15 percent of the company's deposits should be in black-owned banks, 15 percent of its wholesalers should be black, and 15 percent of its purchases should be from black suppliers.

The issue, pitched as one of economic fairness, seemed to have saliency. Jackson had previously reached more modest agreements with Seven-Up, Coca-Cola, and Heublein. If Anheuser-Busch did not agree to an economic reciprocity program, Jackson threatened to launch a nationwide boycott using the theme "Bud is a dud." He planned to kick off the boycott in St. Louis and then carry it to other cities with large black populations.

In this case it was the activists who were poorly positioned vis-à-vis the company. Earlier in the year, push had irritated the St. Louis black community when it held an economic reciprocity conference and charged $500 for admission. The Sentinel, a black weekly, attacked Jackson in an editorial, and Jackson threatened a libel suit.

Furthermore, while it might have been easy for consumers to switch to another beer, Anheuser-Busch turned out to be a poor target. The company was proud of its minority employment record and had established good relations with the St. Louis black community and its leaders. Eighteen percent of its employees were minorities, including 9.6 percent of its managers and officers. The company maintained deposits of $10 million in minority banks and purchased $18 million in goods from minority suppliers. It had two black board members, including Wayman F. Smith III, vice president for corporate affairs. Anheuser-Busch believed its minority programs were among the nation's best. It decided to fight back.

One key to Anheuser-Busch's counterattack was that is was proactive. First and foremost, it adopted an aggressive media campaign. Smith traveled to cities where Jackson was appearing and held press conferences of his own, presenting information on the company's minority programs.

Another key element of the company's strategy was that top-level officials refused to meet with Jackson. August A. Busch III, the company chairman, denied Jackson the opportunity to negotiate directly, diminishing the opportunity for a media event. Smith was willing to meet Jackson, but he controlled the release of information and refused to give out statistics on black employees. The company's policies, he said, focused on all minority groups.

The result was a stalemate, and Jackson was forced to seek rapprochement. Busch finally agreed to meet him in September 1983. Following the meeting, Jackson seemed to step down. "You may recall that Operation push has, on past occasions, been critical of the extent of Anheuser-Busch's commitment to providing the black community with opportunities for advancement," Jackson said. "As a result of my recent meeting with August Busch III, I believe that our prior view of the sufficiency of his and his company's commitment may have been attributable to a failure of communication."

Reducing the Boycott Threat?
BP and Social Responsibility

One way that firms try to avoid the glare of private politics is by taking proactive steps to reinforce a socially responsible image. British Petroleum is a company that has positioned itself as a model of corporate social responsibility. In May 1997, the Lord Browne of Madingley, BP's CEO, told an audience at the Stanford Graduate School of Business that it was time to "consider the policy dimension of climate change."

"A new age demands fresh perspective of the nature of society and responsibility," said Browne, Sloan '81. "We are all citizens of one world, and we must take shared responsibility for its future." To that end, BP announced specific goals to reduce by 10 percent its carbon dioxide emissions contributing to global warming.

Browne's words and policies earned his company praise from environmentalists and the public. "Compared to other oil companies, BP was the first major to come out in favor of policies to reduce co2 emissions," said Chris Rose, deputy executive director of Greenpeace. Rose called BP one of "the good guys in this industry."

BP set targets for reduction of overall air, waste, and water emissions, and built BP Solar International into one of the world's leading manufacturers of solar power generating equipment. The company inked a $30 million contract with the Philippine government to install over 1,000 packaged solar systems in 400 remote villages. BP also pledged to eliminate flaring—the burning of natural gas generated in conjunction with crude oil production and a major source of carbon dioxide emissions.

This type of positioning may diminish the risks of private politics. But in suggesting that oil companies ought to accept greater social responsibility, Browne opened BP to the challenge of meeting that higher standard. That eventually became a problem for BP, which remained the largest producer of oil on the North Slope of Alaska. When BP initially sought permission to drill in the Arctic National Wildlife Refuge, environmentalists cried foul. Activists placed a shareholder resolution on the BP annual meeting agenda seeking to phase out oil and gas production. (It received only 7 percent of the vote but attracted considerable public attention.)

"[BP] built their brand on how environmentally friendly they are," a Greenpeace campaigner told the Wall Street Journal. "This has given us the impetus to push them to fulfill the implicit promises they've made."

In November 2002, BP stated that it would stay on the sidelines on the Refuge issue and pulled out of the lobbying group spearheading the campaign to open the wildlife area to drilling.

Synergy on Solid Waste
McDonald's and Environmental Defense

When confronted with a private politics campaign, one possible response is to evaluate activist claims and determine they have merit. When faced with an increasing solid waste problem in the early 1990s, McDonald's decided to cooperate with activists. The result—instead of boycott—was a negotiated settlement that arguably left both sides, and the environment, better off.

McDonald's, at the time, was an ideal target for a private politics campaign. On any given day, millions of people held McDonald's Styrofoam coffee cups and sandwich containers in their hands. The fast food giant used 50,000 tons of foam packaging each year, a concern to environmentalists working on problems of solid waste disposal. Others targeted the volume of paper it used and the timber cut as a consequence. By 1990, under pressure from the Citizens Clearinghouse for Hazardous Waste, McDonald's had agreed to replace its polystyrene clamshell sandwich container with paper, and it had begun to experiment with on-site incineration, but the massive solid waste problem was still much in evidence.

The company's strategy changed when an invitation came to discuss the issues with Environmental Defense (ED), an advocacy organization that had been critical of McDonald's on-site recycling plans. McDonald's and ED established a joint task force, which analyzed the company's operations. A final report in 1991 identified 40 steps to reduce solid waste by 80 percent. McDonald's formally agreed, for the first time, to consider waste reduction when making decisions on disposable packaging.

"The results of the task force far exceed all of our expectations and original goals," said Keith Magnuson, McDonald's director of operations and a task force member. "We started out to study waste reduction options. Instead, we developed a comprehensive waste reduction plan that is already being implemented."

How do activists gauge the success of a private politics campaign? How can firms know if, in the end, they have adopted an effective strategy in the nonmarket arena? Sometimes, when there is no bottom line to examine and no earnings to tabulate, it can be very difficult to know who, in fact, has "won."

In the Anheuser-Busch case, for example, the company seemed cognizant of the potential impact Jackson's barbed campaign might have had on its image. In a statement released after Busch and Jackson finally met, the company took pains to reaffirm its commitment to minority programs and detail steps it had already taken.

"Anheuser-Busch has a record of which we are proud," Busch said. "We are not perfect. We are committed to a course of fairness and are determined to build upon an already strong record. We recognize our obligations to work closely toward that end with all respected civil rights organizations."

Though Jackson did not get his reciprocity agreement, the issue had been placed squarely on the company's radar screen, and its chairman, in the end, had publicly promised to keep it a top priority.

Consider also the epilogue to the Brent Spar case. Soon after Shell UK backed down, a report came out in the journal Nature concluding that the environmental impact of dumping Brent Spar in the ocean would "probably be minimal." Indeed, the article stated, the metals might even be beneficial to the deep-sea environment. Furthermore, according to some scientists, land disposal posed more serious environmental risks. At this point, however, Shell UK said it would stick to its decision to abandon deep-sea disposal.

The Brent Spar was towed to a fjord in Norway. After an independent Norwegian inspection agency surveyed the contents, doubts arose about Greenpeace's estimates of the remaining oil sludge. Greenpeace UK's executive director, Lord Peter Melchett, admitted that the estimates were inaccurate and apologized. Shell UK welcomed the apology and announced its intention to include Greenpeace among those to be consulted the next time it was considering actions with environmental impact. After a year of acrimonious competition, in which both sides expended tremendous resources, it seems the two adversaries ended up where they might have done well to begin. After an open process to explore disposal options, the Brent Spar was dismantled and used to build a quay in Norway—identifying a new solution to an environmental problem.

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This article was adapted from the inaugural issue of Stanford Social Innovation Review, a journal launched by the Stanford Graduate School of Business to cover best practice and ideas in nonprofit management, philanthropy, and corporate citizenship. To subscribe, visit www.ssireview.org or fax 650.723.0516.

Activist Strategies When Launching a Boycott 

Select a strong issue

• Can it be articulated in a simple and accessible way?
• Is it morally significant to a wide segment of the public?
• Is it likely to attract media attention?

Select a good target

• Companies that make consumer goods. Public can punish by not purchasing goods.
• Companies that make products with low switching costs. Public can easily purchase another product.
• Companies that produce negative externalities (such as pollution).
• Multinational companies. Operations in one place can be attacked by activists in another.
• Companies with a combative or confrontational style.

Strategies for Responding to Public Pressure

• Position the firm as socially responsible.
• Meet with activists; cooperate and bargain; negotiate a resolution that may go beyond what is required by law.
• Launch proactive and counteractive media offensive. 
• Accede to activist demands.

David P. Baron is the David S. and Ann M. Barlow Professor of Political Economy and Strategy at the Graduate School of Business.