4 ideas on how businesses can be responsible for political lobbying

There is growing momentum worldwide to make business responsible for the ways it impacts the planet, workers and communities it relies on. Yet there is one impact that is rarely discussed, that of the “democracy footprint”, which includes corporate lobbying, political spending and other forms of corporate political influence aimed at shaping – and often undermining – regulations designed to benefit society.

Despite representing the greatest impact a company can have on protecting, or harming, the environment and society, corporate political activities remain hidden and unaccountable to both private actors, such as investors, and members of the public – be they employees, customers or activists.

As a result, a company that appears to “walk the talk” on climate change by committing to reduce its greenhouse emissions, may actually be lobbying against greater regulation of such emissions. Meanwhile, a pharmaceutical company may publicly support patients’ access to affordable medicines, yet simultaneously fund a trade association defeating lower price initiatives.

A business may even publicly support LGBTI issues, while at the same time fund a political candidate opposing gay rights. The misalignment between corporate lobbying with a business's stated commitments to purpose, values or stakeholders is often due to lack of oversight, a siloed organization or the involvement of trade association.

This phenomenon is one – possibly THE – major factor underpinning lack of progress on numerous critical issues, ranging from the failure to act on the climate emergency to offshore tax evasion. As such, this pushes down citizens’ perceived trust in government and, ultimately, business.

Amid growing private and public scrutiny, some nascent forms of corporate political reporting exist, be they mandatory, such as lobbying regulations, or mostly voluntary, such as the Global Reporting Initiative standard, Vigeo Eiris, and, when it comes to political spending, the CPA-Zicklin Index benchmarks.

Yet the quality of information disclosed remains poor and strategically selective. In any event, none of these mechanisms assure disclosure of other, subtler forms of corporate political behaviour such as membership of trade associations; philanthropic donations; funding of academic research, chairs and think-tanks; and even creating the impression that something has grassroots support in a misleading practice known as ‘astroturfing’.

Not even the B Impact Assessment – a tool that companies can use to measure its impact on workers, community, environment and customers – captures and measures the sustainability impact of their policy positions. Naming and shaming, as successfully practiced by InfluenceMap (informing investors), ClimateVoice (informing employees) and ProgressiveShopper (informing customers), also does not suffice.

For instance, in regards to political spending, while nearly 200 companies publicly suspended donations following the 6 January 2021 attack on the US Capitol, another 717 continued to donate to representatives who objected to the 2020 presidential election results that prompted the insurrection.

There is still no effective mechanism for citizens, investors, governments and media to monitor the full scope of and impact of corporate political activities, by disclosing exactly if, where, how much, and for what cause a company actually invests its influence.

Yet not only nonprofits, environmental groups, but also major investors – for whom the exercise of corporate political activity is a source of risk – increasingly expect companies to align their political behavior to their mission and values.

But how can this demand for greater corporate political accountability be brought forward? Here are four ideas.

Time has come to embed corporate political activities into corporate sustainability and – from an investor perspective – to include it into the 'G’ of environmental, social and governance (ESG) criteria or even by adding a ‘P’ for political. If sustainability entails that the interests of different stakeholders in the company be duly taken into account, including general societal and environmental concerns, then the exercise of corporate political power must also occur within these boundaries.

So if a company intends to remain a legitimate participant of the political process, it must become more transparent and accountable in its lobbying and other corporate political activity. That’s what a small yet growing number of investors/shareholders, employees, and customers expect from the companies the invest in, work for and buy from.

Turning lobbying and other forms of corporate political influence into a sustainable business practice requires mandating ‘political due diligence’, similar to that existing for human rights or environmental issues.

Companies would be required to disclose all their political activities – from amounts spent to the endowment of professorships to university chairs – and accept they need to be as accountable for that as they are in relation to their environmental and social impact through their supply chain.

Disclosure should not only be more comprehensive in terms of types of political activities covered, but also in terms of greater substantive disclosure of matters lobbied, and require the publication of any substantive positions put forward.

By approving the broad principles governing the exercise of corporate political power and processes, an organization's board should exercise oversight over its actual corporate political activities.

Boards should determine, on an ad hoc basis, the permissibility of lobbying and other forms of influence against existing regulatory framework, be they mandatory or voluntary. As a result of greater, faster and monitored disclosure, the risk of misalignment might be reduced and reputation exposure minimised.

The ensuing greater public accountability of the exercise of political influence may lead several companies to reassess their political engagement, by reducing it or even abandoning some practices, to ultimately align it with their stated environmental and social commitments.

As a result, a few businesses may choose to limit, or avoid engaging in, political activity, including spending, such as IBM; while a few others may strive to offset their negative lobbying through ‘good citizenship’ efforts, such as get-out-to-vote efforts and civic time-off.

The latter examples hint at the shift from passive to active strategies aimed at offsetting the negative impact of lobbying and other forms of corporate political influence on society. Yet, what is most needed is for corporations to use their resources and ability to lobby on important social issues.

Ultimately, as the public demand and scrutiny for political transparency set to grow, it will soon be in the interest of companies themselves to call for such a mandatory framework to govern corporate political activity, so as to capture their ‘democracy footprint’.

Alberto Alemanno is a Schwab Foundation for Social Entrepreneurship 2022 Awardee.