Pressure groups turning up the heat

Source: Het Financieele Dagblad, 16 July 2002

Companies selling consumer products are more attuned to criticism from non-governmental organisations (NGOs) and pressure groups than those which only have professional clients, according to a new study from the Dutch based consultancy and engineering group DHV and Rotterdam’s Erasmus university.
The study has also shown that a public row with NGOs can affect the share price movement of the company involved.

As part of the study, DHV and the university studied 17 conflicts between companies and pressure groups in the last 10 years. This included the famous, and very public, clash between Anglo-Dutch oil giant Shell and environmental group Greenpeace in 1995 over the company’s plans to dump the disused Brent Spar oil platform in the Atlantic Ocean.

The oil company finally changed its mind following a wave of protest from the public, environmental organisations and government officials and a consumer boycott.

According to researchers, in 13 out of the 17 cases studied, NGOs or pressure groups eventually prevailed, while in the other four cases, the companies under attack managed to stand firm and stare down public pressure.

The study revealed in particular that companies which did not sell consumer products rarely bowed to public pressure.

A determining factor was whether the name of the company that was being criticised was directly linked to or was exactly the same as its products. When that was not the case, the company under attack fought back against the public outcry.

The researchers also studied when companies actually changed their polices and relented during their tussles with lobby groups. Those U-turns came when customers threatened to interfere or when pressure groups started calling for a consumer boycott. Another key moment when a firm backed down was when its image or its brand came under threat.

The four companies which successfully repelled pressure groups were Dutch shipbuilding and engineering group IHC Caland , US food products company Cargill, Anglo-Dutch consumer products giant Unilever and Amsterdam’s Schiphol airport.

For IHC, the row centred on orders and other business contacts with the military regime in Burma.

With the help of outgoing foreign trade minister Gerrit Ybema, IHC eventually cut back its business deals with the country. However, it nevertheless came out as the winner in the conflict with the Burma Centrum Nederland, an independent foundation that initiate activities that promote ‘democratisation’ and sustainable development in Burma.

But multinationals such as beer giant Heineken and women’s lingerie manufacturer Triumph, as well as Pepsi have all left the country due to heavy pressure from Dutch lobby groups such as XminY, trade union FNV and the Free Burma Coalition.

On the ongoing conflict between Amsterdam’s Schiphol airport and the environmental lobby, the study claimed that Schiphol had succeeded for the time being, given the fact that air traffic at the airport had grown unabated and the airport has evaded a number of fines for noise pollution violations.

The study’s researchers also discovered that it made no difference whether a company was bourse-listed or not when it came to public pressure.

Unlisted companies such as Triumph and retailers C&A and Ikea were just as sensitive to public criticism as companies such as Shell, Nike or Dutch bank ABN Amro .

The researchers did see a correlation between conflicts over socially responsible business practices and share price movements. Negative news generated by the conflict prompted shares to drop, while compliance with demands of NGOs usually led to a share price rise. The study estimated that share price movements sparked by such conflicts could vary by between 5% and 10%.