Don't just follow the rules

An article in the June issue of the Harvard Business Review shows some of the environmental risks that companies can face in the international arena. Suffice to say, sometimes it's not enough to just follow the rules.

Only one page of the six that make up Scorched Earth: Will Environmental Risks in China Overwhelm Its Opportunities are available online to non-subscribers like me, but I read it recently in my local Barnes & Noble. I will summarize here for those who haven't read it but I urge you to read the entire article for yourself (hint: if you Google it, you just might find the entire article, but I didn't tell you that).

Although the article was about environmental degradation in China, it contained some cautionary advice for multi-national corporations. Foreign companies that come to China and just play by the rules may be putting their environmental reputation in jeopardy. The authors state:

Failure to factor the environmental issue into corporate strategy greatly increases the probability that China's seemingly enormous promise will turn into a nightmare for many firms.

The most interesting portion of the article comes under the header of Reputation Risks:

Accusations by NGOs and the Chinese media include charges that firms invest in the country expressly to avoid the environmental requirements of their own or other countries...Such accusations, and the ensuing negative media attention, can seriously damage a multinational's brand and expose a foreign firm to popular demonstrations and even legal action.

In other words, if a multinational does business in China and follows Chinese environmental regs, they can still come in for criticism if those regs are lighter than those in the multinational's home country. The authors' solution? How about a little public relations?

What, then, can multinationals do to be effective in this political economy? One thing is to help national leaders understand, and explicitly recognize, the contributions multinationals are making to achieving China's environmental goals. Such publicity is powerful because, flexibility notwithstanding, officials at all government levels like to align themselves credibly with the preferences specified at the top. Such national recognition makes it far easier for local leaders to cooperate with a foreign firm..."

In other words, you have to talk about what you're doing. Where have we heard that before?