When BDS and corporate social responsibility collide

Companies have to weigh the costs and benefits of taking political sides, which will likely depend on the political views of their core customers and investors.

By
June 12, 2015 04:26
Employees pack boxes of the SodaStream product at the factory in Maaleh Adumim

Employees pack boxes of the SodaStream product at the factory in Maaleh Adumim. (photo credit: REUTERS)

 
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It didn’t take long for Orange CEO Stéphane Richard to change his tune on BDS. Just days after he told a Cairo crowd that he would pull his company’s dealings out of Israel “tomorrow” if he could, Richard backtracked, explaining that a decision to end a brand licensing agreement with Israel’s Partner Communications once their freshly renewed contract expired in 2025 was not political.

“I am a friend of Israel,” he told Deputy Foreign Minister Tzipi Hotovely in a letter on Wednesday, noting that Orange was still interested in the innovations produced in the Start-up Nation.

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For the Cairo audience, however, Orange’s business in Israel was a matter of corporate social responsibility (CSR). In their view, a company that worked closely with Israel would be held in the same esteem that an Israeli might hold companies that work closely with Iran, or even those that exploit child labor or are damaging to the environment. In certain markets, such associations are bad for business.

“I know that it is a sensitive issue here in Egypt, but not only in Egypt,” Richard reportedly told the group in Cairo. “We want to be one of the trustful partners of all Arab countries.”

Increasingly, corporate social responsibility has become an important element of business around the world.

“As society changes, so its expectations change, and businesses must continue to respond to those changes,” said Giles Gibbons, founder of the UK-based CSR advisory company Good Business, who was in Israel this week for corporate social responsibility week.

Examples of businesses advertising their positive impact on society are easy to find, though Gibbons notes that increasingly, they need to do more than simply donate to philanthropic causes on the side.

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“If you’re going to be a purpose-led brand, you have to be delivering real change in the way you run your business,” he said.

When Apple CEO Tim Cook was in Israel in February for the launch of the local Apple R&D center, for example, he spoke extensively about the environmental efficiency of the building and the company’s efforts to reduce its carbon footprint.

This week, Intel Israel released its annual CSR report, and noted in it the number of women it employed in leadership positions and its efforts to hire minorities such as Arabs and ultra-Orthodox Jews. It also highlighted a NIS 30 million education initiative that drew the praise of Education Minister Naftali Bennett, while global Intel announced an investment fund focused specifically on women.

In Israel, companies working in the global marketplace are increasingly searching for ways to make their core businesses more socially responsible, according to Ivri Verbin, whose company Good Vision acts as a CSR adviser for businesses.

“If you asked me five years ago, I would say that CSR was about community relations, but people understand that’s not enough anymore,” he said.

The social protests of 2011, the growing sophistication of consumers, and the power of social networks for people to share gripes about companies and products have altered the landscape.

Adama, for example, an Israeli company that sells insecticides, refocused its strategy to accentuate that its products help farmers grow more food, which helps to feed the world.

In today’s society, Giles and Verbin argue, strong CSR is actually good for business.

“This isn’t a ‘nice to have,’ this is a core part of being a successful business in the 21st century,” said Giles. “This is not ‘do-gooding.’ I’m no whiter-than-white individual telling business that they have a moral obligation. I’m saying there’s a business imperative.”

When the skincare brand Dove embarked on a series of ads and promotions that challenged unrealistic women’s beauty standards, for example, the company’s fortunes soared.

Jim Stengel, a CSR advocate, did a study that found that branding centered around improving people’s lives resonated, and actually outperformed other brands.

But what happens when CSR turns political? In the US, craft shop Hobby Lobby battled regulation that required it to fund health plans that included contraception for women. The Supreme Court said it was allowed to, but prochoice and women’s rights advocates were incensed. Similarly, when restaurant chain Chik-Fil-A’s COO made public comments against same-sex marriage, it invited boycotts from LGBT advocates while boosting support from the religious Right.

In Europe, some companies and investors have taken the view that BDS is an act of social responsibility.

For example, Norway’s sovereign Wealth Fund, which at $882 billion is the largest in the world, banned investments in Africa Israel and Danya Cebus for their involvement in settlement construction, while the $200b. Dutch pension fund PGGM stopped investing in five Israeli banks because they finance activity over the Green Line.

“Personally, I think there’s no point in setting yourself up on a divisive issue when it’s not a priority, part of a core business or relevant to the running of your business. Why would you?” asks Giles, arguing that it’s preferable to focus on the central elements of the business.

Companies have to weigh the costs and benefits of taking political sides, which will likely depend on the political views of their core customers and investors. For Israel, the key for fighting BDS may be a twopronged approach: convincing people that BDS is not an act of social responsibility, and making its products indispensable in the business world and thus making BDS very costly. Prime Minister Benjamin Netanyahu has argued that Israel’s technological powerhouse has done just that, keeping boycotts at bay.

Indeed, Orange’s Richard seems to believe he had overstepped, or was mischaracterized in the first place. Just a week after the political storm exploded around his comments, he flew to Israel to mend ties.

Giles believes that the private sector can actually help lay the ground for peace. Cisco, for example, landed on the cover of Forbes magazine for its efforts to use business to build bridges between Israelis and Palestinians.

Likewise, a group of Israeli and Palestinian business have banded together to form Breaking the Impasse, which focuses on easing business restrictions.

“Business is the answer to building thriving economies, jobs, giving people quality of life they don’t want to go away from,” said Giles. “In a sense, the boycott is focused on the wrong place.”

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