« Business Diplomacy »

Diplomacy Dialogue

Part I:

Precursors of Business

Diplomats

Diplomacy Dialogue

« Business Diplomacy »

 Business Diplomacy is not a new

contemporary phenomenon. Since ancient times, traders had twin tasks – selling

goods/services and negotiating levies, tariffs, right to conduct business,

conditions of residence etc..

 In the international system business diplomacy takes prominence when globalization is accompanied by an

increase of interaction with non-traditional business partners (civil society, regional

political groupings).

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Marco Polo (1271-1295)

 Venetian, worked for

Qubilai Khan, Mogol rulers, Muslim Merchant

community,

 Dictated his experiences to Rustichello da Pisa

“Travels of Marco Polo”,

detailed descriptions of the wealth of China, a Japan

filled with gold, and the exotic custom of Central Asia, West Asia and

Southeast Asia.

 Bestseller, stimulus for travel and discovery

Zheng He (1371–1433

commanded expeditionary voyages to Southeast Asia, Western Asia, South Asia and East Africa from from 1405 to 1433. His larger ships stretched 120 meter's in length (Columbus's Santa Maria, was 26 meters). These

carried hundreds of sailors on four tiers of decks)

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Mateo Ricci (

) 1552-1610

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Other organisations involved in trade and Business Diplomacy

1. Swedish East Asia Company - 1907-1979

2. UK- East Asia Company -16th–19th-century 3. DK- East Asiatic Company - 1897 to 1970

4. French East-India Company – 1664-1719 5. Basler Mission – 1859- 1928

6. Mixture of Trade, Honorary Consular, Religious Missionary, Military

reconnaissance

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Part II:

Theory Building-

New York- 1980-1984

Relation between diplomacy and

global business

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New York 1980s

 UNITAR- survey (1981) of training needs of diplomats assigned to the UN-NY, Nr. 2 need was negotiation skills (bilateral and

multilateral)

 Interviews with Trade Attachés of missions to the UN in NY (1981) with focus on their scope and experience of negotiations

 Realising some trade officials were previously political diplomats and businessmen on rotational basis

 USA rotating door: Government, law firm, financial company, university, and back to government

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Non-rotational practices of trade missions

 Strict role separation and no crossing of role boundaries between government-private sector- foreign office:

 West Germany- strictly prohibited until retirement

 France- parachutage at the top by elite members of ruling party, former government and ENA

graduates

 UK- then mostly from government/foreign service towards private sector but not reverse

 Austria: separate lines in Embassies, trade officials reporting to Austrian chambers of commerce, not to MoFA (till today)

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Dialogue

Part III:

Initial Research (2001)

Survey of 7 USA- TNCs

Findings

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Interaction with Constituencies

© Saner & Yiu, 2000

0 10 20 30 40 50 60

Int Orgs

Int NGOs

Nat NGOs

Host Govt

Home Govt

Most Increase

% of respondents saw increase (Q7)

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© Yiu & Saner, 2001

Monitoring Business Environment

 57% of the respondents reported that companies systematically

analysed the political-social and

environmental developments in

the key regions and countries

where these companies were

active

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Knowledge Areas Crucial for Business Success Worldwide

© Yiu & Saner, 2001

In order of importance

Decision-making process of host countries

Diplomatic instruments (trade agreements, treaties)

Most Very Least

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Corporate Reputation

 47% of the respondents reported that companies systematically

monitor their corporate reputation in the countries of operation

© Yiu & Saner, 2001

Dialogue

Survey of Four Swiss Pharma &

Food TNCs

Second Study (2005)

CSEND All rights reserved 2021

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Survey Methods

 Semi-structured interviews based on a non- intrusive questionnaire

 Informal inquiry and discussions with staff in charge of BDM

 Total of 20 Swiss MNCs were contacted

 Data were gathered from 6 companies

 4 of them are reported here

DialogueCOMPANY Total Annual Sales

(in billions of USD ^c))

Number of Employees Worldwide

Number of

Countrie s Present

Sales Revenue Originating in Europe ^a) (in billions of USD)

Sales Revenue Originating Outside Europe

(in billions of USD)

World’s Top 100 Non-financial

TNCs by Foreign Assets,

Sales &

Employment ^d)

Roche 26.5 65,000 150 9.9 16.0 6

Novartis Group

28.2 81,392 140 10.2 17.9 34

Syngenta 7.2 19,000 90 2.8 ^b) 4.3 N.A.

Nestlé 73.9 253,000 87 23.8 50.1 48

© Saner & Yiu, 2011

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Research Challenges

 “Trust” issue and personal connection

 BDM function was organised

differently in different companies and BDM managers held positions in different parts of the hierarchy (Consequence: different titles)

 Taking lot of time and perseverance

© Saner & Yiu, 2011

Dialogue

Dedicated Staff for BD?

Professional Backgrounds?

PR

Consultants

75%

Senior Gov’t Officials

50%

Diplomats 50%

Former Exec. 25%

Lawyers 25%

© Saner & Yiu, 2011

3 out of 4

companies said yes

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Part IV:

Traditional vs new

Diplomacies

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Vienna Convention on Diplomatic Relations,

Vienna, 18 April 1961

 PRIVILEGES AND IMMUNITIES, DIPLOMATIC AND CONSULAR RELATIONS, ETC

The Convention was adopted on 14 April 1961 by the United Nations Conference on Diplomatic

Intercourse and Immunities held in Vienna, Austria.

The Conference also adopted the Optional

Protocol concerning the Acquisition of Nationality, the Optional Protocol concerning the Compulsory Settlement of Disputes, the Final Act and four

resolutions annexed to that Act.

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Traditional & Modern Diplomacy

 Past -- "the management of international

relations by negotiation; the method by which these relations are adjusted and managed by ambassadors and envoys." (Sir Harold

Nicolson, Diplomacy, 1939)

 Former US Secretary of State George Shultz stated that "the raw material of diplomacy is information: getting it, assessing it, and

putting it into the system for the benefit and puzzlement of others.“ (Peace Works, 1997)

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Post-Modern Diplomacy

 Present and Future -- "the art of advancing national interests through the sustained

exchange of information among governments, nations, and other groups. Its purpose is to

change attitudes and behaviour as a way of reaching agreements and solving problems.“

(Gorden Smith, 1999)

 "(Diplomacy) is defined as the mechanism of

representation, communication and negotiation through which states and other international actors conduct their business “ (Jan Melissen, 1999).

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Assessment: Diplomacy

 The concept of diplomacy broadened to include state and non state actors

 The scoped of diplomacy broadened to

“facilitate communication between state & non-state actors & to exert influence on policy making &

implementing at local, regional and international levels.

 “diplomacy is continuation of politics

by other means”

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James Baker

Bloomberg, Ch. Rose show, 19th June 2012

 Diplomacy should:

– Manage differences &

– Magnify commonalities!

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Calling for New Diplomacy Roles in Public & Private Sector

“New Genres of

Diplomats”

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Multiplicity of Diplomatic Actors

Diplomacy is the exclusive domain of the Ministry of Foreign Affairs

(Satow, 1979)

PRESENT NON-

STATE ACTORS

 Corporate Diplomat

 Business Diplomat

 National NGO diplomat

 Transnational NGO Diplomat

 Economic Diplomat

 Commercial Diplomat

Economic Diplomats

Commercial Diplomats

T-NGO Diplomats N-NGO

Diplomats Corporate

Diplomats

Business Diplomats

Postmodern

Economic Diplomacy

Shaping socio-economic/

ecological development policies

•Negotiating global economic governance architecture

•Setting standards at multilateral organisations

•Managing multi-stakeholder coalitions & alliances

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Initial Publication with wide impact

International Economic Diplomacy:

Mutations in Post-modern Times Discussion Papers in Diplomacy

Raymond Saner & Lichia Yiu Netherlands Institute of

International Relations

‘Clingendael’, 2001

https://www.clingendael.org/sites/default/files/pdfs/20030100_cli_paper_dip_issue84.

pdf

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Part V

Business Diplomacy

Diplomacy Dialogue

Business Diplomacy

Managing Relationships with non-business Stakeholders

Is about

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Corporate Diplomat vs

Business Diplomat

CSEND All rights reserved 2021

CD BD

Labour Union

Tribal Leader

Political Party NGOs/Media

TNC

Subsidiaries abroad

Country 1

Country 2

Country 3

Country 4

CD = between TNC HQs and TNC subsidiaries BD = between TNC and external constituencies

Diplomacy Dialogue

Hierachy of Options for an Enterprise

 In order to promote an enterprise’s interest, an enterprise may use a

number of strategies:

 Product quality, price, M+A, Hostile Take-over, Cartels, Out-sourcing, PR, Public Affairs, Lobbying & Business Diplomacy (non-business

partnerships/relations)

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« Business Diplomacy »

R. Saner, L. Yiu (2014)

Business Diplomats are best qualified to

nurture a business culture which supports, leads, and cajoles an enterprise towards

orienting its business activities towards

an overall balance of divers objectives and respect of obligations which at times are in opposition with each other and at other times coalesce towards the achieving of a sustained business based on publicly

agreed criteria of good conduct.

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Negotiation Arenas of Global Economic Governance

(Saner, Yiu, 2000)

COPYRIGHT, DD/CSEND, 2006 BG Group London

Standard and rule setting organisations and actors

International level

National level

Community level

Regulatory and enforcing bodies (governments) and formal political actors

Civil society representatives, consumer groups, non-state rule setting groups, tribal leaders

Diplomacy Dialogue

Part VI

Learning from Failed

Business Diplomacy

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Learning from failures of Western food sector TNCs

 Failed to understand product-

environment relation and failed to assess power of NGOs and

International Organisations

 Nestlé in Developing Countries

1973-1984 International Boycott

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 Alternative products to natural process of breastfeeding so called “Baby Milk Formula”

were distributed in poor countries with misleading marketing of the product.

Nestlé and other food product companies insisted that it was not their responsibility if the water used for the formula was

poisonous and that mothers should have the choice to either breastfeed or use formula

but mothers had little knowledge on

proper use and the effects of the product and often water was not clean. Free samples given caused mothers’ breast milk to dry up. Babies got seriously ill and even died.

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Nestlé baby milk formula/scandal /boycott/loss of reputational capital

 Social rights groups began dragging the food industry's exploitative practices into the

spotlight in the early 1970s.

(Nestlé and other food companies)

 The New Internationalist published an exposé on Nestlé's marketing practices in 1973, “Babies

Mean Business” which described how the

company got Third World mothers hooked on baby formula.

 But it was "," a booklet published by London's War on WantThe Baby Killer Organisation in 1974, that really blew the lid off the baby formula industry.

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BD Failure: Nestlé and Baby Milk Formula

 1977: world-wide boycott was launched

against the Nestlé Corporation. Consumers all over the world stopped purchasing Nestlé

products.The World Health Organization drafted the International Code on the

Marketing of Breast Milk Substitutes

 WHO Code States: Manufacturers and

distributors should not provide samples of products, directly or indirectly, to pregnant women, mothers or members of their families.

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Nestlé under fire for marketing claims on baby milk formulas

Source: The Guardian, 1 Feb 2018

https://www.theguardian.com/business/2018/feb/01/nestle- under-fire-for-marketing-claims-on-baby-milk-formulas

Dialogue

Saved fromfbcdn-sphotos-a-a.akamaihd.net

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 Response by Nestlé:

Our former Chairman Peter Brabeck-Letmathe passionately believes that water is a human right. Everyone, everywhere in the world, has the right to clean, safe water for drinking and sanitation.

 His critics use a video interview that Peter

gave in 2005 to claim that he thinks all water sources should be privatized. This is false.

 He supports the United Nations' view on water:

‘There is enough freshwater on the planet for seven billion people, but it is distributed

unevenly and too much of it is wasted, polluted and unsustainably managed’.

https://www.nestle.com/ask-nestle/human-rights/answers/nestle-chairman- peter-brabeck-letmathe-believes-water-is-a-human-right

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Financial Times

Wednesday October 5, 2005

One example with Oil Companies:

Their problems are also concerns of the UN and the international community at large, calling for cooperation not confrontation

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Footprints

 1990: MOSOP (Movement for the Survival of Ogoni People) is founded and the Ogoni Bill of Rights is declared, leading to several peaceful protests under the leadership of Ken Saro-Wiwa

 January 4, 1993: First organized Ogoni Day by MOSOP against Shell's presence in Ogoniland.

 January 1993: Shell requests military support to build a pipeline through Ogoni. Response were wide-spread

public protest by the Ogoni people.

 May 1994: Saro-Wiwa and several other Ogoni leaders are arrested, framed and accused for the murder of 4 Ogoni chiefs, sentenced to death and killed.

 Since then, broad upheavals, violence, repression,

kidnapping, killing also of Shell personnel, destruction

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Resistance

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Shell in Nigeria

(Saner, Yiu & Sondergaard, 2000, „Business Diplomacy Management“

 Accepting exploitation conditions set by military

ruler (joint venture with “National Energy Company”

source of corruption, mismanagement)

 Perceived as “treasurer” of military rulers providing finances for arms purchases used to repress ethnic minorities (Ogoni tribe)

 “business as usual”= lost time to create perceptual distance between Shell and dictator = target for

insurgents

 Underestimating international NGO’s power,

catastrophic loss of reputational capital despite

effort to “repair” perceived past mistakes (building schools, hospitals, clean up polluted rivers etc)

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Clean Up (2018)

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Court Decision against Shell Al Jazeera, 29 January 2021

https://www.aljazeera.com/news/2021/1/29/dutch-court-orders-shell-to-pay-nigerian- farmers-over-oil-spills

 A Dutch court has ordered the

Nigerian subsidiary of Shell to pay compensation over oil spills in

Nigeria’s Niger Delta, a ruling which could pave the way for

more cases against multinational

oil firms.

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Learning from failures by Western energy sector MNCs present in

DCs

 Failed to understand perception by locals of being seen as ally of authoritarian régime

 Failed to see power of NGOs and international media

 Shell in Nigeria

1990-2021

Diplomacy Dialogue

Part VII

Business Diplomacy

carrots & sticks

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Definition of BD (2)

 International business diplomacy is the representation and

communication activities deployed by international businesses with

host government representatives and non-governmental

representatives in order to establish

and sustain a positive relationship to

maintain legitimacy and a ‘license to

operate’. (Ruël 2014)

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Going beyond good intentions

 Laudable attempts to hold companies accountable

A) United Nations Guiding Principles (Bus+HRs) B) Corporate Social Responsibility (CSR)

C) OECD Responsible Business Conduct (RBC)

D) Global Compact- sustainable principles (UNGC) E) Economic, Social, Governance Investment (ESG)

 So far- all non-binding, voluntary, non-reliable- blue

washing, green washing, SDG washing etc (see dismissal of CEO of Danon company by old style activist

shareholders- Friedman principle)

 But sticks grow stronger- companies not complying with OECD RBC end up loosing at court see Shell and Bank

ING in the Netherlands; Germany and France are passing laws on RBC, time to end “business as usual” and non- complying companies loose export subsidies (Canada)

Outcomes achieved by NCPs (2011-2019)

Note: The results of the two graphs are cumulative. A case may be reflected in both graphs if it qualifies for both.

Source: OECD Database of Specific Instances.

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 5th May 2021: District court ruled in The Hague.

 Shell has to reduce its CO2 emissions by 45 percent net by 2030 compared to 2019, the Action brought by environmentalists. The court was clear: the British-Dutch group

“must do its part in the fight against dangerous climate change”. And the

obligation applies not only to their own companies, but also to suppliers and end users.

From nice to have/towards must do

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ING bank violation of OECD Guidelines on climate change

 19th April 2019; Five NGOs - Oxfam novib, Greenpeace Netherlands, Banktrack and Friends of the earth NL filed a complaint against ING bank for failing to sufficiently commit and contribute to the targets set in the international climate agreement

concluded in Paris in 2015.

ING agreed to reduce its thermal coal

exposure to close to zero by 2025 and refrain

from financing new coal-fired power plants;

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Royal Road for companies’ future

 Seek SDG opportunities

 Go for co-creation and

partnerships with non-business partners

 Re-think production process,

following example of Caux Japan

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Main SDG Goals to Which Businesses Contribute

 https://www.shimadzu.com/sites/shimadzu.com/files/sustainability/common_value/image_04_p c.jpg

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Sector Specific Analysis by Value Chain

(Source: Caux Round Table, 2016, human rights due diligence workshop)

http://crt-japan.jp/files2016/SHE/2016%20%20human%20rights%20due%20diligence%20workshop%20in%20Japan%20EN.pdf

Example: Food

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Business Diplomacy Management: A Core Competency for Global Companies Raymond Saner, Lichia Yiu, Mikael Sondergaard Academy of Management Executive, Feb. 2000, vol. 14(1):80-92

https://www.researchgate.net/publication/271527585_Busine ss_Diplomacy_Management_A_Core_Competency_for_Glo bal_Companies

Business Diplomacy in Implementing the Global 2030 Development Agenda: Core Competencies Needed at the Corporate and Managerial Level. Yiu, Lichia and Saner, Raymond, 2017

(https://www.academia.edu/36337768/Business_Diplomacy_i n_Implementing_the_Global_2030_Development_Agenda_C ore_Competencies_Needed_at_the_Corporate_and_Manageri al_Level

International Business Diplomacy: How can

multinational corporations deal with global challenges?

Roel, Huub, Advanced Series in Management, Volume 18, by Emerald Publishing Limited, 2017

Thank you!