The rise of populism presents a significant challenge to responsible business practices in our rapidly changing world. With their divisive tactics and simplistic messaging, populist movements undermine the foundations of corporate responsibility. This article examines the impact of populism on ethical decision-making, sustainability efforts, and stakeholder engagement, highlighting the need for businesses to navigate these challenges to uphold responsible practices.
Zena Al-Esia, Andrew Crane, Kostas Iatridis, and Ayse Yorgancioglu / Rebalance
Populism has emerged as a potent, divisive, and polarising political force. It presents a major challenge for companies seeking to take a responsible position on controversial political issues.
Populists continue to rise to power. In 2022, Giorgia Meloni became Italy’s new populist president and populist Viktor Orbán secured his fourth successive term as Hungary’s prime minister.
The popularity of populist leaders is often attributed to their strategic ability to tap into citizens’ grievances. They claim to represent the voice of ‘the people’ against an unresponsive and immoral ‘elite’. In doing so, populists often adopt simplistic narratives. They distort information and polarise debates on topical issues such as gender and racial equality, immigration, and climate change .
For firms committed to some kind of responsible practices, it is often these very same hot button issues that they are looking to address as part of their own corporate social responsibility (CSR) strategies. At this intersection, populism and responsible business collide.
Populism as an information problem
In many ways, populism is essentially an information problem. By employing mis- and disinformation, or using information controls, populists can alter citizen preferences on important issues such as climate change or LGBTQ+. Firms typically adopt a range of positions on such issues. However, divisive populist narratives are often incompatible with companies’ more liberal stances on such issues. This can render a firm’s more socially responsible activities or positions as controversial, and firms may find themselves on the receiving end of populist ire. At worst, populist narratives may pave the way for populists in power to justify more permanent regulatory changes, which can constrain the scope of future CSR activities.
Considering that information is the bloodline of a functioning democracy, the global populist movement raises serious concerns about the future of democracy. In fact, a target of UN SDG 16 on Peace, Justice and Strong institutions is to ‘Ensure public access to information and protect fundamental freedoms’. Populist narratives undoubtedly disrupt the flow of reliable information, which is essential for the development of an informed citizenry and ultimately informed stakeholders.
For companies, stakeholder voice is essential for transmitting ‘public will’ to them when they seek to formulate a responsible stance. Therefore, populism threatens not only information quality, but also deliberative dynamics with key stakeholders, such as civil society actors. As populist influence can often infiltrate stakeholders circles, stakeholders may adopt polarizing populist narratives, lack credible information, or simply disengage from supposed “elite” corporate actors.
Our research looks at how firms seeking to be responsible might therefore respond to different populist contexts. Given that populist discourse diminishes information transparency levels, this in turn reduces the availability of reliable information, and manipulates public perceptions to produce a ‘manufactured public will’. Considering that companies’ strategies for responsible business are reliant on the availability of high quality information sources to support decision making, populism ultimately challenges effective strategy development.
Importance of context
In the populism-responsible business nexus, context matters. Considering that populism is fluid and adapts to its environment, we cannot expect a ‘one size fits all’ effect on responsible business conduct. In fact, populists operating in different political regimes will generate different responses.
Specifically, firms operating in populist-democracies such as the US or the UK will have more scope to ‘contest’ populist excesses than in more consolidated populist contexts, such as Hungary or Turkey. We can attribute this to institutional conditions. In democratic settings, conditions are favourable for firms to take on a more active political role against populists. This is due to greater constitutional protections that protect freedom of information and reduce the risk of reprisals.
However, in non-democratic populist spaces, such as hybrid or authoritarian regimes, populism has already taken a strong hold. Therefore taking a political stance on controversial issues in such settings is much riskier for firms. Both the information landscape and constitutional protections are compromised, and so the risks of reprisal are greater. The outcome is that in less democratic contexts, firms will likely find themselves under pressure from populist forces and will be reliant on populist state actors for information. This volatility leads to a ‘neutered’ version of responsible business which will see firms seek to calibrate or comply with populist demands. In the latter scenario, political engagement by firms may even be undesirable as it can actually result in firms inadvertently bolstering populist agendas.
Where do firms go from here? While we do not yet have all the answers, it would appear that adopting an information-centric approach can help firms plan their CSR strategies more meaningfully. This involves investing in information resources, so that firms are more closely attuned to the information landscape and the information sources they draw on. It also involves paying careful attention to stakeholder deliberation to ensure accurate representation of diverse stakeholder ‘voices’.
The saying goes, ‘Knowledge is power; information is liberating.’ If this holds true, then populism’s tendency towards manipulating information becomes a major societal challenge. By adopting an information focus, firms can better comprehend the populist challenge and determine the conditions under which they should activate to challenge populism. When exercised under the right conditions, firms can play a formative role in helping to rebalance democracy against populist excesses.
This article was initially published in rebalanceproject.org.