How companies can use power and partnerships to drive system change

Dependent Joeys: small and unknown, needing support

We start small with Dependent Joeys. A joey is a newborn kangaroo, extremely small and underdeveloped, so it has to stay attached to its mother for a while before it is ready to venture out on its own.

Likewise, in this category, we can think of smaller organizations with limited legitimate, coercive or referent power. Unable to influence key stakeholders on their own, they often depend on partnerships with like-minded entities, trade associations or coalitions for support. Collectively, they can grow in power to eventually influence the broader system.

Many social and environmental NGOs fit this description.

In research we have done with colleagues on the early days of wind and solar power, we found that, in the absence of strong economic arguments, regulation and government subsidies, many small nonprofits and social enterprises banded together to lobby and engage in public-private partnerships. Together, they developed specialized technical knowledge that could be used to build a business case for renewables.

This generated a self-sustaining circle, with smaller players connecting with a broader base of activist users, which helped create market-based incentives and pushed clean energy higher up the public agenda.

Working in collaboration with multiple stakeholders lent credibility and helped grow a bigger movement, so the small “joeys” could eventually leap ahead.

Resourceful Gorillas: big and powerful, handle with care

Next are the Resourceful Gorillas: large and powerful organizations that may lack perceived authenticity in their environmental or social initiatives. Owing to their size, they can exert significant coercive influence over suppliers and regulators. However, to compensate for their limited referent power and to build credibility with the public, they often rely on partnerships with trusted actors, such as NGOs, to convey more authentic sustainability messages.

Walmart is a case in point. As the world’s largest retailer by revenue, Walmart’s massive scale allows it to exercise coercive power in negotiation with manufacturers and other suppliers, forcing them to comply with its low-cost demands or risk being replaced. Also, as the largest private employer in the world, it has a huge impact on employment and wage trends. It has put many small, local, mom-and-pop competitors out of business. And research shows that, much like Amazon, when Walmart is the main employer in town, wages stagnate.

But Walmart has been working hard to boost its authenticity. Shortly after Hurricane Katrina in 2005, Walmart’s then-CEO Lee Scott gave a speech in which he admitted:

“We have received our share of criticism over numerous issues, not the least of which is our size… To better understand our critics and Walmart’s impact on the world and society, we spent a year meeting with and listening to customers, associates, citizen groups, government leaders, non-profit and non-government organizations, and other concerned individuals.” He signaled a change of direction.

“Walmart, believe it or not, committed to becoming regenerative, with a plan based directly on the work of the environmentalist Paul Hawken,” said John Elkington, a world authority on corporate responsibility and sustainable development, speaking at an IESE Global Alumni Reunion on SustainAbilities.

Sometimes bigger can be better — if you use your giant resources to good effect. Walmart’s sustainability effort has been helped by partnering with responsible suppliers as well as with Conservation International, the Environmental Defense Fund, The Nature Conservancy and the World Wildlife Fund, among other authentic players.

“Due to our size and scope, we are uniquely positioned to have great success and impact in the world, perhaps like no company before us,” said Scott.

Genuine Bees: small but highly authentic

Now let’s consider organizations that are perceived to be more authentic when it comes to their sustainability credentials, but they lack coercive power owing to their smaller size and scale. We call these Genuine Bees. Many certified B Corps fall into this category — enterprises that are for-profit but also have a strong social and/or environmental mission.

These types of organizations may not wield much direct, coercive influence over large corporations or government policy. However, they command a lot of referent power. Consumers tend to trust and respect them. This can inspire grassroots movements like the fair-trade movement. While fair trade started among niche players, larger stakeholders were eventually pushed to begin offering fair-trade alternatives as consumers demanded more equitable products and services.

One such example is Tony’s Chocolonely, a Dutch chocolate brand known for its long-standing commitment to ending slave labor in the cacao industry and paying farmers the true price. Compared with a large multinational chocolate maker like Nestlé, Tony’s cannot compete, as Tony’s head of sustainability, Chris Oskam, explained during a talk at IESE:

“Because we pay more to farmers, our cost base is higher, which of course affects our competitiveness because it puts us at a different price point. To overcome that, we have to do other things to set ourselves apart.”

Writing about Tony’s in IESE Insight, Christopher Marquis recommended working collectively. Through the Open Chain initiative, Tony’s succeeded in getting other producers to pledge to end forced labor and child labor within their industry. This saw big brands from Aldi to Ben & Jerry’s (owned by Magnum, a Unilever spinoff) committing to increase what they paid farmers — a win for the Genuine Bees.

The Genuine Bees’ other secret weapon, compensating for their limited coercive power, is their ability to generate disproportionate media attention through creative marketing campaigns. In fact, a study by one of us on small, sustainable apparel brands found that, despite their tiny market shares, nearly half of all U.S. mainstream media articles on sustainable apparel over a 10-year period featured smaller brands.

The takeaway is that small but highly authentic firms can still generate a lot of buzz — a powerful reminder of the reach and relevance of referent power.

Legitimate Lions: the double advantage of being big and authentic

The final category is Legitimate Lions. These companies combine size with high public trust. They enjoy both legitimate and referent power, allowing them to drive change with both centralized and diffused stakeholders.

For instance, the large outdoor sports clothing company Patagonia uses its brand to rally customers around environmental causes while also pressuring suppliers to meet sustainability standards. This, in turn, leads consumers to identify even more strongly with the brand, resulting in Patagonia being consistently ranked as one of the most respected brands of all time.

Despite having the double advantage of being a large company and being perceived as authentic, even Legitimate Lions like Patagonia can benefit from collaborating with others — maybe to access a larger pool of Resourceful Gorillas, or maybe to cultivate an even more authentic image with Genuine Bees.

Dependent Joeys, with their small local followings and lesser-known reputations, could have a bigger impact if they chose to partner with Legitimate Lions.

Speaking at IESE on his experience of working with Patagonia founder Yvon Chouinard, Dean Carter gave numerous examples of how the company partnered with stakeholders in pursuit of its mission “to save our home planet.” Patagonia gives a percentage of its revenue — including up to 100% of Black Friday revenue — to a variety of environmental groups dedicated to preserving and restoring the natural environment. And when Chouinard made Forbes’ rich list, he set up a trust and nonprofit to get him off that list by giving his money away.

“Now, all the profit from Patagonia, after paying expenses and people, will go to small, grassroots efforts to save the planet, around the world, forever,” Carter said, underscoring Patagonia’s commitment to use its sizable resources to help drive system change through other authentic partners.