NGOs: More than flower power

Nongovernmental groups that wield nearly $1 trillion shift tactics to work with business for fair trade.

When Global Exchange decided to make Starbucks sell "fair trade" coffee, the nongovernmental organization campaigning for more thoughtful and fairer ways of running the world economy planned dramatic demonstrations outside the chain's outlets nationwide.

Within days of the first televised protest, Starbucks executives were visiting the group in San Francisco to discuss how they could offer consumers coffee made from beans grown under more humane conditions, and sold at more remunerative prices for poverty-stricken growers.

Today, Global Exchange and Starbucks work together to make "fair trade" a reality.

The deal is one in what a new report on the future of NGOs calls "early tremors" that "represent warning signs of seismic shifts" in the way increasingly powerful NGOs are operating.

With a turnover approaching $1 trillion a year, according to one study, and a reservoir of public trust much deeper than either governments or business enjoys, the international NGO sector could become "amongst the most influential institutions of the 21st century," in the words of John Elkington, coauthor of the study published by SustainAbility, a British consultancy company.

And signs indicate that many leaders in the field are "moving beyond a culture of criticism to one of engagement with business and other partners in a search for solutions" says Gavin Power, a spokesman for the UN Global Compact, which helped draw up the report.

But the shift, spurred by recognition of the power of market forces, is risky, the study warns. NGOs that have earned international credibility as watchdogs could be in danger of becoming lapdogs. Businesses that have concentrated on the short-term bottom line have now to focus on long-term prospects. Both sides have to ally themselves with people they once treated as enemies.

"We had to psychologically shift gears" in discussions with Starbucks, recalls Kevin Danaher, a cofounder of Global Exchange. Instead of confronting a corporation, and shaming it, "we were saying 'We want to help you.' "

The rewards are tempting, both for NGOs to inculcate their human values in the business world, and companies looking to grow their economic value. "Successful companies plan for the long haul," says Mokhethi Moshoeshoe, who runs the African Institute of Corporate Citizenship in Johannesburg. "If you are not acceptable in the communities where you operate, your business will fail and shareholders will not be happy."

SustainAbility's report, "The 21st Century NGO: In the Market for Change," points to cases where NGO cooperation with business has had mutual benefit. Amnesty International's section in Norway helped train employees of Statoil to spot and resolve human rights issues in the oil company's third-world operations, for example. In the Canadian province of Alberta, energy companies and NGOs work from the outset of every project on limiting environmental damage, giving NGOs a decisive say in planning, while the companies have an easier time with regulatory authorities.

"Greenpeace is a company's best ally," said John Passacantando, an official with the NGO at a business conference last year. The group can help "bring companies into port before the storm."

NGOs that set themselves the task of civilizing capitalism through markets seek to hold that system in check in a world where globalization is weakening the grip of governmental regulation.

Raymond van Ermen, who once lobbied European Union officials for stricter environmental safeguards, found the process "long and difficult." Though regulations are still needed, he says, the European Partners for the Environment, a firm he runs from Brussels, sets up "a fast track to influence the market" by working directly with business leaders,trade unions, and NGO activists. "In the last two or three years, we have seen impressive changes in the way stakeholders can influence the business agenda," he says.

A similar trend is evident in the way antiglobalization protesters - so violently visible in Seattle or Genoa - are shifting their approach to promote "alternative globalization." Rather than demanding an end to this historical process, they are seeking to shape it by globalizing labor rights and high environmental standards. But government regulations are still important to sanction companies that don't take the ethical bait NGO's offer, say some NGO activists, and noisy campaigns have a place alongside quiet persuasion.

The prospect of a public campaign can be just what a company needs to heed an NGO's complaints, says Mr. Danaher. "We tell them we know how to make their lives miserable but we'd rather not," he explains. "If they want us to go bother some other company, they just have to do the right thing."

And NGO negotiators in suits find their job easier if they seem to be struggling to make their voice of reason heard over the cacophony of protest in the street. "Inside or outside, we are all on the same side," Danaher says.

Beyond the carrot-and-stick tactics that Danaher employs, the nature of NGOs' long-term relationship with corporations is at stake. In many cases, says Mr. Moshoeshoe, that relationship goes little further than philanthropy. Huge companies that treat workers appallingly and devastate the environment "outsource their conscience," he scoffs, by donating money to NGOs.

"Our work is to make the business case for corporate social responsibility - if a business is to be sustainable it needs to integrate social and environmental issues into its structure," he says.

That attitude is gaining ground, says Seb Beloe, a coauthor of the report. Ratings agencies are springing up that measure companies' financial performance as well as a "triple bottom line," which takes account of their social and environmental record, as well as their profit margins. Though only a few hundred companies have drawn up "triple bottom lines" so far, that is "massively more than a few years ago," he says.

And on the other side of the activist-corporation divide, a matching change of mood points to some new directions. "Instead of just railing at capitalism," advocates Danaher, "let's see if we can't use some market savvy."