Both True — Getting Your Political Lobbying House in Order

In an earlier Both True this year I covered BlackRock’s 2021 Stewardship Expectations that foreshadowed the need for oil and gas companies to align their political giving with the climate goals of the Paris Agreement.  Many of Adamantine’s clients were skeptical: We don’t track how the trade associations we support lobby. How would we report this anyway? But recent news confirms how important it is for your company to (1) get its political spending accounted for and (2) make this spending part of your climate leadership strategy.

Both of these things are true

  • Companies rely on trade associations and political spending to hold a “right flank” on political outcomes, allowing companies to take more climate-friendly action. (You might remember: I used to run a trade association!)
  • Incoming scrutiny on political and trade association spending is about to upend this paradigm.

What should take its place?

The situation

Recent headlines around lobbying and political spending are going to keep this topic at the front of your stakeholders’ minds for some time. As I often do here in Both True, below I cover the guidance BlackRock has given their portfolio companies on the topic.

“We will now seek confirmation from companies, through engagement or disclosure, that their corporate political activities are consistent with their public statements on material and strategic policy issues. Moreover, we expect companies to monitor the positions taken by trade associations of which they are active members on such issues for consistency on major policy positions and to provide an explanation where inconsistencies exist.”

“Companies that engage in political and lobbying activities should develop and maintain robust processes to guide these activities and mitigate such risks, including effective board oversight.”

  • The BlackRock commentary specified information for companies to disclose, including the following:
    • Purpose of the company’s political contributions and lobbying;
    • How this aligns with the company’s strategy, including legislative and regulatory priorities;
    • How the company engages in these activities. Is there a government relations or policy team?
    • The company’s political contribution and lobbying policy, including management and board oversight processes;
    • Trade association memberships for which the dues amount requires board oversight; and
    • An affirmation of compliance with federal and state laws governing political activities and lobbying.
  • BlackRock also advises companies to provide easily accessible public information on their political activities.

If all this weren’t enough, Washington lawmakers earlier this month revealed plans to subpoena oil and gas executives around their “disinformation campaigns around climate change.”

Earlier this week, Ceres put out a report scrutinizing corporate lobbying on climate change. They conclude, “The majority of large companies assessed have not translated their broader statements on the importance of climate change policy into consistent advocacy in favor of specific climate policies.”

Believe it now: Companies have every reason to get their political house in order.

Seize the day

How should game-changing oil and gas leaders prepare for the incoming scrutiny from lawmakers, shareholders, and community stakeholders? Here’s your checklist:

  • Assess your status quo and your risk. Delegating political activities to your government affairs team (and to the trade associations to which you belong) is no longer an option. Instead, first  conduct a comprehensive assessment of at least their 2020 political activity and giving. Then, assess what activities generate reputational risk for your company: Have any candidates, organizations, or trade associations been engaged in any scandals or particularly contentious fights? Would any of your activities create heartburn for your stakeholders? Does your policy engagement align with your public statements and messaging? Important: Also assess the risks complete transparency may create.
  • Take your assessment to the board. Your board reads the papers and is wondering — even if they haven’t brought it up with you — what the company’s reputation risk, policies, and plans going forward are. Let them know what you uncover and your plans to manage and mitigate that risk.
  • Prepare to disclose. Most companies need to get their political house in order to simply disclose their political activities.  Whether or not you are publicly traded, you can expect questions on political alignment from your investors in the future. 
  • Develop a new political activity strategy. At a bare minimum, companies will now require a political activity policy, accountability to the board of directors, and processes to track activities. Even better, companies can take this opportunity to take a hard, strategic look at the new role and risks of political activities. As with all risk, this threat can be converted to a leadership advantage. What strategy would separate and elevate you from your competitors? What activities would demonstrate that you are acting on your aspirational ambitions?

Our team at Adamantine can guide you as you prepare to meet these new expectations around political and lobbying activities. You don’t have to be all things to all stakeholders — but you do need a strategy to proactively understand and mitigate your risks. Even better: Work with us to turn your political activity risk into an advantage.

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