Continuous Improvement: GE Military Product Disclosure in 2007 Citizenship Report


Communicators have responsibilities that span various areas of corporate social responsibility.  One would argue that the primary role of a communicator typically focuses on managing company and stakeholder alignment to anticipate stakeholder action. Increasing regulation and guidelines have introduced more stringent requirements and heightened expectation for divulging company information. 

In addition, demand for greater accountability and improved social impact increasingly drive stakeholder decisions and inputs. The question remains: How can a communicator anticipate stakeholder action when faced with an ever-increasing complicated and dynamic stakeholder environment? 

GE recently published its third annual corporate citizenship report.  GE engages stakeholders regularly on various issues and topics. This year’s report broke new ground in many areas, such as the convening of an independent Stakeholder Report Review Panel (SRRP) to review and comment on the report and the release of the company’s Statement of Principles on Human Rights.  The most unique aspect of the report, some would argue, is the disclosure of previous statements and disclosures associated with the manufacturing and provisioning of components for cluster bombs.

For over five years, GE has communicated to its stakeholder community, including human rights organizations and socially responsible investors (SRIs), that the company does not manufacture components for cluster bombs or landmines. In preparing the 2007 Citizenship Report, the company became aware that this was an inaccurate statement. In fact, GE acquired a company in 2001 that was supplying a sensor for use by a U.S. manufacturer of a next-generation cluster weapon for supply to the U.S. military. In 2005, sales of this sensor generated less than 0.001% of consolidated GE revenues. Of more than 250 million sensors produced each year, only 15,000 are used for this application. Regardless, the company was faced with an inconsistency in practice against stated commitments.

Steps Taken
Discussions were held among the business leaders of the impacted business and the corporate communications, citizenship and legal teams. It was decided that the best approach was full transparency, including publishing the disclosure in the annual citizenship report. This full disclosure had to address the discovery of the issue, the inconsistencies with previous public statements from the company, what actions were taken in this specific case and what processes are in place to minimize this from occurring again. In addition, representatives from other functions were invited to the discussion, including investor relations and the commercial/sales organization.

After discussions with the customer and review of the situation at senior executive levels of the company, the decision was ultimately made to cease supplying this product to the customer. This was an important development to share with stakeholders who were interested in this issue, as remaining a supplier of this component would still run counter to our stated position. 

The next step was in ensuring this decision was communicated successfully.  After deciding to develop a case study on this situation for the 2007 report, GE decided to reach out to key stakeholders ahead of the report release.

Specifically, the SRRP, which advised the company on the 2007 Citizenship Report, was briefed about the situation and a draft case study was presented to them for review and feedback. Also, weeks before the report release, we engaged stakeholders about the situation, including various socially responsible investment (SRI) firms and NGOs, all of which had a unique stake in this subject. The purpose of these briefings was to demonstrate our commitment to addressing this issue and answering any questions each organization had before we released the report.

Results
In mid-June, the 2007 Citizenship Report was released with the case study on the cluster bomb disclosure in the “Customers, Products and Services” section. Since the release of the report, the feedback from stakeholders – media, SRIs, consultancies, NGOs and others -- has been positive and any coverage received in the media regarding this topic has been presented as a best practices in responsible corporate citizenship reporting and transparency. Specifically, within the media, Chief Responsibility Officer, Ethics World, Ethical Performance Newsletter all commended GE on this disclosure. 

The SRRP also submitted an independent letter for publication in the 2007 Report, which, in part, stated that “GE is to be congratulated for disclosing and remedying shortfalls in areas of key stakeholder concern, notably its discovery that one of its business units…was selling components destined for use in cluster bombs.”

The Boston College Center for Corporate Citizenship stated that “GE's summary of the cluster bomb situation is a leading example of best practices in reporting and transparency.” Even the top South Korean daily newspaper, The Hankyoreh, reported on the disclosure and stated that it is apparent that “the ultimate goal GE is pursuing through its report is to become a ‘good growth company based on trust.’” Finally, Edelman Public Relations, in collaboration with the Boston College Center for Corporate Citizenship, Net Impact and the World Business Council on Sustainable Development (WBCSD), released a report entitled “Corporate Responsibility and Sustainability Communications,” where GE is mentioned as a best practice in regards to transparency based on the cluster bomb disclosure issue.

The proactive and transparent approach, and the integration of stakeholder feedback during the reporting process, was key in the success of managing this issue, which had the potential of reflecting poorly on GE’s reputation. The company not only made the right business decision, it also made the right decision to disclose, including what steps the company will take to ensure statements in the report are accurate and reflect a living commitment by the GE businesses. 

As stated in the report, this is a perfect example of how the citizenship report development process is helping overcome structural barriers to identify gaps between stated policy and practice.

For communicators, this situation reflects how often they are on point with stakeholder engagement and how these relationships are becoming increasingly important to the company’s reputation. Communicators establish trust in part by the accuracy of the information provided and also by resolving issues with speed, clarity and humility.  Transparency can shine light on issues within your company and only help the business—and it is the right thing to do.

This article was written by Gary Sheffer, executive director, communications & public affairs, GE Corporation and Frank Mantero, director, corporate citizenship programs, GE Corporation. It appears in the recently released PR News Guide to Best Practices in Corporate Social Responsibility, Volume 2. For more information, visit www.prnewsonline.com/store.




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