Turning gadflies into allies.

Multinational companies are the driving force behind globalization, but they are also the source of many of its most painful consequences, including currency crises, cross-border pollution, and overfishing. These problems remain unsolved because they are beyond the scope of individual governments; transnational organizations have also proved unequal to the task. Nonprofit, nongovernmental organizations have leaped into the breach. To force policy changes, they have seized on all forms of modern persuasion to influence public sentiment toward global traders, manufacturers, and investors. By partnering with NGOs instead of opposing them, companies can avoid costly conflict and can use NGOs' assets to gain competitive advantage. So far, however, most companies have proved ill equipped to deal with NGOs. Large companies know how to compete on the basis of product attributes and price. But NGO attacks focus on production methods and their spillover effects, which are often noneconomic. Similarly, NGOs are able to convert companies' standard competitive strengths--such as size and wide market awareness of their brands--into liabilities. That's because the wealthier and better known a company is, the juicier the target it makes. Emboldened by their successes, NGOs continue to take on new causes. By partnering with NGOs instead of reflexively opposing them, companies could draw on NGOs' key strengths--legitimacy, awareness of social forces, distinct networks, and specialized technical expertise--which most companies could use more of. And with NGOs as allies and guides, companies should also be able to accelerate innovation, foresee shifts in demand, shape legislation affecting them, and, in effect, set technical and regulatory standards for their industries.