A century ago, Sir Ernest Satow, a British diplomat, published ‘A Guide to Diplomatic Practice’ (1917). The ‘Satow,’ a first of its genre, rapidly became a reference book for diplomats worldwide. According to it, ‘diplomacy’ is ‘the application of intelligence and tact to the conduct of official relations between the governments of independent states […] and between governments and international institutions.’
‘Corporate diplomacy‘ borrows from this definition and relates to diplomatic activities led by private corporates. The concept gained attention in the 90s as globalization gathered pace and multinational companies entered new markets around the world. The need to ascertain the geopolitical risk and build new relationships with local governments, NGOs, and interest groups required new skills.
Distilling various scholarly definitions, corporate diplomacy essentially represents an enlarged public relationship function promoting the self-interest of a firm when interacting with stakeholders globally.
The current environment requires that this definition be expanded. Market forces now compel firms to define a set of values to be incorporated into ESG objectives. When a company affirms its environmental and social beliefs, it loses its neutral political status and adopts a political identity. This evolution marks the fusion of capitalism with progressive, sustainability-linked values – a phenomenon sometimes called ‘woke capitalism,’ which is not without political detractors.
To their dismay, the rise of the political firm is moving partisan discussions away from archaic and failing political systems to the financial markets where investors vote every day. To find out who the winners and losers are, follow the money!
Through this evolutionary process, firms, like nation states, become obligated to promote their values and stand for them when challenged. And when these values clash with that of stakeholders, whether at home or abroad, corporate diplomacy must be called upon to manage backlashes, help ease differences and maintain peace.
As a diplomacy function gets established in organizations to fulfil this role, it is worth considering its required qualities. According to the ‘Nicolson test’ named after another British diplomat, Sir Harold Nicolson, the characteristics of a good diplomat consists of ‘truth, accuracy, calm, patience, good temper, modesty, loyalty, intelligence, knowledge, discernment, prudence, hospitality, charm, industry, courage, and tact.’
(PS: Where have the renowned British skills in diplomacy gone?)