Supply Chain Reaction

Here’s what you need to know…

Will there be anything under the Christmas tree this year? If you follow the news, you’re probably worried supply chain issues will be this year’s Grinch. Beyond holiday fears, however, there are even bigger supply chain worries for a wide range of industries whose effects will reverberate long after New Year’s Eve.

A recent survey commissioned by Oracle found 82 percent of Americans are scared supply chain issues will “ruin their life plans,” and policymakers are taking notice. While COVID-19 complications have added strain, there are many other factors that have significantly contributed over time to the breakdown we’re experiencing today. As a result, organizations now face significant and compounding operational risks, and governmental policy pressure at the behest of the American people could bring even more challenges.

As public affairs professionals help companies and industries navigate this policy response, here’s what you need to know about how we got here and what happens next.

There were many cracks in the supply chain before COVID, and the weight of the pandemic broke it.

HOW WE GOT HERE: From aging ports to hard-to-find workers to high regulatory burdens, there were systematic issues imperiling the global supply chain long before the onset of the pandemic, including:

  • NO PORT OF CALL: The U.S. Federal Maritime Commission (FMC) expressed concerns that the quality of American ports threatened the security of the nation’s supply chain as early as 2015, warning “congestion at ports and other points in the nation’s intermodal system has become a serious risk factor to the relatively robust growth of the American economy and to its competitive position.” Indeed, no American ports made the 2020 World Bank/IHS Markit “Container Port Performance Index” ranking the top 50 global ports for quick and efficient ship turnaround.
  • TRANSPORTATION LABOR PAINS: In an effort to cut costs, railroads reduced their workforce by more than 22 percent from 2017 to 2021, and large rail companies have struggled to bring workers back amid rising consumer demand in recent years. Meanwhile, the trucking industry has repeatedly sounded the alarm about its desperate need for drivers. What was a 60,000-driver shortage before the pandemic has exploded to a projected 105,000-driver deficit by 2023, which industry representatives blame in part on months-long backlogs obtaining commercial driver’s licenses from state Departments of Motor Vehicles.
  • ALL SUPPLY CHAINS ARE LOCAL: Many import challenges center upon the management of ports at Los Angeles and Long Beach, which according to Reuters “handle the most ocean cargo of any ports in the United States, but are some of the least efficient in the world.” Experts say the lack of efficiency is in part due to local labor, zoning, and environmental ordinances, such as Long Beach prohibiting the stacking of more than two containers high to protect scenic ocean views (though this rule has been temporarily lifted to four containers high), the state’s controversial AB-5 labor law keeping independent truckers off the road, and state air quality regulations constraining the number of trucks allowed at warehouse facilities. Last week, California ports saw a record backlog of 111 container ships awaiting entry, despite operating 24/7 at the direction of President Biden. In fact, just 60 percent of the round-the-clock spots have been used to offload goods due to “burdensome” processes.

PANDEMIC PANDEMONIUM: The pandemic created new and exacerbated existing impediments to Americans’ access to needed materials that hinge upon the ever-changing conditions in foreign countries. In fact, a single case of coronavirus shut down China’s Ningbo-Zhoushan Port, causing a two-week shuttering of the world’s third-largest cargo port that serves as a “big gateway for Chinese exports … headed to markets in the U.S. and Europe.” With Americans already facing lengthy wait times for these key items, such lockdowns – like the increasingly stringent ones bringing factories in Vietnam to a screeching halt – have “paralyzed commercial activity and added stress to a strained global supply chain.”

As Americans feel the supply chain strains, shifting political dynamics mean more pressure on companies and industries operating globally.

THE GHOSTS OF GLOBALIZATION: According to The Wall Street Journal, for the past several decades, America’s financial system of robust credit and financial interconnectivity allowed companies to “adopt outsourcing and offshoring, just-in-time inventories and ‘capital light’ models that split design from production.” The COVID-era supply chain challenges are bringing scrutiny to these practices from policymakers, the media, and consumers. They are also bolstering corporate critics, who claim “monopolistic tendencies” in pursuit of big profits inflicted “choke points” throughout the supply chain, while industry consolidation has made shipping slower and more expensive.

FALTERING FIREWALL AMIDST NEW POLICY CONSENSUS: While Republicans have traditionally served as a free markets firewall against Democrats’ tactics to force the repatriation of American companies, there are now voices across the ideological spectrum proposing governmental actions to “reshore” critical materials and manufacturing. While some conservatives cite national security implications, others are calling for “common good capitalism,” as Sen. Marco Rubio (R-Fla.) calls it, that protects American jobs and economic security over corporate profits. This creates an unusual synergy with Democrats who have spent decades chiding American businesses they claim headed offshore to avoid high costs of labor and labor union influence, resulting in a momentum to do something that is hard for businesses to combat. While historically Republicans sought to repatriate American companies operating abroad by enticing them with tax reform, easing regulatory burdens, and loosening control of labor unions, Democrats have long championed punitive measures that would force companies to return stateside or face steep taxes and penalties. On the campaign trail and throughout his presidency, President Biden has advocated for a hybrid approach of credits and fees, punishing offshoring while incentivizing job creation at home with tax relief. The ultimate policy solution is likely to be a combination of carrots and sticks decided by a select few lawmakers amid razor-thin majorities.

RISKS IN RESHORING: With companies facing more questions about maintaining global supply chains, it is no surprise a recent Deloitte survey found 75 percent of companies are accelerating their plans to reshore. For those who actually end up doing so, the road home is lined with big expectations. Greater public scrutiny of corporate actions means these organizations will need to keep the promises they make on local investment and hiring when accepting the government incentivizes for their return. Meanwhile, would-be domestic competitors and investors who want to back them are hoping to take advantage of these same incentives to create new projects without all the costs and hassle of the repatriation process. In recent years, however, such benefits have become increasingly unpopular among the American people, so any government action that could be seen as a “handout” to corporations will indubitably invite public skepticism.

For public affairs professionals, the supply chain crisis presents both short-term and long-term challenges, from navigating current scrutiny to weighing reshoring in the long run. These are the kinds of risks Delve asses for our clients, ensuring them have the information they need to make the best decisions possible to navigate uncertainty. Whether your organization is enduring the pains of the current supply chain crisis or working hard to avoid the next one, we’re here to help turn them into opportunities.

Your Exclusive Guide to the Never-Ending “Infrastructure Week”

Here’s what you need to know…

The last month in Congress looked a little like Groundhog Day as legislators moved closer than ever to passing major infrastructure investments, only to have the apparent consensus crumble over how and whether the bill should be linked to President Joe Biden’s broader “Build Back Better” reconciliation package.

For those wondering what happened and why the so-called “Infrastructure Week” seems to never end in Washington, our team of analysts dug deep to produce an important report for your consideration.

Digging Deep: Why ‘Infrastructure Week’ Just Won’t End details 10 of the biggest fights on the horizon – far beyond the sensational headlines of price tag squabbles and intraparty meltdowns. Our analysis instead focuses on the numerous unsettled debates beneath those headlines in which competing interests clash and the infrastructure debate will keep on going long after whatever bill is eventually signed into law.

As we explored the consequences of these proposals for a wide array of industries – energy, environment, FinTech, pharmaceuticals, transportation, telecommunications – several key themes emerged. Here’s what you need to know:

The energy transition has unlikely opponents.

The Infrastructure Investment and Jobs Act (IIJA) encourages industry to invest in technology and infrastructure that reduces emissions and greens the grid. But as is increasingly the case for a variety of alternative energy projects, such solutions face obstacles from the very environmentalists advocating for cleaner options. While the IIJA has been called the “most ambitious portfolio of carbon management policies in the world to date,” tools like carbon capture remain immensely controversial among green activists and their allies among lawmakers. Activists are similarly concerned about what they call “the hydrogen hype,” for which the IIJA provides significant support. Beyond these individual technologies, the bill would support a transmission line buildout to bring renewable energy from where it is best generated to where it is most needed. However, new authority granted to FERC by the IIJA is likely to face a variety of opponents including state regulators, environmentalists, and incumbent power producers.

President Biden’s desire for streamlined permitting clashes with his efforts to expand public participation.

President Biden wants more infrastructure built more quickly. That’s why the IIJA seeks to streamline permitting. However, his administration also wants to expand public participation and include broader climate and environmental justice considerations into such decision-making, inevitably prolonging the process. Already, environmental groups are criticizing IIJA’s permitting provisions, complaining they “gut needed safeguards” and “curtail the way the public can weigh in on how projects building roads, laying pipelines, cutting timber, and mining for hard-rock materials are done.” Such groups are better-funded, better-organized, and more legally proficient than ever before, making them highly adept at using public comment periods and public engagement processes as a means of delaying and derailing infrastructure projects they oppose. That means they are likely to question any new limitations on public engagement in their legal challenges to permitted projects.

Being a convenient pay-for can cost an industry big.

Lawmakers seeking to pay for their ambitious suite of proposals are targeting a variety of industries to help foot the bill for IIJA. For example, lawmakers proposed billions in new Superfund excise taxes on a dozens of chemicals, critical minerals, and metallic elements. The superfund taxes are the result of a “dozen years” fight to “hold polluters accountable,” and represent just how quickly a heated but seemingly settled issue can become a convenient pay-for when legislators seek to fund other priorities. In addition to the superfund provisions, pharmaceuticals, cryptocurrency “brokers”, and others all play undesired roles in funding the IIJA’s many initiatives. Organizations in these sectors were probably surprised to learn they would be responsible for covering the costs of one of America’s most expensive pieces of legislation in history, and that puts them – and their allies on Capitol Hill – at odds with IIJA.

For some long-sought objectives, passing the bill will just be the end of the beginning, not the beginning of the end.

IIJA seeks to advance several long-sought objectives that have run aground in the past due to unsettled debates about how to implement those initiatives. Even if IIJA passes, these challenges remain. One such area is IIJA’s electric vehicle provisions, which set the stage for fighting among states and localities for charging infrastructure. Similarly, the bill proposes to invest billions to fund initiatives to ensure access to drinking water free of contaminants such as lead and PFAS, as well as to “expand Internet access” to underserved and low-income communities. However, in both of these cases, significant implementation hurdles, and major regulatory uncertainty means even if IIJA passages, the communities targeted by the bill, and those who serve them, are unlikely to be able to tap into the IIJA’s funds in the near term.

Get an information advantage with an exclusive copy of our eBook.

No matter how long or what form it takes, the infrastructure bill will affect countless companies and industries. So, chances are it will affect your organization, too.

Smart public affairs professionals understand that to achieve desired results, they need to anticipate what’s next and organize support ahead of time. That’s why competitive intelligence is the foundation for any successful public affairs effort.

To dig deeper and better understand what comes next in the never-ending Infrastructure Week, click here to download the full report. As you prepare for the big fights to come, you’ll be armed with the information advantage you need to win what matters.

 

Forbes Column: Are you prepared for a communications or reputational crisis?

It may not always seem it on the surface, but political and reputational risks exist in every organization. In his second column as a member of the Forbes Business Council, Delve CEO Jeff Berkowitz explains why organizations need to be prepared to anticipate and mitigate a communications or reputations crisis before it happens, because once the viral moment hits, it will be too late. Read on to learn more.

It’s the day you have long feared. You wake up to frenzied phone notifications and emails from colleagues and questions from reporters. Your viral moment has arrived. Someone said or did something — now or years ago — and your organization is under siege from the press, public, shareholders and policymakers.

Today, it’s no longer a matter of if your viral moment will happen, but when. That’s because companies are made up of people, and people make mistakes — both in their work and personal lives. Sometimes, no one does anything wrong at all, and the blowback is seemingly unjustified. No matter the circumstances, your viral moment is inevitable.

So, as the old adage goes, “by failing to prepare, you are preparing to fail.” That’s why organizations must invest time and resources before something bad happens. Smart companies are doing so by applying the same kind of competitive intelligence they leverage elsewhere in their business to build a public affairs toolbox that ensures they can respond quickly and effectively to any viral moment.

Continue reading at Forbes.com and find out the three steps public affairs leaders should take to ensure their organization that can withstand the headlines and scrutiny when crisis strikes.

From Europe, With Disapointment

Here’s what you need to know…

Contrasting himself with then-President Trump’s “America First” diplomacy, Joe Biden pledged during the campaign to strengthen America’s alliances to “address the most urgent global challenges.” Then-campaign advisor and now Secretary of State Antony Blinken said Biden’s foreign policy “means engaging the European Union instead … treating it like it’s an enemy,” promising Biden would “bring to an end [Trump’s] artificial trade war,” and “rebuild strong ties with the European Union.” As President-elect, Biden underscored these commitments in a call with European leaders, vowing to “deepen and revitalize the US-EU relationship.”

These overtures from the Biden campaign was met with resounding anticipation, with the former French Ambassador Gerard Araud calling the prospect of a Biden victory as “orgasmic” for Brussels. London-based Business Insider reporter Thomas Colson boldly prognosticated that a Biden win in 2020 would, “repair most of the damage Trump has done to America’s historic alliance with Europe.” There were high hopes for an end to so-called trade wars with Europe, as well as greater financial investments in Europe’s security.

Yet eight months into the Biden Administration, some analysts may be wondering if Biden is actually the most Eurosceptic president in recent American history. From reinstituting a travel ban on European visitors to a bungled Afghan departure and beyond, transatlantic tensions have intensified, reaching a crescendo with the controversial AUKUS submarine deal earlier this month. For organizations counting on stronger transatlantic ties, the unexpected turmoil poses unique challenges for both day-to-day operations and long-term growth. Indeed, even where the two sides of the Atlantic appear to be cooperating, the policy direction may hurt rather than help. Here’s what public affairs professionals need to know to help their organizations navigate the turmoil.

The Biden Administration’s action have not matched campaign promises – or European expectations – for a strengthened alliance.

BAD BAN: When President Joe Biden took office, he reinstituted a travel ban on visitors from most European nations, regardless of an individual’s vaccination status and with very few diplomatic or commercial exceptions, even though individuals from nearly 170 other nations could visit America, regardless of their country’s COVID-19 situation or vaccine campaign efficacy. After Europe lifted its restrictions on vaccinated or negative-testing American travelers, they expected the U.S. to reciprocate. In the several months that followed, President Biden wouldn’t budge, leaving European leaders furious and triggering a deluge of public statements from ambassadors, national leaders, and EU chiefs emphasizing how damaging the Biden Administration’s decision was to U.S.-Europe relations, international commerce, and the millions of families kept apart for nearly two years. While Biden finally ended the ban last week, the damage had already been done.

AFGHANISTAN FALLOUT: Despite broad international criticism, President Biden has remained defiant about his decision to end a U.S. presence in Afghanistan. The chaotic departure has infuriated European allies – in particular, France, Germany, and the United Kingdom – who have made long-term troop and financial commitments to support U.S. efforts in the region and expected Biden to strengthen, not surprise, the NATO alliance. In mid-August, the British Parliament held President Biden in contempt over the messy withdrawal, while Europeans openly discussed whether they can still rely upon the United States as a partner in global security. “There was a time when the U.S. talked about upholding the global order,” Sweden’s former Prime Minister Carl Bildt told the BBC. “But that is not the language now coming out of the White House. Expectations for a revival of the transatlantic relationship have been deflated. And one is resigned to an America that does it its own way.”

LAFAYETTE, NOUS NE SOMMES PAS DÉSOLÉS: The U.S.-EU relationship deteriorated further after the Biden Administration “torpedoed a multibillion-dollar French submarine deal with Canberra,” with the French insisting they were left in the dark about the incoming hit to one of its most prized industrial products until it became public. The French were so angry, in fact, that they recalled their ambassador from Washington to Paris – one of the deepest cuts in America’s longest alliance dating back to the American Revolution. Even as President Biden attempted to smooth things over by lifting the travel ban, Europe isn’t forgetting the slight anytime soon. The EU delayed the first session of the U.S.-European Trade and Tech Council planned for September 29th, and EU Internal Market Commissioner Thierry Breton suggested, “It is probably time to pause and reset our EU-U.S. relationship.”

WAIVER-ING RELATIONSHIP: These missteps in the U.S.-EU relationship are not recent. Back in February, the Biden Administration caught European officials by surprise when it endorsed efforts at the World Trade Organization to provide waivers on COVID-19 related intellectual property protections. Meanwhile, Speaker Nancy Pelosi (D-Calif.) is sending signals to London that, should Prime Minister Boris Johnson interfere with a Northern Irish peace process, it would hinder his ability to secure a post-Brexit trade deal. And allies in Central and Eastern Europe were disturbed by the Biden Administration’s abrupt decision to withhold sanctions against Russia’s controversial Nord Stream 2 pipeline project. With so many developments in a short eight months in office, it is no surprise European Council President Charles Michel expressed disappointment, noting Biden had declared, “America is back. … What does it mean … Is America back in America or somewhere else? We don’t know … We are observing a clear lack of transparency and loyalty.”

Transatlantic tensions add challenges for companies in this “new era” of U.S. diplomacy, but so does cooperation.

NAVIGATING A NEW ERA OF UNEXPECTED TENSION: Last week, President Biden gave a speech at the United Nations where he outlined his vision for a “new era” in U.S. diplomacy. Yet while the Council on Foreign Relations once lauded the President Biden and Secretary Blinken as “confirmed Atlanticists” eager to re-engage with Europe on initiatives like the Paris Agreement and World Health Organization, the economic picture remains unclear. The state of trade wars, once portrayed as relics of the Trump Era, are no longer the exclusive sign of the health of America’s economic relationship with Europe. For public affairs professionals, the Biden Administration has not turned out to be as predictable on transatlantic affairs as experts once hoped.

COOPERATION BRINGS COMPLICATIONS OF ITS OWN: Even areas where there is cooperation between the U.S. and Europeans do not bode well for companies. From anti-trust crackdowns to global minimum taxes to carbon reduction initiatives, this collaboration can be just as much a source of angst among companies that expected Biden to get the U.S.-Europe relationship “back on track.” Now, corporate public affairs professionals must juggle what’s happening with Washington, Brussels, and London – and Paris, Vienna, and Berlin, too. With this expansion in what developments in which jurisdictions can impact their interests, companies will need sharp competitive intelligence efforts to make sense of it all.

Under Pressure

Here’s what you need to know…

Texas’ recent law restricting abortion is not just the latest flashpoint in the long running culture war. It is also the latest example of the growing pressures and expectations facing corporations in an increasingly divided America. Until recently, companies and coalitions avoided public policy fights outside of those that affected their “bottom line.” Now, apolitical organizations are expected to become political, even when it seems to make little sense to get involved. For activists, inaction on any particular policy is essentially an endorsement of it, so they demand companies of all shapes and sizes take stands on hotly contested issues ranging from abortion access to election law, and vaccine mandates to gender identity issues.

As more companies decamp for more business-friendly policy environments in Republican-led “red” states, they are realizing that conservative policy isn’t limited to economics. That’s leading to added pressure from highly motivated, well-organized, and well-funded activists unwilling to accept anything less than complete and enthusiastic alignment with their point of view. For public affairs professionals helping companies navigate these competing pressures, this new reality means trying to get along with the leaders who enact policies that are good for business while placating the activists whose agitation isn’t, or finding ways to speak up for important values without blowback from elected officials.

To understand how we got here and why such challenges are unlikely to go away anytime soon, here’s what you need to know.

Organizations are emigrating to “red states” for pro-business policies.

RED STATES RISING: Many Republican-led states have enacted business-friendly policies to recruit top companies. These organizations are enticed by low tax rates, minimal regulations, and favorable labor laws, while their employees appreciate the quality of life and low cost of living. States like Texas, Tennessee, and Florida – all with no state income tax, affordable housing, and agreeable weather – have seen population booms and robust economic growth in recent years. Even tech organizations like Tesla, Oracle, and HP aren’t shying away from reaping the benefits of a conservative state like Texas, happy to intensify the blue dots in red states as they flock to cities like Austin. They’re also moving to communities like Atlanta and Salt Lake City, eager to take advantage of those states’ overall business climate while adding their own urban flair.

BLUE STATES BLEEDING: As America’s largest state and one of the world’s largest economies, California had lots to offer businesses. Yet its high tax rates, labor policies, abundant regulations, and other positions on a variety of issues are driving companies out. According to the Hoover Institution, CEOs rank California as having the country’s worst business environment. Years of these policies have led businesses to head to friendlier climes, including Florida, which “welcomed a net inflow of 4,811 ex-Californians between 2018 and 2019” alone, according to Patrick Gleason of Americans for Tax Reform. California is not alone, either. Like the snowbirds before them, New Yorkers are migrating south – this time for work. Big names like Goldman Sachs and Jet Blue are heading there, according to the Partnership for New York City, while financial firms like Elliott Management, Citadel Group, and Blackstone are moving tens, if not hundreds, of billions of dollars to the Sunshine State. Next door in New Jersey, 70 percent of CPAs have advised their clients to relocate elsewhere due to the region’s high cost of doing business, especially its tax rates.

Businesses are caught between competing political agendas.

THE FACTS OF (POLITICAL) LIFE: While corporations appreciate the benefits of operating in Republican-led states, conservative policy isn’t limited to economics. For some companies, they must take “the good” (an attractive business climate) with what they see as “the bad” (socially conservative laws). For some industries, the delicate balancing act is worth it. But, as state governments take an increasingly active role in addressing causes of social concern for their constituents, that’s becoming more difficult.

ACTIVISTS EXPECT A RESPONSE: In a hyper-politicized, highly digitized world, companies have to worry more and more about activist pressures from both within their own organizations and outside of them. Every issue, no matter how ungermane to their day-to-day activities, could be a lightning rod for activists’ fury. And now more than ever, these activists have plenty of time, resources, and motivation to keep the pressure on. Unlike C-suites, activists aren’t concerned with how a state’s economic policies are creating jobs or profit. Instead, their goal is to make life as difficult as possible for organizations with the wrong political opinions or who choose not to speak out. It doesn’t matter if you’re Jeff Bezos, running one of the world’s largest companies that employs millions and adds trillions to the economy or a small business owner trying to make ends meet. You’re still expected to speak out on immigration policy or whatever politically charged debate has crossed activists’ radar at a given moment.

BUT ACTIONS CAN CAUSE BACKLASH: Even with mounting activist pressure, organizations can’t simply advocate against GOP policies in states where they operate without facing blowback. When companies like Delta took a public stand against a new voting reform law passed by Georgia Republicans, lawmakers retaliated against the Atlanta-based airline by voting to strip them of tax breaks worth tens of millions of dollars annually. Peach State GOPers responded similarly in 2018 when they pushed back on Delta dropping its National Rifle Association discount by killing its jet-fuel tax cut that had previously saved the company about $40 million. And as a populism-tinged skepticism of corporations takes hold of many Republicans, a growing number are unwilling to sit quiet when companies, pushed by activists, take antagonistic positions against them.

Public affairs professionals need to keep two very different sides happy.

BEND UNTIL THEY BREAK: From apologies to executive shakeups, companies will keep bending to activist demands to protect their standing with consumers or employees. The question is how much. CEOs feel they have a responsibility to their stakeholders to speak out on controversial issues, and their voices matter, since they’re still among the most trusted leaders to impact social change. In some cases, activist-driven corporate pressure has changed laws or thwarted enactment of new ones. When North Carolina moved to enact a transgender bathroom bill, Deutsche Bank and PayPal announced they would no longer expand in the state, while the NBA threatened to cancel its All Star Game plans. The state ultimately relented.

THREADING THE NEEDLE: For many corporate leaders, the goal is to do just enough to show they have the right social opinions without upsetting elected officials they need to maintain a positive economic environment. As Texas implements its new abortion law, even typically vocal companies, like SalesForce, are carefully balancing their response, offering employees relocation bonuses to work from California but avoiding broader comments on the law. Meanwhile, rideshare companies are providing legal coverage for contractors, and one, Lyft, is contributing a sizeable donation to Planned Parenthood. And some tech companies are even starting abortion funds for their employees. Yet few, if any, have any plans to push back against the law, and none of them have decided to leave Texas. Meanwhile, some of the state’s biggest corporations – Apple, AT&T, Dell – are staying quiet.

PUBLIC AFFAIRS JENGA: Getting caught amidst the culture wars poses unique and growing challenges for public affairs teams. They must protect their firms’ economic interests while placating an increasingly-activated consumer and employee base who are sometimes not aligned with Republican values on social issues – not to mention a narrative-driven national media that has little sympathy for conservative policy initiatives. To stay out of the fray – or engage in a thoughtful way – public affairs professionals need the right insights to understand who all their stakeholders are and how to anticipate their expectations when issue debates get heated.

Forbes Column: Is your company culture a political risk or opportunity?

In his inaugural column as a member of the Forbes Business Council, Delve CEO Jeff Berkowitz notes that while we often think of political and reputational risks as coming from external forces, that is not always the case. The culture you build in your company can have a real impact on your company’s brand, reputation, and policy interests. Read on to learn more.

When Basecamp CEO Jason Fried shared a memo that prohibited political discussions at work, the headlines to follow caught the attention of many and were, arguably, every business leader’s nightmare. The news quickly spread across the internet, and even a member of Congress tweeted a response critiquing the company’s new policy. The uproar might not have been the intention, but in the weeks that followed, roughly one-third of the staffers at the tech firm accepted buyouts if they did not support the new restrictions. Among those exiting the company were the heads of customer support, marketing and design.

As someone who specializes in assessing political and reputational risks, this news immediately caught my attention. But, as a skeptical news consumer, I dug deeper to understand what was really happening beyond the flashy headlines and social media chatter. According to The Verge, the directive came in response to employee discussions that “centered on what is happening at Basecamp.”

So, what was causing such an employee uprising that the founders felt the need to shut down the discussion? Some employees sought a reckoning over a practice by the company’s customer service representatives to keep a list of users with names “they found funny,” some of which were Asian or African in origin. Employees pushed for more and broader discussions on diversity, inclusion and equity, and “after months of fraught conversations, Fried and his co-founder, David Heinemeier Hansson, moved to shut those conversations down,” the Verge reported. Outside the company, many piled on what they believed was the insensitivity with which the company treated important social issue discussions.

With the workplace — at Basecamp and beyond — caught in the middle of this fraught debate, there is an important lesson.

Continue reading at Forbes.com and find out the three fundamental practices business leaders should focus on to ensure their corporate culture that can withstand the headlines and scrutiny when crisis strikes.

The Chips Are Down

Here’s what you need to know…

Most Americans don’t think about the nation’s supply chain, but recently, they’ve discovered the consequences of its fragility. Shortages on important technology, like microchips, have driven up the prices of everything from cars to computers – if they’re even in stock – and experts predict it will take years for the marketplace to recover. While automobiles and the latest tech gadgets might be top-of-mind for the chip crisis, Goldman Sachs says the shortage has affected at least 169 industries, including the solar sector, household appliances, and even Fido’s grooming.

COVID-19 presented obvious challenges to America’s supply chain, but so, too, did lesser-known factors. These issues, unlike COVID, may persist for years, complicating efforts to replenish our tech materials supply and increasing costs for businesses and consumers. Public policy plays a key role in rectifying the problem, but many in and out of government are skeptical about getting involved. Here’s what industry public affairs professionals need to know.

The pandemic exposed weak links in our supply chain that will take years to fix.

CORONAVIRUS CHAOS: While the global marketplace screeched to a halt as public safety became the world’s foremost concern, consumer demand for products requiring microchips skyrocketed. Manufacturers did not anticipate the growth in electronic sales, which was the highest in a decade thanks to a new work-from-home reality, as well as limited recreational possibilities during lockdowns heightening demand for “home entertainment gadgets.” Meanwhile, car companies, concerned homebound Americans would curtail demand, canceled microchip orders, only to discover rapidly rebounding sales with pandemic-friendly road trips and an eventual return to normal. But, when they went to place orders for new microchips, they found themselves at the end of the line, behind more profitable sectors. Meanwhile, nationwide lockdowns shut down or reduced activity at key chip production facilities in places like Taiwan, responsible for around two-thirds the world’s microchips, and Malaysia, where a number of German and Japanese firms manufacture semiconductors and related electronic components.

MOTHER NATURE STRIKES SUPPLY CHAIN: The past year also saw “acts of God” disrupting the global microchip supply chain. Texas’s February 2021 winter storms forced Samsung, Infineon, and NXP to shut down their chip manufacturing due to lack of power. Then, a massive drought in Taiwan reduced global production, as chip manufacturers “require[d] voluminous quantities of water to churn out chips” amidst the island nation’s worst water shortage in 56 years. An enormous fire in March 2021 at Renesas, one of the world’s leading auto chip makers in Japan, only worsened the shortage, with executives estimating it would take up to four months to come back online. Just one month earlier, Renesas’s factory had sustained damage from an earthquake.

America’s microchip shortage isn’t merely another painful byproduct of the pandemic. It’s also policy consequence.

OFFSHORE TRADE OFF: While Western firms offshoring production of microchips has meant cheaper products for consumers, it also concentrated the supply chain in East Asia, leaving critical materials abroad. Today, Taiwan generates 65 percent of all global revenues for outsourced chips. Just one Taiwanese company, TrendForce, is responsible for more than half of the world’s semiconductor supply, including 80 percent of microcontroller units that direct car functions like power windows, braking, and headlights, and 92 percent of the world’s most sophisticated chips, including 1.4 billion smartphone processors. Since 1990, the U.S. share of global chip manufacturing fell from 37 percent to just 12 percent, even as half of all companies were headquartered in America. The Semiconductor Industry Association says that without significant government intervention, the U.S. will soon only maintain 6 percent of the world’s chip manufacturing capacity.

CHINA READIES FOR DOMINATION: In December 2020, America announced sanctions on China’s largest chip manufacturer over links to the Chinese military. Chinese firms responded by stockpiling chips for their own use – a sign of what looms on the horizon. The Semiconductor Industry Association warns China is on track to become the world’s largest microchip manufacturing location by 2030. An American adversary, policymakers see Chinese domination in the tech market as not only an economic threat to the U.S., but also a major security concern. Today, China controls 40 percent of the world’s back-end manufacturing, and while the country currently lags in new innovation, it is increasingly adept at copying the works of others and has invested heavily in building a domestic semiconductor industry.

President Biden and Congress want to help, but some legislators and activists aren’t so sure industry deserves it.

LEGISLATION WITH LEGS: In June 2021, the U.S. Senate passed with a large bipartisan majority the United States Innovation and Competition Act (USICA), a $250 billion bill “designed to boost U.S. semiconductor production.” It contains the CHIPS for America Act, allocating $52 billion for domestic semiconductor manufacturing, including $2 billion for “legacy chips” found in the most common automobiles. U.S. Secretary of Commerce Gina Raimondo estimates that between 7 and 10 new semiconductor plants will be built as a result of USICA’s passage, generating at least $150 billion in private sector investment. The legislation awaits action in the U.S. House of Representatives.

BIDEN WEIGHS IN: After a 100-day review, the Biden Administration offered its list of recommendations for fortifying the semiconductor industry. In its brief, The White House argued the “private sector must take the lead” but said the U.S. government can “facilitate the information flow between semiconductor producers and suppliers and end users.” President Biden says he wants urgent legislative action taken, calling on American corporations to bring their manufacturing home and arguing it would be better for jobs and national security if they did. His administration has also begun mediating talks among chipmakers and the industrial sectors suffering from the shortages, with officials insisting that new transparency measures will make things easier. But, industry leaders say they’re still frustrated by the lack of details or deadlines for production.

SKEPTICS ACROSS THE IDEOLOGICAL SPECTRUM: While industry embraces legislative proposals to address the problem, there are activists raising concerns – and lawmakers are paying attention. Sen. Bernie Sanders (I-Vt.), who voted against USICA, accused lawmakers of giving a bailout to offshoring manufacturers. Environmental activists also expressed worries, complaining that any new manufacturing would lead to more carbon emissions. On the right, Sen. Pat Toomey (R-Penn.) said he opposed the legislation because it was Chinese-style central economic planning, while Sen. Rick Scott (R-Fla.) argued America could not afford more debt. Media outlets and think tanks also spoke out against it, with Reason arguing it was a “massive handout” and the Hudson Institute explaining it would put America at a disadvantage in the long run. Even the business-friendly Wall Street Journal is skeptical it would make a difference.

While some lawmakers and Biden officials want to encourage domestic investments to help address challenges causing chip shortages, others in and out of government are skeptical – upset by industry offshoring in the first place, concerned about industry’s environmental impact, and disinclined toward industrial policy and corporate subsidies. Public affairs professionals will have to understand and navigate this scrutiny to ensure the industry can leverage the policy opportunities to address the shortages and satisfy consumer demand.

The Great Compromise May Be Dead

Twenty years ago, a newly inaugurated President George W. Bush faced an evenly split Senate, a slim House majority, and volatile public sentiment after a hotly contested, divisive election result. Securing legislative victories would require bipartisanship and compromise, American traditions dating as far back as The Great Compromise – negotiated over the 4th of July weekend of 1787 – that shaped the U.S. Constitution.

Today, President Joe Biden faces a very similar political landscape. Yet the media, who once exalted compromise as a virtue, now treats it as a deterrent to progressive aims. This new narrative has emboldened the most leftward partisans of the Democratic Party, who are convinced they enjoy a mandate that is not evident in the makeup of this Congress or the voting coalition that elected Joe Biden.

For companies and industries seeking compromises borne out of bipartisanship to advance their policy priorities, this landscape is fraught with challenges. Central to those challenges is the question of whether bipartisan compromise can survive in the age of polarized 24-hour news and social media punditry. If it cannot, what does that mean for public affairs professionals trying to navigate Washington’s morass for their organizations and clients? Here’s what you need to know.

The media, who once celebrated moderates as mavericks, now portray them as roadblocks to progress.

Throughout most of political history, the public and the press have expected elected officials to set aside ideological differences to deliver real results for their constituents and the country. When government is closely divided, this bipartisanship often takes the form of opposition to the majority’s policy proposals and seeking to temper its more partisan impulses.

President George W. Bush discovered this reality firsthand as he tried to advance his agenda. At that time, the media cast his attempts to score legislative victories as extreme while pushback from his own party was sensible, civic-minded, and even brave. When Vermont Senator Jim Jeffords switched his political affiliation from GOP to Independent, he earned glowing media coverage that warned Republicans their pursuit of GOP priorities was alienating moderates. Meanwhile, Sen. John McCain (R-Ariz.) garnered media favor for his independent streak that imposed political obstacles on the new Republican president.

For the past two decades, the media have openly pined for a “radical center” built by the “moderate middle” of “politically homeless” who they say simply seek solutions to the problems facing our country. They heaped praise on the various bipartisan “gangs” who crossed party lines to solve big problems facing the country, and in 2020 argued disaffected Americans eschewed the divisive tone of the Trump Administration for then-candidate Biden’s message of unity and a return to normalcy.

Then Democrats’ narrow 2020 electoral victories left the fate of President Biden’s agenda in a 50-50-split Senate with two moderate Democrats: Sen. Krysten Sinema (D-Ariz.) and Sen. Joe Manchin (D-West Virginia). Once revered as honorable and constructive, moderation, standing athwart the Democrats’ agenda, is now reviled as obstinate and regressive. When Sen. Manchin indicated he would not support progressives’ proposed overhaul of federal voting laws, one liberal commentator accused him of upholding “white supremacy” as a “cowardly, power-hungry white dude,” while The Washington Post’s Eugene Robinson called him a “villain” for refusing to eliminate the filibuster. Sen. Sinema has endured similar derision, with The New York Times lambasting her for standing in the way of “major legislation,” arguing that while her predecessors took courageous stands in the tradition of compromise, Sinema merely “delights in trolling” her fellow Democrats, void of any discernible principles.

The media keeps advancing the narrative of a progressive mandate, but Congressional math and Biden’s electoral coalition suggest otherwise.

This new media depiction of bipartisanship as a bug, rather than a feature, of democracy is built on the premise that progressives have a governing mandate from voters. Yet that is simply not the case. The U.S. Senate is split evenly, while Democrats have the slimmest House majority in two decades – just nine seats. While Biden won the presidency, many Democrats considered the 2020 elections a “failure,” with voters who rejected President Trump also rebuffing candidates who promoted the Democrats’ most leftward policies.

Critics say the media live in a progressive social media bubble that inoculates them from genuine voter sentiment, even within the Democratic Party itself, with election analysts noting platforms like Twitter are largely unrepresentative of mainline Democrats. That bubble gives “Very Online” reporters and commentators a poor understanding of what actually moves voters and those who represent them. This warped view of electoral reality makes it harder for the agenda-setters of the political media to accurately assess the landscape in front of them. Indeed, the moderates they decry, like Sens. Sinema and Manchin, actually better mirror the overall electorate (as well as a significant swath of Democrats) than the progressive voices the media regularly insists Biden must appease.

Industries hoped Democrats’ slim majorities would foster productive bipartisanship, but they got big demands from progressives instead.

The media narrative of a progressive mandate may not match up to governing reality, but it has not stopped liberal Democrats from pushing their party ever leftward. Their policy wish list is long and it is, by most accounts, far outside the political mainstream. These days, they are advocating for major legislative overhauls like the Green New Deal and student loan cancellations. While the Congressional Progressive Caucus promises “sweeping, transformative change,” it seems that neither their Democratic colleagues nor the voters are seeking such extremes.

Neither is the business community. When a governing majority is incredibly slim, as it is now, industries desire the productivity and reliability that bipartisanship and moderation provide. In contrast, intense political polarization often creates instability that industries try to avoid. No matter who is in power, there are still major policy problems and big legislative priorities that businesses need addressed.

Look no further than the full court press from public affairs professionals across a variety of industries on the infrastructure spending package. As we noted during the transition, this issue could “be Groundhog Day for obstruction or Ground Zero for compromise,” depending on how the parties approached it. While industry representatives are pushing moderates on both sides of the aisle to find a compromise, they more overcome an increasingly antagonistic media tone toward the very lawmakers whose support is crucial for success. With significant policy challenges on topics ranging from health care to energy, businesses are hoping that Democratic leadership and The White House will ignore calls from progressives to abandon bipartisanship in exchange for advancing an activist-oriented agenda. To convince them to do so will require challenging the accepted wisdom in the media and overcoming widely-reported (mis)perceptions of reality.

Breaking Up Is Hard To Do

Here’s what you need to know…

As the Biden Administration adds a “global minimum corporate tax rate of 15 percent” or higher to its plans to raise taxes and increase regulations, the business community should be able to turn to its traditional allies among Republicans to fight back. However, while Biden is unlikely to win Republican votes for higher taxes, in today’s political environment, the GOP may not mount the full-throated defense upon which the corporate community has depended in the past.

As Senator Rick Scott (R-FL), who chairs Senate Republicans’ campaign committee, warned companies last month, “There is a massive backlash coming. You will rue the day when … Republicans will take back the Senate and the House.” Indeed, Scott’s “day of reckoning” may not wait until the 118th Congress. Already, companies must contend with Senator Marco Rubio’s (R-FL) “Common Good Capitalism,” Senator Josh Hawley’s (R-MO) anti-trust initiatives, and other populist shifts among Republicans on core business policy interests like trade and tariffs and drug prices.

So, how did we get here, and what does it mean for companies and their business and policy objectives? Here’s what public affairs professionals need to know to help their organizations navigate this political realignment.

Under pressure from progressives in and out of their firms, companies have gone too “woke” for Republicans.

“For decades,” The New York Times recently reported, “business leaders have been able to count on Republicans … to support core policy priorities such as low taxes, reduced regulation and free trade. … But in recent years, that compact has begun to fracture.” Pressure from social activists and activism-oriented employees has led businesses that once avoided the political fray to take controversial stands on matters far beyond their typical purview, alienating conservative Americans and drawing ire from the lawmakers who represent them. For companies, the principles in question seem straightforward – every vote should count, the lives of African Americans matter, and so on – but behind these shared principles are expectations that firms will endorse divisive, partisan solutions as a result.

Every acquiescence, even if made in earnest agreement, may at least temporarily redirect activists’ attention elsewhere, but it also sparks objections from conservatives. These days, Republican lawmakers feel antagonized by what they view as “Big Business” needlessly provoking their voters by engaging on social issues. From Nike pulling its Betsy Ross shoes at the behest of NFL-star-turned-social-activist Colin Kaepernick to social media companies “de-platforming” former President Donald Trump to an open letter from major corporations opposing Republican-led election reform laws, Republicans increasingly see Corporate America as fundamentally at odds with the GOP. Nor does it help that as corporations cut off donations to many Republicans, key business groups get little help from Democrats they backed in the last election.

From TARP to Trump, the GOP base has been increasingly questioning its elected officials’ accommodation of corporations with divided loyalties.

For generations, Republican lawmakers have been reliable partners for business interests as together, they advanced the ideals of limited government, lower taxes and regulatory restraint. These had long been core tenets of conservatism, and these policies served the business community well. However, the taxpayer-funded bailouts of “Big Business” during the 2008 financial crisis led an increasing number of conservatives to question whether or not the interests of Corporate America aligned with their own. This skepticism built on years of automation and outsourcing erasing certain types of American jobs.

These trends have led to an intensifying flirtation with populism, an ideology that up until recently had gained more traction among Democrats than Republicans. While industry analysts may have hoped populism would be on its way out with the Trump Administration, eager GOP would-be successors are lining up for their turn at the anti-corporate bully pulpit. Some, such as Sen. Rubio, argue for a policy approach that “recognizes that what the market determines is most efficient may not be best for America.” These would-be successors’ proposals include protectionist measures intended to help American workers but that could make it more difficult for U.S. companies trying to compete globally, such as trade barriers like Buy American and tariffs, industrial policy for strategic industries, and greater antitrust measures. Such proposals are becoming more accepted among GOP voters, especially “traditional conservatives” nostalgic for Main Street America of yesteryear and increasingly skeptical of large corporations.

This ongoing realignment puts companies’ business and policy objectives at serious risk across the political spectrum.

In 2021, Americans seem to find little room for agreement in politics, but they do share concern over the sweeping influence of “Big Business.” For politicians in both parties, this angst is all the permission they need to push for radical transformations in economic policy. In addition to the shifts on trade and tariffs seen under the Trump Administration, this realignment even has some conservatives musing about the virtues of private sector unions, especially when they’re pitted against activism-minded executives at companies like Amazon.

The most noticed shift in policy, however, may be Republican interest in antitrust measures once a tool generally preferred by Democratic lawmakers who oppose big corporate profits. In addition to toying with the idea of using anti-trust rules against Major League Baseball following their decision to relocate the 2021 All Star Game after Georgia passed new election reforms, some prominent Republicans, including Sen. Hawley, are joining with Democrats eager to break up Big Tech. This major philosophical shift for Republicans could create greater obstacles to mergers and acquisitions, an important consideration as the Biden Administration nominates – and a bipartisan panel supports – antitrust crusader Lina Khan, to serve as a commissioner of the Federal Trade Commission (FTC). While she has previously focused her aim on Big Tech, her activist résumé is ringing the alarm bells across all industries.

From taxes and tariffs to tech and trust, the ground is shifting in Washington for public affairs professionals representing companies and industries, which now face greater headwinds from both political directions in Washington. At the very least, it means that the business community can no longer rely upon a unified GOP to stand strong for their interests in all cases. At worst, it means that Democrats and Republicans could find some room for bipartisan agreement at the expense of “Big Business.” Either way, companies will need to dig deeper to understand the new landscape.

The Employee Activism Revolution

Here’s what you need to know…

As the recent public debate over Georgia’s new voting law makes clear, American CEOs and corporations have been increasingly willing to make their voices heard on hot button social and political issues. While corporate activism is not a new phenomenon, the forces driving that activism have shifted to inside many firms, with employees demanding their bosses speak out and take actions, even if it hurts the bottom line.

With corporate giants such as Delta and Coca Cola issuing public statements disavowing Georgia’s new voting laws and Major League Baseball relocating this year’s All-Star Game from Atlanta, it is worth considering how we got here and what it means for public affairs professionals advising companies and industries. Especially in this hyperpolarized political environment, it is important for CEOs and companies to remember that while they may believe they are signaling the right thing, they very well may be widening the divide instead of closing it. Here’s what you need to know to navigate these debates effectively.

We’ve been in a new age of activism for a while. Companies are just catching up.

We’ve previously written about how activism “has become increasingly professionalized, digitized, and globalized.” While these efforts are not new — see the Keystone XL pipeline opponents who ringed The White House perimeter in 2011 — they increased significantly during the Trump years, with heightened expectations that companies and their leaders would weigh in on issues of the day. Companies today are meeting these expectations more than in the past. As the workforce continues to grow younger, companies must align their actions with a set of shared values and clear purpose if they hope to attract top talent. According to one survey, over three quarters of millennials strongly consider “a company’s social and environmental commitments when deciding where to work.” This rise in employee scrutiny is pushing employers to take stances on political issues they once avoided, creating new political and reputational risks even as they are intended to do societal good. Employee expectations have joined media and advocacy group pressures in thrusting companies into the political spotlight on issues ranging from social justice to the environment and, most recently, voting rights in Georgia. Not surprisingly, public affairs professionals are feeling the pressure, seeing an increase in senior executives’ interest in political and policy issues farther afield from core business needs than ever before.

CEOs are the most trusted leaders in public life. That comes with expectations.

Private businesses have become the most trusted institutions in the United States as Americans have become increasingly divided by politics. That means businesses and their CEOs can play a pivotal role in bridging this partisan divide and rebuilding the public’s trust in societal institutions. A recent study by Edelman found that 54 percent of Americans trust business more than politicians and the media. 86 percent of the respondents expect CEOs to speak out on societal challenges and 68 percent of respondents believe “CEOs should step in when government does not fix societal problems.” In fact, a Morning Consult survey found that despite growing concerns over censorship in the digital public square, Americans even trust big tech companies, such as Amazon and Google, to “do what is right” more than they trust government officials, the news media, and police officers and teachers.

However, CEOs must be aware of the risk associated with their activism. In 2018, we warned that “taking a stand inherently attracts and alienates customers depending on their view of that stance, meaning that companies need to fully understand their customers and audience before starting any corporate advocacy.” The NBA learned this reality first hand last year as it saw its television ratings plummet amidst a league wide social justice movement that weaved politics with the sport. Commissioner Adam Silver said this year “there will be somewhat of a return to normalcy,” in hopes of re-attracting fans who very well may agree with the messaging but want to keep politics out of sports. More recently, in response to Delta’s statements regarding Georgia’s new voting bill, Republicans in the Georgia House of Representatives voted to strip the airline of a tax break worth tens of millions of dollars, while Congressional Republicans have called to revoke Major League Baseball’s antitrust protections over MLB’s actions on the same issue. Whether either of these actions come to fruition, it signals to companies that weighing in on issues that divide Americans might come with a cost to the company.

Employees are engaging in their own advocacy — in and out of the office.

A recent survey found that nearly 40% of employees consider themselves “social activists” who are willing to speak out against their employers on controversial political and societal issues, even if these issues are totally unrelated from their employer’s business or industry. In January, we got a glimpse of how this willingness may evolve. Employees at Google successfully formed a minority union aimed at giving “structure and longevity to activism at Google.” This union intends to be more focused on wielding political influence than traditional union work regarding conditions of employment. The union formalizes employee pressures that have been mounting for some time. In 2018, for example, thousands of Google employees banded together in opposition to a drone-related contract the tech giant had with the Pentagon. Under this pressure, Google allowed the contract to expire the following year. Similarly, in early 2019, hundreds of Microsoft employees signed an open letter protesting the company’s $500 million contract to supply the U.S. military with augmented reality headsets.

Internal employee activism is not unique to the tech industry. In 2019, hundreds of Wayfair employees staged a walkout in opposition to the company’s decision to sell furniture to a migrant detention center and later that year, Nike employees walked out of the company’s headquarters demanding the company offer more support to female employees and athletes. When Georgia was considering a “heartbeat” abortion law, then CEO of Disney, Bob Iger, said that the company would have to reconsider future filming in the state, saying, “I think many people who work for us will not want to work there, and we will have to heed their wishes.” Iger’s sentiment is increasingly shared by corporate executives, with Judith Samuelson, director of the Aspen Institute’s Business and Society Program, predicting more “companies will begin to embrace employees as an early warning system on risk and reputation.”

CEOs need to weigh all sides before taking a stance

While showcasing purpose can strengthen a brand, companies must tread cautiously. Every action has a reaction, and in today’s highly polarized, highly attuned political environment, engaging without fully understanding the facts and the landscape can cause as much or more of a backlash than not speaking out. To stay ahead of this, public affairs professionals and their organizations must first be prepared for today’s fast moving environment by knowing their vulnerabilities and understanding the context of the issue before weighing in. While this trend of corporate activism does not appear to be slowing down, companies must be mindful that the best way forward is to remain consistent with their values and close to their stakeholders in order to avoid a full-blown public affairs crisis.