The dream of sponsors of the Beijing Olympics to reach out to a billion Chinese consumers is turning into a public relations nightmare

Corporate sponsors of the 2008 Beijing Olympics are facing a tough challenge to protect their own reputations as a worldwide campaign breaks out against the host country. An intensifying campaign against China’s crackdown on ethnic protests in Tibet, the jailing of activists, suppression of human rights and its role in Darfur is calling on sponsors to act.

Hoping to increase their share in the huge market of China, companies forked out record sums – some of them paid $100 million – in hotly contested bidding to become official partners for the Beijing Olympics. The August games are being touted as the biggest sporting event ever.

Top sponsors will be collectively spending an estimated $2 billion on Olympics-related promotions in China alone in what marketers call “360-degree brand engagement” covering television, print, radio, internet, outdoor and mobile phone advertising, and event sponsorships.

Major multinational sponsoring companies for the Beijing Olympics include Coca-Cola, General Electric, Visa International, McDonald’s, Johnson & Johnson, Adidas, Omega, Volkswagen, Haier, Eastman Kodak, BHP Billiton, Lenovo, Panasonic and Samsung.

The Beijing games had promised to offer an eye-popping level of exposure for partner companies. An estimated four billion people will tune in at least once to watch the games on TV, with a cumulative audience, counting every time a viewer tunes in, expected to reach 40 billion. In comparison, the 2006 football World Cup in Germany had an audience of 29 billion.

The most prized catch for Olympic sponsors will be access to China’s 400 million urban consumers. Media investment firm Group M estimates that advertising spending in China will rise 29 per cent this year to $31 billion, largely riding on the Olympics.

But a surprising turn of events in Tibet, triggered by China’s brutal crackdown on Tibetan monks and demonstrators that began in March, has caught sponsoring companies off-guard, spoiling the party. Suddenly, being associated with an otherwise lucrative Olympics has become a burden. Sponsors’ glitzy advertisements that were supposed to win more customers have become a reminder of their association with a Chinese government that apparently cares little for human rights.

Running the gauntlet

Brands already have campaigners asking them to explain how their human rights policies are consistent with supporting the event host, and are even urging them to withdraw sponsorship.

The most immediate threat for brands is expected from the activists trying to use the Olympic torch relay to make their point, as witnessed at its launch in Greece and during legs in Istanbul, London, Paris and San Francisco. Tensions have been expected to peak when the torch is taken to Mount Everest, passing through Tibet, a gesture that pro-Tibet groups call provocative. Boycotts of ceremonies, heavy security arrangements and images of activists scuffling with police, violence and arrests have resulted in regular negative publicity for China, and the sponsors.

This is all bad news for Coca-Cola, Samsung and Lenovo – the three sponsors of the torch relay. A group of 153 pro-Tibet organisations has written to Coca-Cola chief executive Neville Isdell asking him to withdraw from sponsorship and to request the organisers to drop Tibet region from the relay route. But Coca-Cola spokeswoman Kelly Brooks told Ethical Corporation: “We remain committed to supporting the torch relay, which provides a unique opportunity to share the Olympic values of unity, pride and inspiration with people all over the world.”

Samsung cancelled a press conference, in Beijing, about the torch relay in March days before the launch in Greece, later saying that it “wanted to stay away from politics”.

Crisis management

Corporate insiders say that sponsoring companies are scrambling to put together crisis-management teams and articulate strategies to save their reputations from any potential battering. However, almost three weeks into the crisis, at the time of writing this report, most sponsors do not seem ready to speak on the matter.

Foreign business lobbies in China also refuse to offer any views. Ian Crawford, director of the British Chamber of Commerce in Shanghai, says: “The chamber has a strict policy of not making any comments on political issues relating to China.”

The only corporate response to our repeated requests came from Coca-Cola. Kenth Kaerhoeg, Coca-Cola’s Hong Kong-based group communication director, says: “The Coca-Cola Company joins others in expressing deep concern for the situation on the ground in Tibet and the ongoing violence and tragic situation in Sudan. While it would be an inappropriate role for sponsors to comment on the political situation of individual nations, we firmly believe that the Olympics are a force for good.”

Jem Bendell, founder of Authentic Luxury Network, which advocates social and environmental excellence in luxury brands, says: “High-end brands like Omega [the upmarket watchmaker and the games’ official timekeeper] must recognise that their high profile means they must take a stand on issues that matter to their consumers and the celebrities they work with. To say that business is not politics displays either ignorance or cowardice and is an untenable position.”

Human rights groups point out that affluent Asian consumers are increasingly growing intolerant of unethical corporate behaviour and that there is discontent within China. Roland Watson, director of human rights advocacy group Dictator Watch, says: “The companies have willingly placed themselves in a public relations trap. The only choice they have at this point is to find some way to speak up for human rights, or to bail, to cut their advertising during the games.”

Silence not golden

Observers say that sponsoring companies are in a tough situation. If they say anything against the Chinese action in Tibet or Darfur or the crackdown on human rights activists in the mainland, they will be risking their future in China. If they say nothing, they risk a backlash in the global market. So, is maintaining a calculated silence a good strategy for the sponsors?

“The experience of companies keeping mum is that there is inevitably a backlash,” says Malini Mehra, chief executive of the Centre for Social Markets, a UK-based non-profit organisation for promoting sustainable development and human rights. “Look at the case of Tata Motors in Singur. The company thought that discretion over the land acquisition controversy was the better part of valour. This backfired on them, with even corporate sympathisers questioning their judgment on this,” she observes.

Mark Goyder, director of Tomorrow’s Company, a UK-based responsible business think tank, agrees that brands should be clear in their communications around the games, saying: “The best way for sponsors is to exercise their influence, in private, and then explain to stakeholders that they are using their influence responsibly and they are committed to human rights.”

The president of a multinational PR firm in Hong Kong whose client list includes two sponsors confirmed that companies are working behind the scenes to encourage the Chinese authorities to do something to avoid further crises.

Another PR executive in Hong Kong revealed that on the private advice of key sponsors, the Chinese government has decided to hire a global PR firm to improve its image. Chinese officials have reportedly interviewed top British and American PR firms and a final decision is awaited. Sources say the main task of the agency would be to “correct western media’s bias toward China”.

However, corporate responsibility experts warn that a PR offensive can backfire if the real situation on the ground does not change.

Build a firewall?

PR strategists working with sponsors say multinational companies are more tempted to scale down their Olympics exposure in home countries and concentrate on the Chinese market. UK Business in the Community director, and Ethical Corporation columnist, Mallen Baker sums up their view, saying: “To limit the damage, the sponsoring companies will now focus the bulk of their profile within China itself, hoping to maximise the benefits and minimise the pain.”

But sponsors will not need to cut back advertising in western markets to limit the damage of their association with the Biejing games, argues another regular contributor to this magazine, Chandran Nair, founder and chief executive of Global Institute for Tomorrow, a Hong Kong-based organisation advocating sustainable development in Asia. He says: “There is no reputational risk for sponsors. It is a myth. The average global consumer is pretty mindless and will continue to consume irrespective of what companies do.”

Observers point out that there has not been any serious call so far to boycott products of the Olympics sponsors. Some even believe that violent protests during the torch relay will eventually turn off the masses who may view it as “over-politicising” the Olympics, and worse, as routine China-bashing by western media and campaigners. Singapore Global Compact’s executive director Thomas Thomas says: “Sponsoring companies need to convey to all stakeholders that they are sponsoring a sporting event and not supporting the position of the Chinese government.”

Clive Wright, a former director of Visa International in Hong Kong and now a brand consultant in Singapore, agrees, saying: “The best way to handle this is to rise above the storm by invoking the spirit of the Olympics. They are sponsoring the games, not the host.”

Activists argue that companies do have a responsibility to use their influence to protect human rights. Responsible companies should rise above commercial interests and speak up against suppression, according to Renee Xia, the international director of Chinese Human Rights Defenders. She says: “Companies sponsoring the Olympics have responsibilities to promote and protect human rights as outlined in the UN Global Compact principles.” She even suggests that the Olympic sponsors should set up a human rights fund for China, independently administered by human rights experts, to promote and protect human rights in China.

A similar move was made by Yahoo in March, when it announced the Yahoo Human Rights Fund, headed by a famous Chinese dissident, Harry Wu, to aid dissidents jailed in China for posting human rights views on the internet. Yahoo took the step after being accused of revealing the identities of dissidents to Chinese authorities leading to their jailing.

Sponsoring companies have difficult choices. They have paid huge sums for rights to global marketing. Limiting that marketing to China seems like a safe last resort, but will undermine their investment. Meanwhile, the moment can be seized by their competitors back home.

Speaking up for human rights, as campaigners want, could now be very risky if the Chinese authorities took it as a “loss of face” and retaliated by making life in China difficult for the companies.

For the moment, sponsors do not seem to be in danger of a consumer backlash. But their association with the games is a major risk to their credibility as responsible companies, and they risk revealing that human rights run in second place behind profits.

Beijing Olympics 2008 in numbers

· China is spending $2.1 billion on the Olympic Games.
· 10,500 athletes will compete for 302 gold medals.
· 550,000 tourists are expected during the Olympics.
· 2.4 million domestic spectators are expected.
· More than 30,000 foreign press reporters will provide media coverage.
· An estimated four billion TV viewers will watch the games.
· More than 50 corporate sponsors have dug deep, the highest number ever for the Olympics.

Sources: Beijing Olympics official website, Beijing Tourism Administration Report, Xinhua and independent estimates.

Olympic torch relay – the facts

· The Olympic torch relay is themed “Journey of Harmony”.
· The torch has so far run into trouble from anti-China protesters in Olympia, Athens, London, Paris, San Francisco, New Delhi, Bangkok, Canberra, Nagano and Seoul.
· Coca-Cola, Samsung and Lenovo are sponsoring the 130-day relay covering 137,000km.
· Estimated carbon footprint of the torch: 52 tonnes of CO2.
· More than 21,000 torchbearers have been selected from around the world.
· Lenovo designed the Olympic torch.
· Coca-Cola has recruited 100 environmental activists to serve as torchbearers.
· Samsung will be distributing Samsung flags in all the 134 cities along the Olympic torch route.
· The Olympic flame will also pass through Tibet, an idea opposed by activists.
· A group of 153 Tibet organisations has written to Coca-Cola, demanding it withdraw sponsorship of the torch relay.
· Taipei was taken off the torch route after objections by Taiwan.

Sources: Beijing Olympics official website, Samsung, Coca-Cola, Lenovo, Canada Tibet Committee and media reports.

Potential flashpoints

Apart from pro-Tibet protests and the Darfur campaign, other concerning moments for brands worried about tensions in China are:

· Burma

Burma’s military junta is holding a referendum during May on the proposed new constitution amid growing unrest. Another crackdown on pro-democracy groups there would instantly be linked to China, which supports the junta. And the opening day of the Olympics, 8 August, coincides with the 20th anniversary of a major student uprising in Burma.

· North Korea

North Korea, which gets crucial support from China, is flexing its muscles against the new government in South Korea, which is tough toward Pyongyang, by provocatively test-firing missiles, deporting South Korean officials and even threatening a war. Any escalation there will further put China in a tight spot.

· The Uighurs

The Uighurs – ethnic Muslim minorities in Xinjiang – are fighting for religious freedom and civil rights and are now calling for an independent Islamic state.

Media circus

A large presence of foreign media – a temporary concession allowed by the Chinese government to comply with Olympics hosting conditions – could be a potential threat as journalists would be tempted to cover human rights issues. The recent jailing of human rights activist Hu Jia was, in fact, triggered by his allegations against the government made in interviews with foreign media.

Companies, such as Olympics sponsor Adidas, with large supply chains in China can expect greater scrutiny of working conditions in their factories by foreign media. Any scandals will be very costly for corporate reputation.

Chorus of criticism

· “The high-level sponsors are inextricably tied to the games and the best way to preserve their reputation is to be strong on human rights. They should publicly articulate their human rights policies and how they will be applied to the games.” – Arvind Ganesan, Washington-based director of Human Rights Watch

· “To minimise the risks to their reputations of being linked to an Olympic Games marked by serious human rights violations, the sponsors should raise their concerns over China’s human rights situation with both the Chinese authorities and the International Olympic Committee.” – Amnesty International Asia-Pacific spokesman Howard Hudson

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