As most of the Public Affairs professionals know well, lobbying is actually mutually beneficial, and a fair and even transparent way to provide decision-makers with accurate and timely information to base their decisions on real data, and therefore make fact-based decisions. Nevertheless, according to a recent study by Benjamin Egerod, an assistant professor at Copenhagen Business School, the vast majority of companies do not engage in lobbying activities.
A small pond (with big fish)
In his recent article "The Surprising Reason Most Firms Don’t Lobby", Egerod examines why approximately 90% of publicly traded firms in the United States abstain from lobbying activities. Egerod identifies a significant information gap as the primary deterrent. According to his findings, many firms lack the necessary knowledge to navigate the complex and opaque market for lobbying services.
Furthermore, managers often focus on core business operations and may be only vaguely aware of lobbying as a strategic option. Additionally, the unpredictable nature of the policymaking process makes it challenging to assess the potential returns on lobbying investments. This uncertainty leads firms to avoid engaging in lobbying, even when potential benefits are substantial.
Sticking to the familiar is a risky business
Egerod's research further indicates that firms heavily rely on established behaviors; those without prior lobbying experience are unlikely to start, regardless of political changes that might impact them. Conversely, firms are more inclined to begin lobbying if they can learn from the practices of other companies.
However, political lobbying should be an essential component of long-term risk management, as it enables organizations to anticipate and influence regulatory changes, create a stable operating environment, and build valuable relationships with key stakeholders – as a quite recent article on NATURE (Timbate et al., 2024) shows. By investing in lobbying, public affairs, and advocacy work, organizations can effectively manage political risks and ensure their long-term success.
The lack of participation results in a skewed playing field, granting disproportionate influence to the minority of firms that do engage in lobbying. Egerod suggests that addressing these information barriers could encourage more firms to participate in lobbying, leading to a more balanced representation of interests in the policymaking process. And that’s what SAVOIRR is here for!
Struggling to get started? We’re here for you!
We at SAVOIRR know that lobbying is an integral part of policy making, and the more versatile voices the decision-makers hear, the better quality legislation we get. That’s why we are happy to help you get started in your lobbying journey, by bridging that information gap through our extremely easy-to-use platform, providing you with millions of documents, files, legislative processes and stakeholders - not to mention all the tools you need to manage the efforts internally.
So here’s a recap why your company should engage in lobbying:
- Voice in Policymaking: Without lobbying, firms risk being excluded from discussions that shape their industry. By engaging in lobbying, they can ensure their perspectives are heard and considered by policymakers.
- Shaping Regulations and Policies: Lobbying allows companies to directly influence legislation and regulations that affect their industries. This can help firms ensure that new laws or policies are favorable to their operations or mitigate the risk of adverse regulatory changes.
- Competitive Advantage: Companies that lobby can secure advantages over competitors by shaping rules in ways that align with their strategic interests, potentially making it harder for rivals to compete on an equal footing.
- Mitigating Risks: By engaging in lobbying, firms can anticipate and address potential regulatory threats before they become significant challenges. This proactive approach can help reduce uncertainties in the business environment.
- Securing Resources and Opportunities: Lobbying can also lead to direct financial benefits, such as government contracts, subsidies, or favorable tax treatments, which can have a tangible impact on a company’s bottom line.
Interested in stepping up your public affairs game? Book a demo with us!
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