**Abstract**

Today, corporate diplomacy refers to a new business governance model in a challenging global order where economic complexity, uncertainty and potential sociopolitical conflicts should be considered in any successful policy and strategy. Indeed, taking into account that the practice of corporate diplomacy enhances the redistribution and reallocation of economic power and wealth, there seems to be a global trend away from the shareholder business model of value creation towards a new one where stakeholders might be considered. However, there has been a controversial understanding of this new global management trend in terms of the configuration of relevant features of market dynamics. Considering this background, and adopting the methodological perspective of case studies, this chapter elaborates an analysis (i) of the complex drivers that shape corporate diplomacy competencies and strategies and (ii) of the potential results of corporate diplomacy in a global trade scenario that has been deeply affected by the coronavirus pandemic. Among the key findings, the Brazilian experience after the outbreak of the coronavirus pandemics shows that the role of corporate diplomacy as a business tool of governance aimed to defend sectorial interests might be crucial to normalize trade flows.

**Keywords:** corporate diplomacy, stakeholders, normalization of global trade, coronavirus pandemics, governance

#### **1. Introduction**

Corporate diplomacy refers to a new business governance model in a challenging global order where economic complexity, uncertainty, and potential sociopolitical conflicts must all be taken into account in any successful policy and strategy. Indeed, given that corporate diplomacy influences the redistribution and reallocation of economic power and wealth, there appears to be a global trend away from the shareholder business model of value creation towards a new one that takes stakeholders into account. However, in terms of the configuration of relevant market dynamics, there has been a contentious understanding of this new global management trend.

The practice of corporate diplomacy aims to build reputations and relationships with external stakeholders [1]. In this attempt, the goals to consider refer not only to the immediate results, but also to the long-term effects of any policy or strategy. This perspective is nowadays relevant since the current investment chain is complex due to complex interactions not only between investors and managers, but also among other stakeholders [2–4].

Considering the evolution of global business models since the 2000s, they can be apprehended as a form of governance that aims increasing short-term earnings by means of a "clash of rationalization". The economic and social outcomes have involved a trend to 'downsize and distribute', that is to say, a trend to restructure, reduce costs and focus on short- term gains. In practice this has meant plants displacement and closures, changing employment and labour conditions, outsourcing jobs, besides the pressure on supply chain producers in the global markets. Therefore, within this business model, investments that are fixed for society turn out to be liquid for investors. The dominance of a culture based on short-termism has major implications that go far beyond the narrow confines of the financial markets. In this setting, the costs of this business model fall disproportionately on society because of the commitment to liquidity.

Against this backdrop, we address that corporate diplomacy is a new tool of governance that emphasizes collaborating with governments to develop societal rules to govern business conduct. Corporate diplomacy is a promising approach to business governance in order to learn how to create and change global rules for better outcomes in business, society and trade. In short, the relevance of this relies on the growing concern on the management of common-pool resources at local and global levels where polycentric systems of governance refer to build collective-actions.

At this respect, Elinor Ostrom in her 1990 well-known book *Governing the Commons: The Evolution of Institutions for Collective Action* considered there is not one ideal governance regime, but a variety of regimes of governance that might include: rules of appropriation and maintenance of resources, rules for of conflict resolution, besides the evaluation of strategies to change rules. Focused on the capacity of people around the globe to create long-run resilient arrangements for protecting environmental resources. In particular, she studied how groups of people manage and preserve common-pool resources such as forests and water supplies. However, collective actions have not inevitably emerged in all groups of people. She defined common or common-pool resources as public goods with finite benefits. Therefore, common-pool resources can be potentially used beyond the limits of sustainability because of the lack of exclusion of users. This creates an incentive for increasing the rate of use of this resource above its physical or biological renewal. Besides, her research pointed out that common property is a kind of institutional arrangement that regulates ownership and responsibility.

Considering this framework, the users of common-pool resource can work together to enhance the sustainable governance of their commons by collective action. Indeed, under her view, successful commons' self-governance institutional arrangements depend on: the coherence between the resource environment and its self-government structure, the enforcement of rules through effective monitoring and sanctions, and the adoption of low-cost conflict resolution mechanisms.

According to Ostrom, adaptive governance is related to changing rules and enforcement mechanisms over time since institutional arrangements are able to cope with human and natural complex systems. As a result, citizens, governments and businessmen might deal with collective-action problems in different ways at diverse scales. Indeed, her contribution adds to our understanding how collective actions and polycentric arrangements of governance can influence economic outcomes, human behaviors and institutions towards growing resilience and sustainability. In this attempt, she crossed traditional boundaries between political science and economics. Indeed, Ostrom's proposal is at the core of ethical business.

Drawing on the relevance of different governance regimes in business, it is interesting to note that most of academic literature focuses exclusively on the analysis of voluntary agreements in more developed countries or regions [5]. For instance, Magali A. Delmas and Maria J. Montes-Sancho [6] compare two theories

#### *Global Business Challenges and the Role of Corporate Diplomacy DOI: http://dx.doi.org/10.5772/intechopen.98492*

that can be used to evaluate corporate initiatives and that serve to explain the motivation of actors to participate in voluntary agreements: institutional theory and the theory of collective action. The theory of collective action argues that companies participate in corporate sectoral strategies much more to maximize gains than to protect the common good. These gains may also be reputational or purposive. In turn, the institutional theory is complementary and helps in understanding how the social context influences the firm's actions. In this sense, this theory argues that companies enter into collective agreements in response to social pressures and to improve their reputation. For the authors, voluntary agreements are signed between companies and regulatory agents, in which the former commit to commitments to address environmental issues and reduce their impacts on the environment. These agreements can be created in response to a new regulation, to make its implementation more flexible, or even to encourage the creation of new regulatory practices. In general, the authors indicate that these agreements can be created in two ways. The first occurs when industries of the same sector voluntarily commit to reducing their environmental impact, and these commitments are usually coordinated by an industry association. The second form refers to those initiatives in which the government and the industry agree on common commitments. In their study, Delmas and Montes-Sancho highlight factors that may explain the behavior of companies to participate in voluntary agreements. Among these factors, firstly, the authors point out that the greater the political and social pressure on companies in their home countries, the greater the chances of these companies participating in voluntary agreements. Secondly, the performance of industry associations also plays an important role for the emergence of effective sectorial initiatives.

Considering this background, the present study is centred on the Brazilian case also aims to fill the literature gap and contribute to the existing knowledge on corporate governance. The main goal is to analyze how corporate diplomacy in Brazil has been used as a tool of governance to manage the consequences of the global trade challenges in 2020. This methodology is considered appropriate to analyze specific business actions in order to elaborate some generalizations that might be of theoretical interest for the definition of further business strategies oriented to global trade.

In this attempt, the first section presents an overview of the business scenario in retrospect. Second, we explore an analysis of the complex drivers that shape the shift towards the emergent role of corporate diplomats with new competencies and strategies under the new normal. Third, considering the Brazilian experience, we briefly present a case study to show the outcomes of corporate diplomacy as a tool of governance in a global trade scenario severely impacted by the coronavirus pandemic. Finally, the conclusions summarize the key findings about new governance tools that might be relevant for business management in a complex global trade order.
