The Association Alibi

The Strategic Edge - by Stefan Borst

The Association Alibi

There is a sentence I have heard in boardrooms across Europe more times than I can count. It usually comes from a CFO, sometimes a CEO, occasionally a general counsel. It sounds responsible. It sounds efficient. And it is quietly eroding competitive advantage.

“We don’t need a bigger PA function – we’re members of the XYZ association.”

On the surface, this seems like a perfectly rational statement. It may even be rooted in national culture. Germany for example has had a very strong association ecosystem. So why duplicate effort? Why invest in in-house political expertise when a well-funded industry association employs a team of seasoned professionals in Brussels, Berlin, or Washington to represent your interests? The logic appears sound. The economics seem favorable. And the conclusion feels safe.

It is also fundamentally short-sighted - especially in the international context.

Not because associations lack value – they can be tremendously powerful instruments. But because relying on them as your primary or sole vehicle for political engagement is like outsourcing your entire sales function to a cooperative and wondering why you’re losing market share. The association represents the sector. It represents the smallest common denominator of its members’ positions. It does not represent you or your particular interests.

The Nature of the Compromise

Let’s start with what associations do and do well. At their best, they aggregate industry positions, build coalitions, provide early warning on regulatory developments, and lend the weight of an entire sector to policy arguments. In a world of record-breaking lobbying expenditure collective action through associations remains a legitimate and often effective channel.

But there is a structural reality that every executive needs to understand: an association’s position is, by design and necessity, a compromise. It is the aggregated, negotiated, smoothed-over version of what all members can agree on and live with. This is the very nature of collective representation. An association with 200 members across different market segments, geographies and competitive positions cannot possibly represent the specific strategic interests of any single company. The positions that emerge from working groups and board negotiations may reflect an optimal compromise, but not a strategic optimum.

The Japanese experience offers an instructive contrast. Research on nonmarket strategy in Japan found that when companies approached government officials individually, the first question was often: “Why are you not going through your trade association?” In systems where collective action is culturally embedded (Germany used to be another example), individual company engagement requires deliberate strategic justification. In the European and increasingly global regulatory environment, however, the opposite risk is more common: companies hiding behind collective action when individual engagement would serve them far better.

European Parliament research has long documented this phenomenon, describing what scholars call a “dual lobbying strategy”: a large company will wear the trade association’s hat when it has an interest in doing so – and undertake its own lobbying action when this is to its advantage. Smart companies have always understood and utilized this. The question is why so many others have not.

The Illusion of Coverage

As I like to reiterate in many of my blog posts: political risk today remains the last unmanaged corporate risk. This is yet another example. The association alibi persists because it creates a comfortable illusion of political risk management. Executives can point to significant membership fees – often running into six or even seven figures annually – and feel they have checked the regulatory risk box. But let me illustrate what this means in practice.

Consider a mid-sized chemicals company operating in a European market. It pays substantial dues to its national chemical industry association and to the European federation. These associations do excellent work on broad regulatory frameworks – REACH implementation, classification and labelling standards, general environmental policy. But when the European Commission proposes a restriction on a specific substance that happens to be central to this company’s product portfolio but marginal to the broader sector, the association’s response is tepid. Why? Because most members either don’t use that substance or have already found alternatives. The association’s cost-benefit analysis of political capital clearly says: dont fight this one.

For the company in question, this regulatory move could represent tens of millions in stranded assets and market disruption. But they’ve outsourced their political strategy to a body that - rationally and correctly - concluded it wasn’t worth the fight. The company had coverage on paper. It had none in practice.

This is not a hypothetical. Versions of this scenario play out across sectors every regulatory cycle.

What Smart Companies Do Differently

The most politically sophisticated companies I’ve worked with treat associations as one instrument in a broader orchestra – they don’t solo it. They operate with what I call a “three-lane issue map” that brings clarity to every regulatory topic on their radar:

Lane 1: Association-led. Issues where the sector consensus fully aligns with the company’s position. Here, the association carries the flag. The company supports from behind, contributes to working groups, provides data, and amplifies the sector message. Investment is low, leverage is high. Bonus : you can also protect your brand behind the association if the debate gets heated.

Lane 2: Company-led. Issues where the company’s interests diverge from the sector mainstream or where competitive differentiation depends on a specific regulatory outcome. Here, the company goes direct – building its own relationships with policymakers, developing its own positions, and investing in its own political intelligence. This is where in-house PA capability pays for itself many times over.

Lane 3: Parallel engagement. The most strategic category. Issues where the company works through the association on shared ground while simultaneously pursuing its own specific angles directly. This is sophisticated orchestration – using the association for air cover and broad legitimacy while running a targeted campaign on the elements that matter most to the business. This can however create friction within the association.

Companies that operate with this clarity don’t just react to regulatory developments – they shape them. They know, issue by issue, whether they’re riding with the group or running their own race. And they resource accordingly.

The Association as a Stakeholder, Not a Service Provider

Here’s a perspective that too few companies embrace: your industry association is itself a stakeholder to be managed, not merely a service you subscribe to.

The most effective PA operations treat their association memberships with the same strategic discipline they apply to any other important relationship. They seek to influence association positions from the inside. They place senior people on committees and boards not as a status symbol but as a strategic investment. They build coalitions within the association to shift the center of gravity toward positions that serve their interests. They provide the association with input, intelligence and analysis that shapes the narrative before positions form.

This is what I call “association statecraft.” It recognizes that associations don’t simply produce positions – they are negotiation arenas. A company that passively receives the association’s output is being shaped by its competitors’ political strategies. A company that actively engages in the internal politics of its associations is shaping the playing field.

In the EU alone, there are over 1,000 European-level trade associations and more than 13,000 entities on the Transparency Register. With corporate lobbying spending in Brussels climbing to at least €343 million annually from the 162 largest corporate spenders alone – a 13% increase over the prior year – the competition for political influence is intensifying. Companies that treat associations as their sole channel are relying on a Swiss army knife to win in a high-tech arms race.

The Real Cost of the Association Alibi

When executives use association membership as a reason to keep PA functions small and underdeveloped, the actual costs are rarely visible on any balance sheet. But they are real and compounding:

1. Regulatory outcomes that don’t reflect your competitive reality. When sector-level positions drive policy outcomes, individual companies absorb regulatory costs or miss regulatory opportunities that a targeted engagement could have addressed.

2. Lost political intelligence. Associations filter information through the lens of collective relevance. Company-specific early warning signals – the kind that give you a six-month head start on a competitor – often get lost in the noise.

3. Absence from critical conversations. Policymakers in Brussels and national capitals increasingly seek direct dialogue with companies that can bring specific market expertise and implementation reality. An association representative speaking in generalities is no substitute for a company expert who can explain exactly how a regulation will affect production, investment, and employment.

4. Competitive vulnerability. While you rely on the association, your competitors are very likely running their own direct engagement alongside association participation. They are not either/or companies – they are both/and companies. And they are accumulating political capital that you are not.

A Diagnostic for Your Organization

We recommend doing a proper audit of your Public Affairs function on a regular basis. Association memberships are a part of this exercise. But these five questions may help you to assess if your organization suffers from an association alibi:

1. Can you name the three regulatory issues where your company’s interests most significantly diverge from the sector consensus? If you can’t, it might be a good investment to analyse this more rigorously.

2. Do you have direct relationships with the policymakers most relevant to your business, or do you rely on the association for access? Relationships are not transferable or outsourcable. The association’s access is not your access.

   
   

3. When did a senior leader from your company last attend an association working group or board meeting? If the answer is “I don’t know,” you’re paying for influence you’re not exercising.

4. Has the association ever taken a position that actively worked against your specific business interests? If so, what did you do about it? Some leading companies have explicitly documented processes for when association positions diverge from their interests and values. Does yours?

5. Does your PA function have the capacity to run an independent campaign on a company-critical issue if the association can’t or won’t? If the answer is no, you have a structural gap in your risk management.

From Either/Or to Both/And

The solution is not to abandon associations. That would be strategically foolish. The solution is to stop treating association membership as a substitute for organizational capability and start treating it as an important complement.

This means investing in the in-house capacity to understand which issues need which treatment. It means building an issue map that categorizes every significant regulatory topic into one of the three lanes. It means developing direct relationships with policymakers that exist independently of the association channel. And it means treating the association itself as a stakeholder relationship to be actively managed (funded and staffed).

McKinsey’s research on organizing government-affairs functions noted that among low-performing companies, very few external-affairs personnel have business line experience – and at one company studied, only the department head had it. The most sophisticated companies, by contrast, view the relationship between business units and the government-affairs function as a two-way street, using rotation programs and cross-functional teams. This integration is impossible to achieve through association membership alone. It requires an in-house function that is connected to the operational reality of the business.

The Bottom Line

The next time someone in your organization argues that association membership is a sufficient PA strategy, ask them this: would you outsource your entire competitive strategy to a consortium of your competitors?

Because that’s essentially what you’re doing.

Associations are valuable and powerful allies. They are not substitutes for strategic capability. The companies that understand this distinction – and invest accordingly – are the ones shaping the regulatory environment. The rest are just paying membership fees and hoping for the best.