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sir-markdougGlobeScan Chairman Doug Miller had the pleasure of discussing challenges and opportunities for business with Sir Mark Moody-Stuart who, in a distinguished career, has served as Chief Executive of Royal Dutch Shell, Chairman of Anglo-American, and now Chairman of the United Nations Global Compact. He is the author of “Responsible Leadership” (Greenleaf, 2014).

 

Published 23 October 2015


QWhat are the pressures on global business today, and what are the resulting imperatives for business leaders?

AThe continuing imperative for business is to keep one’s radar operating on the outside world and continue to engage your stakeholders in meaningful dialogue – even your worst critics who you think are completely misguided. I say this because there’s a lot of valuable learning from this on how to guide your business.

But we’re also coming into a new era, a period arising because governments have failed to fix some things that really are the responsibility of government – and yet business now gets the blame for it. There is no sense for business leaders to sit there whinging at the unfairness of this; they must take constructive, proactive approaches to engage with governments to support things like rational regulatory frameworks. There’s a tendency to think that we don’t need government, but I think that’s a mistake. We do need regulatory frameworks that guide the market.

There are two good examples of this. The first is climate change, where the likes of Shell and BP have been calling for appropriate carbon pricing for nigh-on 20 years. Because governments have been unable to put this in place, people are now blaming the carbon industry for this inaction and setting out to penalize the petroleum industry by opposing frontier exploration and hoping to strand some of their assets.

The second example is taxation. Without doing anything at all illegal, most global businesses would be subject to attack if all of their tax affairs were publicly available. The tax regulations have simply not caught up with life in today’s global world. The only answer to this is for business to speak up and say that yes, we think the global taxation system is bust, but it’s very complicated and any adjustment will mean some countries will win and other countries will lose. And we need to help create a more rational approach to this.

In this new era, we really need business leaders who will put on more of a statesman-like societal hat; business people who can say, “Let’s put our own business aside for the moment and look at what we should be doing in this area, what should the market do, and what are the things that we need from a regulatory perspective to guide the market?”

I don’t think we have enough businesses who have built the trust with governments and with society to be able to be that proactive. And we need to be proactive. I mean, a business can say that we’ve followed everything that we are supposed to follow; but when you stand back and look at it, it doesn’t seem fair to some country or another. And when that happens, business can’t sit back and say it isn’t my fault, it’s the government’s fault. Because you’re the one that’s targeted.

We’ve seen those in this position offering voluntary tax contributions after being caught out, but that’s not the answer. The answer is to fix the system. To me, how you fix the system is not going about it the way they’re doing it with the banking industry – with an expert commissioner. The mining industry’s sustainability initiative under Sir Robert Wilson at the turn of the century is a better example. I say to my oil colleagues, you’ve never had an ICMM (International Council of Mining and Metals). An ICMM approach is not perfect, but it does start a process where they lined up companies with commitments and did good work on taxation. If you go on the websites of companies like Anglo-American and Rio Tinto, they are transparent and say what profit they make and where it goes.

Avoiding reputational harm has been a key driver of some proactive initiatives by business in the recent past. Are there going to be other mechanisms that will drive progress in the future, and to what extent do you think societal purpose is going to be one of these mechanisms to drive progress?

We need more capacity for business people to put statesman-like societal hats on. Companies need to empower their people to switch hats as appropriate, between their societal hat and their corporate hat, rather than keeping their corporate hat on at all times.

You need executives who, during their corporate careers and at business school, learn how to do this. And the key to it is listening. Being open to talking to people who initially sound implausible. Active listening in a neutral setting.

Our sense of purpose at GlobeScan is looking to redefine what it means to be in business. This means changing some of the boundary conditions like deeply listening to all stakeholders, not just selected stakeholders, to get to new solutions. Do you think at the C-suite level this is something that resonates?

Yes I do. I think bringing businesses and civil society organizations together can have a very positive impact. There are interesting differences between them, but also similarities. NGOs are really enterprises, and that is not pejorative; they are actually providing a service and someone is paying them to do it. And their business models are fascinating. For example you have the Rainforest Alliance – largely funded through their partnership with Starbucks – who pays them to teach their suppliers how to grow coffee with low negative impact.

When I think of social entrepreneurs, it’s pretty close to actual business. I think it’s a great idea. I was at Case Western University when they were doing an event with B Corp (Benefit Corporations), and the guy running it was saying here is a list of statutes that any business can use to see if they could become a B Corp. I went through the checklist in my head with an aggregation of Shell, Accenture, and HSBC, and they all score in the 60-70s. The big difference, in meeting the requirements of a B Corp, is changing your articles of incorporation to commit to maximizing benefit to all stakeholders, not just shareholders. But then I thought in the original Shell business principles, drafted in the 1970s as a letter by Jeffrey Chandler, it said we have responsibilities to our shareholders, our employees, government, customers, and society at large. None of these is dominant; it is the obligation and duty of management to balance these.

This has been in Shell’s principles since the 1970s, so I thought, could you do an annual general meeting of Shell and incorporate these principles into the articles and see if Shell would then meet the statutes of a B Corp? I think in Europe you could get this passed by the shareholders, but I’m not so sure about US shareholders.

With all the conflict around the globe, most citizens do not think military force is the answer, except when they get afraid. Do you feel that there is a role for business to play in the primary prevention of conflict?

We have various initiatives in the UN Global Compact and one of them, which started 10 years ago, was mainly for companies operating in conflict zones. The original goal was to produce a set of guidelines for conducting business in these zones of conflict and that’s kind of extended into what we now call “business for peace” … and I’m very enthusiastic about it. We had a meeting in Istanbul with 40 countries and there was a group of South Koreans there who told us of something they are doing with the North Koreans. They’ve set up on the boundary, in North Korea, a kind of free trade zone where they manufacture things, and they employ several thousand North Koreans. At the end of the meeting they gave out goody bags containing a few of the products they manufacture, and what I found most interesting was when I looked at the label on one of the products to see if it said Made in Korea, or Made in North Korea, I was bowled over to see – Made in Peace. I think it’s terrific, that’s the kind of thing we need between North and South Korea, and in other global zones of conflict.

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