Waldorf Astoria Hotel, New York, USA
14-15 June 2005
RT HON LORD HOLME OF CHELTENHAM
Chairman, GlobeScan Incorporated
Chairman, LEAD International
I want to do something very brave, or according to your perspective, rather foolhardy, this morning, and attempt to connect the agenda of sustainable development not only to the well-being of companies and the societies where they operate, but to the wider issue of a more secure and viable world.
Let me start, however, at the level of the enterprise. Many companies are flirting with CSR, or CR as I prefer to call it Corporate Responsibility, plain and simple. Some have gone beyond flirtation to commitment and have put principles, policies, and practices in place to make that commitment a reality. All credit to them.
Yet despite that, the questions persist. Cynical observers ask if it is all for real or merely the latest fad. NGOs are quick to question the sincerity of what is done and call it Greenwash. Agonised financial analysts try to work out when and how the benefits of behaving responsibly will show up in the bottom line or in the share price and there are no shortage of experts to pull the whole movement up by the roots and to question whether it is really taking hold.
Why is this? On the face of it the idea that society should expect companies to behave responsibly rather than irresponsibly, and that the people in those companies would prefer to behave well rather than behaving badly, seems to be a no-brainer.
So why the continuing uncertainty? I suggest one reason is because CSR is counter-cultural to the myth of how business works which has prevailed for over one hundred years. This myth, which I call BID, Business Is Different, has been avidly embraced by the detractors of business but all too often readily accepted by executives themselves. Let me characterise it as a sort of heroic determinism, based on the idea of the all-powerful market, fired by neo-liberal economics and fuelled by ferocious red in tooth and claw Darwinian competition. As in all good myths, the gods ultimately intervene because this turmoil turns to be orchestrated by the invisible hand which benignly if mysteriously reconciles individual struggle with the general interest. And for those who accept this myth as the total explanation of how business works, and believe business is subject to special rules, it follows logically that any attempt to introduce other considerations than the pursuit of short-term profit which might have the effect of qualifying or muting the single-mindedness of the Darwinian struggle will be seen as potentially dangerous and therefore liable to bring the whole prosperity machine crashing down. If it aint broke, dont fix it! say the Chicago purists.
Let me say hastily before I am burned as a heretic at the next Conference Board event that I, too, believe in vigorous competition and in free markets as the primary source of innovation and wealth. It may not be the best system but as Winston Churchill said of democracy, its the best we have got.
Where I part company with the all-encompassing business is different myth is that I do not believe in business without values, competition without context or in markets being used as a metaphor for life itself. It is a sort of economism gone mad which assumes that people live primarily as consumers, shrinking the significance of the rest of their lives into the margin. Of course, it is their consumption patterns that interest us most as business people, but we should have the wisdom to recognise that no-one is exclusively or even primarily a consumer. She is also a citizen, a daughter, a parent, a teacher or technologist, a person with interests, values and relationships, of which her consumption patterns are only a part.
Even in the mediaeval market-place success depended on more than sharp elbows. The townsfolk knew whom they could trust not to adulterate the flour or water down the ale. How much more important is trust in our information-rich world in which people seek to translate their complex needs and values into decisions as consumers, as employees, as share-holders and as social beings.
Business is beginning to understand that it has to re-connect with the wider world rather than living in a smug parallel world of its own: to align its values with societys values; to understand and contribute to the broader context, including the solution of shared problems; to treat its customers and suppliers, employees and investors as people in the round with whom they have the privilege to deal and whose humanity they share.
But by divorcing itself from society as a separate caste with its own narrow code and ideology, business has helped to create a dangerous gap of suspicion, ignorance and cynicism. So every ENRON is taken not as evidence of the occasional rotten apple but as living proof of the Hollywood story-line cliché that businessmen will do anything for a quick buck and that the bigger the corporation, the more certain it is to be evil in its intentions and practices. For instance, many NGOs continue to assert that MNCs lower wages in the developing world, despite all the evidence being to the contrary.
Much of this misunderstanding and misrepresentation is due to the lamentable failure of business to connect. How often do we in companies talk about our businesses and our results in terms of people, prosperity and the planet rather than profit? And when companies do account for their profit, as of course they should, how often do they describe it, for instance, as an index of efficiency or as the basis for the sustainability and strength of the firm or as the source of investment and innovation for the future rather than in terms more suited to a big pay-out at Las Vegas. Small wonder that for many people casino capitalism seems a more plausible description of what we do than wealth-creation.
What is needed, I believe, is a new and stronger paradigm to re-connect business to peoples hopes and fears and to the shared human experience, to remind people that business is part of the warp and weft of life, not something set apart.
This, I believe, is one of the main attractions of sustainable development. That first it puts a tangible shape on the often rather vague and general aspirations of CSR and then that it connects a responsible business agenda to parallel agendas in government and civil society, so re-creating a sense of shared community and objectives.
We live in a post-ideological age but perhaps one of an intensified search for authentic values. Sustainable development is as good an expression of consensual 21st century values across a diverse world as I have seen: that economic development and human development go hand in hand; that the environmental cost of development should be minimised and be as far as possible within the carrying capacity of this fragile planet; and that development should be inclusive, not leaving billions of people hungry, poor, ill and excluded.
Or, put in moral terms, that in seeking a better life for ourselves we should not forget equity between the generations, aiming to leave the world in as good a shape for our children and grandchildren as we inherited it, and not forgetting equity within this generation for all those excluded from the feast of prosperity.
Companies which have embraced the path of CSR and sustainable development are faced with a paradox. More of them are doing more than ever before, not just in terms of being more rigorous in minimising their adverse environmental impacts but in a host of other ways. Yet at the same time, societys expectations of the corporate sector, perhaps stimulated by such initiatives as the Millennium Development Goals, the World Summit on Sustainable Development, and the Commission for
Africa, as well as by the persistence of grave environmental and social problems, have been on a rising curve.
So there is now a growing gap between expectations on the one hand and the worlds perception of industrys performance on the other, as the GlobeScan CSR Monitor indicates. If this gap is not to compound and widen the general mistrust gap which I have already described, I believe part of the answer is for companies, rather like political leaders under pressure to move on from lofty generalities of good intention, which, too often, sound like spin, to focus on the specific issues and programmes which a commitment to sustainable development demands.
My point is illustrated by a second insight from the GlobeScan CSR Monitor. These higher expectations of companies which I have just described, are wide in their scope, but particularly high in the case of what we might call a companys operational responsibilities.
These responsibilities are those for which in the 21st century companies are going to have to step up to societys plate. They certainly go further than the narrow business is different ideology I described earlier. But they seem to me a reasonable statement of what a responsible company nowadays will accept as intrinsic or endogenous to its work. Let us accept that they have become part of the contemporary version of operational responsibilities. On most of them the company will or should have its own policies, codes and practices and on some of these there will also be minimum regulatory or legal standards to be complied with.
Just a word here in parenthesis about letting your performance in these areas be lawyer-led, bare compliance, rather than management-led compliance-plus. The danger of an excessively legalised approach, often a characteristic of US corporations, is that it can carry an implication that responsibility begins and ends with compliance; that that which is not forbidden is allowed, the very antithesis of the value-led aspirational approach which I am discussing this morning.
So, even where there are legal minimums to be complied with, they should be a spring-board rather than a ceiling on performance in these operational areas.
Thus there are a second set of responsibilities where once again society expects much from companies but where realistically they are not expected to bear the primary burden, and certainly not alone. Let us call these citizenship responsibilities, since it is acknowledged that they are shared with other social actors.
It is noteworthy how far, for instance, increasing global economic stability, helping to reduce the rich/poor gap and helping to solve social problems are all amplifications of the second bottom line of sustainable development i.e. promoting the sort of economic development which is likely to produce a more stable, equitable and inclusive world.
I think we are confronted with a sort of beyond environmentalism or environmentalism plus phenomenon. Companies which started down the track of responsibility twenty or even thirty years ago, originally started with their environmental performance. That is where the shoe of criticism pinched, where the effects of not taking care were most tangible, where the threat and sometimes the reality of regulation loomed. Most large companies have long since staffed up and adopted the policies and metrics to do better. In that sense the research is right to identify corporate environmental performance as having become a core operational responsibility, certainly where the management of direct environmental impact is concerned.
Of course, as consciousness and information have grown, the corporate environmental focus has also widened: to eco- and energy efficiency which is sometimes also driven by straightforward economic pressures on material and energy prices - ; to climate change and global warming; to the preservation of bio-diversity; and to wider effects on public health.
But on the social leg of the sustainable development tripod there has been no such evolution. Indeed, although no-one denies the importance of the issues, many companies are somewhat puzzled how to proceed, both in terms of conceptual definition and operational action. As every source of measurement has found, from the Global Reporting Index to the Dow-Jones Sustainability Index, the metrics are a problem. What to measure and how? How to bench-mark success? The agenda is enormous. What contribution can one company make, however large, powerful and international? And, as has already been identified, companies cannot do the social piece alone. They generally need partners to leverage and inform their efforts.
I want to explore briefly the idea of partnerships, both global and local, but before I do that, I want to re-iterate the connection between plain operational competence and socio-economic development.
First of all in a general sense, business should become less apologetic about the contribution which trade and industry make to moving people out of poverty, just by the process of companies going about their everyday business. In the last ten years, over one billion people, many of them in the fast-growing economies of Asia, particularly China and India, have moved irrevocably away from the bread-line to sustainable livelihoods. This has not been the result of government action for the most part, but of businesses, both large and small, being allowed to get on with the job. That is one of the reasons I should like to see business much more vocal in pressing for completion of the Doha Development Round to free up the world trading system further and to remove the shameful barriers which we in Northern countries erect to the products of the developing world.
But second, looking at socio-economic development on a more local basis, any TNC or MNC in a developing country can make a significant contribution by relatively minor adjustments to its everyday operations in the direction of being a good local company. How far does it train, develop and promote indigenous employees in the company? This creates much-needed capacity. How far does it seek local suppliers, thus stimulating the local economy, instead of flying in supplies like the PX on a US Air Force base? How far does it sub-contract functions in order to create local enterprise and employment?
The World Business Council for Sustainable Development also suggests in its Report Doing Business With The Poor that there is something else which companies should consider. It is to stop treating poor people as a collective social problem, to be dealt with by governments perhaps, but beneath the attention of serious companies and to start seeing them as potential customers. The rapid spread of mobile telephony in poor countries, the boom in micro-finance with most of the lending to women, the mushroom multiplication of new enterprises when townships were connected to the electricity grid in Johannesburg, or the substantial new business in detergents built by Unilever in India by new marketing and packaging to reach the rural poor, are all good examples of treating what had been seen as insoluble problems as a source of opportunity.
I mentioned partnership with other organisations to enhance understanding of some external, or exogenous, issues with which a company may be faced locally or globally and to increase the capacity to contribute. I shall give one global example only but it is intensely topical, given the focus on Africa at the up-coming G8 Meeting. It is the Extractive Industries Transparency Initiative designed to ensure that the local benefits of oil, gas and mineral extraction are not misappropriated, the so-called natural resource curse, by getting companies and governments to undertake to declare transparently what rents, royalties and revenues have been paid and received in the country concerned. This initiative is sometimes known as Publish What You Pay. This seems a useful step towards better governance, which is a crucial pre-condition of economic success in less-developed countries, and the corporate response from the major oil and mining companies has been good. Sadly, the governments concerned have been slower to signup.
At a local level, given the difficulty which I described earlier, of defining a companys social responsibilities, many companies focus has been on developing the local community where they are based. The Biblical question Who is my neighbour? springs to mind, and one of the merits of working with local people, particularly in developing countries, which is incontrovertible, is that it engages employees, most of them drawn from the neighbouring community, themselves, in a core partnership which is likely to work.
I promised at the start that I would try to connect the agenda of sustainable development to the Big Picture question in all our hearts and minds, particularly since 9/11, of how we create a more secure and viable world.
The Survey of Sustainability Experts carried out by GlobeScan shows what issues they see at the top of the global profile in 2004:
And what they see as priorities; water, poverty, HIV/AIDS, food, and security.
This agenda overlaps with but is not by any means identical with the list of problems with which political leaders see themselves grappling at any meeting such as the G8 at Gleneagles. There the political leaders will inevitably be looking also at trade and economy, peace and security, and currently counter-terrorism issues, as well as Africa and climate-change, the sustainable development issues which head the agenda in 2005.
One thing implicitly if not explicitly on their agenda at every meeting, as you can see from the motley crowd of protesters, is the accelerating trend to globalisation, in all aspects of life. Leon Trotsky once notoriously said that you could not have communism in one country. Although Fidel Castro seems anxious to prove Trotsky was wrong he meant that some phenomena cannot be contained within national boundaries and will burst their limits.
Well, our world has shrunk dramatically and is teeming with issues that can in no way be confined to one country. The nation-state, tempered by such international organisations as the UN and the EU, may still be our chosen unit of political organisation but most of the issues with which our leaders grapple have long since burst national bounds and gone global.
Yet every major tide of change in human affairs, like this bundle of changes which we call globalisation, has an undertow. In the undertow, internationalisation is called Americanisation, spreading prosperity can be scorned as materialism, business can be called greedy capitalism, supra-national discussion can be feared as anti-democratic. Fear of change and loss of identity are powerful emotional drivers, as we have seen in many parts of the world, not least in the EU in recent weeks.
If we treat globalisation as another aspect of the blind determinism I was describing in a business context earlier, these resentments will grow. If globalisation proceeds in a vacuum of values and without constructive leadership, we can be sure they will.
One of the attractions of the paradigm of sustainable development is that it could supply a basis for values and leadership to shape a better shared future. I was struck at Johannesburg in 2002, for instance, at the global deal which was not done: that the South would take the environment seriously when the North took development seriously.
Well, even in three years, things have moved on. China and India, having to confront the effects of their own 7-9% growth year on year, are also now getting the environmental message loud and clear. They want to be part of an international process on climate change, Business, too, is recognising that climate change and greenhouse gases have gone well past the days of procrastination and quibbling about the science to become an action item for companies. Jeffrey Immelt of GE has set off on a green trail that many will follow, including ultimately our political leaders and it is striking that twice in two weeks the Financial Times in London has led its pages with stories of large companies, including Shell, BP, Deutsche Bank, HSBC, Standard Chartered, Volkswagen, Siemens Toyota, Rio Tinto and Hewlett-Packard , positively demanding certainty and limits to emissions from our collective leaders. As one representative said: What companies are seeking is certainty for long-term investment.
But I think the point at which the limitations of national perspectives in a global world came home to me most poignantly was in the adoption of the phrase homeland security in the United States after the dreadful atrocities of 9/11. In this small inter-connected world where a story in Newsweek one day is blamed for riots in Afghanistan the next, where is this cosy homeland in which any of us can be safe, if it is not to be everywhere?
So the issue, in terms of security, is what would make the whole world safer? That is not easy, given the undertow of varied resentments which I have just described. Yet one important answer to the question has still not really been tried. It is to put a sense of a shared future for all the people of the world into the debate, and to devise the international policies which will help bring it about. I am convinced that the moral and practical framework which sustainable development provides, by including everybody whilst reminding us of our shared responsibility for a liveable future, could play that role of creating a hopeful narrative which could unite people, let alone their governments.
It would be wrong and patronising to say that poverty breeds terrorism but terrorism does need the oxygen of popular support to survive and thrive. Tragic and wrong-headed as it may seem to us, for millions of people Bin Laden is seen more as a Robin Hood than a mass-murderer. We must therefore find a stronger idea of a shared future which transcends the blind rush of globalisation, whilst using its force and energy, to draw people towards the light and away from the darkness and which provides forward momentum and an underpinning for democratic development.
I, for one, would like to see, alongside the Coalition against Terror, a new global coalition for universal development and security which would represent the prospect of a win-win for us all. Sustainable development could be the realistic basis for that and responsible business has a large part to play.