09. 02. 2017

All Change for Corporate Sustainability?

“We’re a nation of immigrants whose diverse backgrounds, ideas and points of view have helped us build and invent as a nation for over 240 years.”

Those are the words of Jeff Bezos, founder of Amazon, and keen supporter of the Attorney General in the State of Washington in his lawsuit against President Trump’s travel ban – the first official legal action from a state against one of the President’s Executive Orders. Both Microsoft and Expedia, also based in Washington State, are supporting the suit, and Washington has since been joined by New York State, Virginia and Massachusetts. Elsewhere in America, Google, Apple, Goldman Sachs, EBay, Facebook, Starbucks and many others have now indicated their opposition to the travel ban.

So could this be the start of a very different kind of corporate responsibility?

Best not to jump too quickly to easy conclusions. But it’s hard not to think that the rather cosy model of corporate sustainability that has served both companies themselves and society reasonably well over the last couple of decades isn’t due for a major overhaul. Levels of trust in business in general are at an all-time low ebb, and the abiding anger at the role of the US and UK financial services sectors in crashing the economy back in 2007/2008 remains deep and visceral. As the Guardian said in a recent editorial: “It was taxpayers who had to fork out hundreds of billions for [the banks’] lies, and in the austerity years since then, it’s been the working poor and the young who’ve had to pay for the recklessness of bankers.”

But will all this anger, cynicism and widespread suspicion about the role of business in society turn into something more positive?

A bit of history first.

Tracking back to the mid-1990s, the current model of corporate sustainability has proved to be remarkably resilient. The constituent elements of that model are pretty well understood these days, with company strategies led by a shareholder-friendly ‘business case rationale’ (rather than values-led), and based on integrated ESG (Environmental, Social and Governance) approaches; there’s a strong emphasis on carbon, water and waste, but far less on biodiversity; a traditional balance between risk management (including reputational risk), and new business development; there are usually lots of warm words about consumers (though they rarely result in any real traction), a broad acceptance of the need to be ahead (but not too far ahead) of relevant regulation, and a big investment in measuring and reporting.

Beyond that, the social agenda has become more and more important over the last five years, with a growing emphasis on human rights and ‘living wage’ issues. One can also detect a growing enthusiasm for collaboration, both within and between sectors, and some commentators point to the importance of an increasingly influential ‘business voice’ in global conferences and policy-making.

It’s difficult to assess the net beneficial impact of all that corporate activity over the last 20 years, and even harder to distinguish between that which would have happened anyway (because of regulation) and that which is genuinely ‘beyond compliance’. But on the whole, you’d have to say the world is a better place as a result of all that corporate sustainability activity.

But is that model any longer fit for purpose? A number of companies like to highlight what they call their VUCA environment: volatile, uncertain, complex and ambiguous. We’re pretty keen in Forum for the Future to persuade them to upgrade VUCA to VUCADD – and add ‘Dramatically Disrupted’.

That disruption phenomenon will unfold partly through the need to avoid runaway climate change, and partly through the increasingly urgent need to ‘reinvent capitalism’.

The climate disruption story is now much better understood. More and more companies are committing to ‘science-based targets’, based on the need to restrict the average temperature increase by the end of the century to no more than 2oC – and, since the Paris Agreement, to 1.5oC. And this one really couldn’t be simpler: either we do manage to do what’s needed to stay within that threshold (in which case our energy economy – and hence the economy at large – will be totally disrupted), or we don’t (in which case the lives of more and more people will be more and more disrupted by extreme climate shocks).

Companies are increasingly on the case here – for instance, there are now 83 of the world’s largest brands signed up to the Climate Group’s RE100 initiative – with commitments to source 100% of the power they need from renewable resources over different timeframes.

The reinvention of capitalism is rather less simple! The recent ‘shocks’ to the political establishments in both Europe and the USA have led many to predict a period of intensive political turbulence, during which the hegemony of today’s dominant neo-liberal orthodoxy will be challenged more and more robustly. That may just sound naïve given that, in one of the cruellest political travesties of the modern age, huge numbers of the ‘left behind’ in both Europe and the USA have chosen to throw in their lot (for all sorts of reasons) with precisely that part of the political establishment that has prospered so obscenely at their expense. But such a surreal conflation cannot last very long.

Indeed, it’s already clear that the Trump presidency has given birth to a completely revitalised voice of opposition in the United States – on a host of different issues and causes. Writing in the New York Times recently, Thomas Friedman specifically targeted US business leaders with the following call to arms:

“I am writing to you today because it will soon become clear that you’re going to need to do a job that you’ve never thought of doing before: saving the country from a leader with a truly distorted view of how the world works, and the role America should play in it.”

There are significant implications in all of this for business leaders around the world. The first generation of corporate sustainability operated more or less within the prevailing political and economic framework of the time. That left companies with a lot of room for manoeuvre, but there were clear limits beyond which they chose not to operate or speak out: on matters like shareholder supremacy, for instance, and the ever-so-convenient ‘inviolability’ of their fiduciary duties; simply going along with globalisation as ‘a good and necessary thing’ for everybody, when it clearly wasn’t, particularly in terms of those affected by some of the more crass outsourcing that was going on; ruthlessly exploiting loopholes in taxation law to deprive countries of legitimate tax revenues through transfer pricing and other devious mechanisms; failing to respond to the iniquity of low wages in their supply chains on the grounds that their ‘hands were tied’ by international competitiveness; giving remuneration committees free rein to boost executive pay, often regardless of actual performance on behalf of shareholders, on a truly disgraceful ‘you scratch my back, and I’ll scratch yours’ basis; demonstrating extreme reluctance to point out that it is sometimes necessary to do things because they’re the right thing to do – even if there isn’t an immediate business case to justify them.

Which means there have been very few CEOs or Chairs of Boards who’ve spoken out against the structural deficiencies in the current capitalist model. Which means, in turn, that those business leaders are now directly identified, through their silence and through their own massively inflated salaries, with an inherently unfair and unsustainable system.

It seems reasonable to assume that the next generation of corporate sustainability will be fundamentally transformed by these two dramatically disruptive forces. And that has to be a good thing, with the world and so many of its people still in such pain and strife.

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