10. 02. 2017

Better Business, Better World - but Better for Whom?

 So what exactly is the appetite for ‘reinventing capitalism’ – amongst capitalists, rather than amongst campaigners? A very interesting new report has just been published that provides some interesting pointers here.

Better Business, Better World’ is a bit of a blockbuster from the Business and Sustainable Development Commission. This body was set up after publication of Sustainable Development Goals in 2015, essentially to elaborate on the role for business in helping deliver those Goals. It has a lot of firepower, with a prestigious line-up of senior business people and other stakeholders, and a big budget to do the research and to pull everything together.

It’s a good report, which rests essentially on two big ideas:

1. That trillions of dollars of economic value ($12 trillion, to be precise) could be created in delivering solutions within 60 ‘market hotspots’ in energy, food and agriculture, cities, health and wellbeing – in other words, the heartland of the Sustainable Development Goals.

This obviously speaks powerfully to those businesses best placed to get stuck in on these hotspots. It’s also classic ‘business case’ stuff, or corporate sustainability 1.0, referring back to my earlier blog. It sounds a bit like this: Let’s sort out poverty, health inequalities and hunger, not just because these are good things to do in their own right, but because there’s a mountain of money to be made out of it. As Jeremy Oppenheim, the Commission’s Programme Director, put it:

“The Global Goals provide a sustainable, profitable growth model for business, and have the potential to trigger a new competitive ‘race to the top’. The faster CEOs and Boards make the SDGs their business goals, the better off the world and their companies will be.”

This is indeed a big idea, but it’s not a new big idea. As I was reading through the Report, I couldn’t help but spot endless similarities with the ground-breaking work done by C K Prahalad and Stu Hart on their ‘Bottom of the Pyramid’ initiative – nearly 15 years ago! Many good things happened as a result of that work, but it did not change the prevailing paradigm. There was no great corporate rush to get after the trillions of dollars identified at the bottom of the pyramid at that time, simply because most companies were not remotely interested in changing their business models – needing to pursue high rates of return and high margins to maximise return to their shareholders.

So here’s the first question: why is it going to be any different 15 years on? Awareness of the continuing damage done by poverty, inequality, hunger and inadequate education is certainly much higher than it was then, but the imperative of squeezing as much profit as possible out of any market opportunity remains undiminished. Lower rates of return, longer pay-back periods and ‘poor margins’ do not feature in many CEOs’ remuneration packages!

2. The Report also calls for a new ‘Social Contract’ between business and civil society, primarily to help rebuild trust:

“Trust in business has eroded so sharply since the global financial crisis, the social fabric is wearing thin. Many see business as reneging on its social contract. Business leaders can regain society’s trust and secure their licence to operate by working with governments, consumers, workers and civil society to achieve the whole range of Global Goals, adopting responsible, open-policy advocacy.”

Historically, as it happens, there’s never actually been a ‘social contract’ between business and civil society – implicit social contracts do indeed exist between civil society and governments, with business regulated or incentivised to help deliver social value over and above the benefits that they generate just by being in business, but that’s a different story.

However, let’s put that to one side! No-one disputes the need to rebuild trust after what’s been a calamitous decade in terms of a combination of endless one-off corporate scandals, and generic, anti-social behaviours that pervade the entire big business world.

So it’s a big ask to suggest a new social contract to help put those things right. The Report advocates two specifics as examples of what this might actually look like: “Paying taxes transparently” and “Ensuring that workers through the supply chain receive a living wage”. Both are critical, both demonstrating a readiness to share more of the total store of value created by businesses with citizens, either via tax revenues or via enhanced incomes for employees.

These are both huge areas of NGO / civil society pressure, and this call from a very significant group of leading companies has been well-received. But the real test of this will be clear evidence (on the part not just of those companies, but from the majority of companies that operate globally) that they’ve moved to do these things in practice, that they’ve supported those civil society organisations campaigning for these causes (such as the Fair Tax Mark, for instance, or the Living Wage Foundation), that they’ve opened themselves up to third party scrutiny to affirm what they’ve done, and that they’ve used their massive leverage with governments and investors to mainstream these behaviours across the global economy as a whole.

That has to be one of the critical hallmarks of sustainability 2.0: not just signing up, but leaning in; not just staying within that charmed circle of progressive business leaders, operating within today’s fundamentally unjust and unsustainable business paradigm, but getting out there to bring others into the fold, to counter the deadweight of regressive, lowest-common-denominator trade associations, and to enable people to hear the voice of responsible wealth creation loud, clear and uncluttered by self-serving hypocrisy.
 

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