Olympics in China, the US presidential election and more climate change talks – just some of the highlights of the year ahead
John Russell, managing editor: The predictions we made for 2007 seemed to have been generally borne out by events. Where do you see things going in 2008 on the corporate social responsibility front?
Paul Hohnen, Ethical Corporation advisory board member: Yes, the expected “ABC” focal points of Africa, BRICs [Brazil, Russia, India and China] and climate change were not far off the mark, and will continue to be prominent in 2008. Overall, we will continue to see a shift away from the philanthropy and volunteering end of the CSR spectrum towards a more integrated sustainability strategy, where enterprises evolve their business model towards more measurable contributions to sustainable development. And more challenges on the question of how far voluntary and free-market measures can take us to where we need to be in terms of meeting the challenges of climate change, human health, sustainable growth and the like.
JR: Climate change is set to dominate the business and political agenda in 2008. What progress do you see being made?
PH: Climate change will certainly take centre stage. Indeed, some fear that climate concerns could displace attention given to other issues, such as local communities, but I’m not so sure. For business, however, it will be a “climate and …” agenda. Business is bumping up against the limits of what can be done on climate change within a voluntary framework. That’s why we’re seeing a rash of calls for a clear legal regime to succeed the Kyoto Protocol.
Contrast, for example, the posture of the business community before the Kyoto climate negotiations in 1997, and before Bali in December 2007. Ten years ago, apart from the notable leadership of the insurance and banking sector, most of the business community was either actively lobbying against binding targets and timetables, or silent. Now the wind has changed entirely.
In the run-up to Bali, several new business coalitions were formed – including in the US – to push for stronger, legally based, commitments. Climate change has been accepted as an issue and leading businesses are jostling for a share of the growing energy efficiency and low-carbon technology markets. There’s also recognition of the reputational risks: with the IPCC [Intergovernmental Panel on Climate Change] science firmer than ever, who wants to go down in history in 2008 as opposing climate change?
Toby Webb, founding editor: Business coalitions will continue to push governments for more action – and surety – on climate change and in particular the carbon price. Financial institutions are wringing their hands in despair right now about the lack of a real carbon price and the European Union Emission Trading Scheme must begin to prove its usefulness in 2008. While heavy industrial companies in the cement, steel, aluminium, power generation and car industries are making climate change moves, many will likely lobby against carbon auctioning for some time. 2008 may be the year when large companies have to be a little more honest about the limitations of energy reductions beyond a certain point.
Companies outside these sectors making the running in the fast moving consumer goods and retail areas such as Cadbury and Marks & Spencer will have to begin thinking about whether they can ever sell nuclear as ethical to customers and non-governmental organisation partners as plans get further under way to introduce more nuclear.
Those companies pledging research budgets and large cash donations to tackle climate change, such as Exxon and HSBC, will need to start talking about what these might deliver too, in real terms. It will be an interesting year for the offsetting market. Can carbon offsetting gain sufficient credibility to survive and grow? Can it convince customers?
JR: The Beijing Olympics in August will thrust China onto the world stage. Will it be a great coming out party?
TW: The Chinese government has had a big debate on what to do next summer about the hordes of western journalists set to descend on Beijing. Many will be less interested in obscure sports and be more interested in heading out into the countryside to interview peasants and non-governmental organisations about what’s really happening on the land, and in the cities. Right now it looks like the Chinese will let most, if not all, hacks into the country, but what happens then remains to be seen and will be interesting to watch. Can a country “manage” its coming out party with the eyes of the world on its shortcomings? No, but how they handle the press and associated activists will be telling, and it will be interesting to see how China-based foreign non-governmental organisations are viewed post-Olympics.
JR: Beyond China, human rights seems set for greater focus in 2008, doesn’t it?
PH: Absolutely. As you have reported throughout the year, the next chapter in the work of John Ruggie, the UN special representative, will be key. In the realm of human rights as much as environment, there’s still a wide gap between the clarity of the rights and obligations agreed by governments, and the application or implementation of those rights at the national level.
While at a formal level the business sector has been right to say that international treaties do not automatically apply to it, it also recognises the need for a practical, level playing field. It does not seem to be tenable for governments to make commitments on, for example, labour conditions, which are then routinely breached in practice. This not only undermines the value of governmental leadership and international law, but also erodes confidence in business. In many respects, the corporate social responsibility phenomenon is nothing less than an attempt to reach a practical consensus on how internationally agreed norms can be implemented most effectively.
TW: In 2008 I would hope that more and more companies start to understand that corporate social responsibility doesn’t matter a damn if institutional frameworks are not functioning in the nations they operate in. By that I mean many will start thinking further about what they can do to further the basics in many countries: business rules, human rights enforcement, local will and capacity for implementation.
Already in Latin America we’re seeing companies work more closely on encouraging a better business climate for small companies, and in Africa, corporate catalysing of customs reform and human rights training for judges by NGOs are good examples of lessons that may be picked up. In Asia more companies will begin to engage suppliers on how to run better overall businesses, rather than just audit bad firms and hope they improve.
JR: US presidential elections stories will run all year until the final vote in November. How do you see this one playing out?
TW: It’s a rock and a hard place. The Republicans are incompetent, at least by current showing, and the Democrats are dangerously populist and highly union funded. The unions will want their pound of flesh at some point and that may mean more protectionism. On the upside, if Clinton wins we may see the most pragmatic, centrist candidate possible, as long as she can resist disadvantaging importers with barriers.
Also, whoever does come in will “get” climate change to some degree, which is positive. But on both labour and environment, the slowdown in the US, likely to continue into 2009, means to me that whoever wins, they’ll pander to the jobs and import barriers lobby in some significant way.
PH: As is well known, US politics tends to degenerate quickly into over-simplified positions. The main thing the incoming president needs to do is review all of the ways it can help harness the power of US business to do good. This will involve some exercise of regulatory functions, but also use of “soft powers” as the convening role to raise awareness and encourage greater respect for labour and environmental issues. US firms such as Wal-Mart and US banks have made a lot of progress in recent years in terms of setting up CSR policies for supply chains and investments.
JR: Isn’t the road running out for corporate social responsibility in some ways? How far can CSR claims keep going unchallenged, for example?
PH: In some ways I expect 2008 to be a “Year of Reckoning” on the accountability front, and not before time. Take sustainability reporting, for example. It’s now been a decade since the Global Reporting Initiative [GRI] was established. Since then, sustainability and CSR reports have become commonplace, at least among listed global companies. While these reports vary widely in depth and breadth, it’s time to take stock. Why aren’t more organisations reporting? What can be done – especially by governments – to scale up the process? What impacts are reports having, either within reporting enterprises or externally?
There is plenty of anecdotal evidence of reporting-driven change, but so far it hasn’t been well captured and analysed. There’s also the issue of who is reading reports. We really don’t know enough about who is reading them, and what use is being made of the information.
JR: Doesn’t this consideration apply equally to initiatives such as the UN Global Compact and the various sectoral CSR instruments?
PH: Absolutely. Market uptake and effectiveness are not necessarily the same thing. It’s essential that the efficiency of all CSR instruments is kept under review. The problem is, however, how to measure their impacts. You can argue that the Global Compact’s main objectives are to raise awareness and support for its ten principles, and to create a platform for experience sharing. In these respects, it is doing well.
But there are growing calls for the Global Compact and other initiatives to show specific examples of change at an organisational level. Reduced greenhouse gas emissions, fewer cases of human rights violations and so forth. Part of this might be met by increased reporting – “communications on progress” – in the Compact’s terminology, but this still has a long way to go.
JR: An increasing number of companies seem to be putting sustainability and CSR issues at the heart of their advertising. How long can this last?
PH: We’re seeing an exploratory phase. Everyone knows that issues such as climate change will be with us for a long time, but that consumer attention can be fickle. Along with sex and greed, fear has proven a hardy theme in advertising so perhaps it might work with sustainability. But this raises another aspect of accountability. More attention will be given to the burgeoning corporate labels and claims about superior performance. Especially in the post-Bali environment, the bona fides of claims about “carbon neutrality” and “carbon offsets” will obviously receive closer scrutiny.
Interestingly, NGOs have been generally behind the play in challenging these claims: it has mainly been left to the markets. It will be important for the various high profile “CO2 neutral” commitments by the likes of News Corp, HSBC and others to come up with some pretty firm evidence of their strategies and achievements if the credibility bubble isn’t to burst. The same goes for Tesco and its carbon labelling and Timberland with its “eco-foot print” data on shoe boxes. Some of these claims will be solid, but others may not stand up to rigorous analysis.
TW: It’s here to stay. It’s a virus you can’t get rid of. That’s probably a good thing and I am generally convinced that for all the media’s faults, with bumps along the road, good companies get recognised in the end. So if their claims are real, they will stand up. It will be interesting to see what regulators like the UK’s Advertising Standards Authority begin to do on green claims. Standards and proof of progress will be more and more vital.
The most important theme that I hope will emerge in 2008 around corporate communication is a realisation that no-one is going to hand you evidence-based management tools on a plate. You have to go and find out your liabilities and opportunities deep inside your company, and you need time, people and resources to do it. Taking standardised data that your sector peers use and fitting it into GRI, for example, will not do it, and will be a dangerous way to go. Companies must study themselves, their operations and issues, and act and report accordingly.
JR: Paul, you were quick to welcome the 2007 G8 Summit’s focus on CSR. Given the fact that the G8 is slightly notorious for not following through on its commitments, isn’t it a risk that the Japanese presidency might drop the ball?
PH: My guess is that it will be very hard not to maintain the momentum. First, the Heiligendamm Summit actually asked the OECD Secretariat – a respected international organisation – to follow through on some specific issues, together with the International Labour Organization and the UN Global Compact. This will ensure some independent impetus.
Second, governments are beginning to recognise that CSR commitments can be an effective way of complementing legislation and advancing human rights and other sustainable development goals. In fact, most of these goals will not be achieved without a fully engaged business sector. So it’s in their interests to stimulate more business interest in CSR approaches.
Third, CSR is a natural issue for the Japanese government to focus on. Japanese companies have been in the lead in many areas – think of Toyota with its “Zero Emissions” approach – and their high level of sustainability reporting. While social performance has not always been as strong as the environmental side of things, the 2008 G8 Summit might be the place to help nudge things along.