Big companies really are getting to grips with responsible business, despite what everyone might think, argue Andy Wales, Matt Gorman and Dunstan Hope

Many people who work within big businesses have been in countless conversations, often in a pub or around a dinner table, where smart people who work in other sectors – health, education, the civil service, the voluntary sector – struggle to believe that big business is anything other than “bad”.

The story of big business as the “villain” grew through the 1980s and 1990s as NGOs highlighted cases of environmental damage, such as oil spills, human rights abuses, and child labour in Asian supply chains.

Of course we still have oil spills, including BP’s recent disaster in the Gulf of Mexico. And recently we have seen further allegations of UK retailers buying from companies which use child labour.

If you just read those media stories – as most of the public do – then you might assume that in the last 20 years not much has changed.

Central strategy

But actually a great deal has changed, especially in the last ten years. We have seen many major companies set out on a journey over the past decade, understanding that issues previously viewed as corporate social responsibility, philanthropy or environmental compliance are increasingly important to business strategy.

It’s a journey that will take those companies some time, as there are no quick fixes for the scale of social and environmental challenges that society faces.

It is also important to acknowledge that there are a whole range of companies who have not yet really started the journey, especially many small and medium enterprises. Yet our experiences working for and with major global businesses have shown us that it is happening, and the influence of those companies on their peers, suppliers and customers is significant.

Whether we see the pace and scale of change we need from the business sector in the coming decade will be a good test of both the seriousness with which this is being integrated into strategy, and the extent of these leading businesses’ broader influence.

We believe that five new realities are emerging that mean some major global businesses are now more likely to be leading calls for environmental protection rather than lagging behind them; to be promoting human rights rather than ignoring them; and to be working with NGOs in partnership rather than always in response to campaigns.

Shared risks mean shared responsibilities

Companies are moving beyond a philosophy of enlightened self interest to recognise that they are but one institution that faces shared risks and therefore shared responsibilities. The largest global companies – especially those that depend on scarce land or water resources, such as food and beverage companies, will be the first to see and respond to new “tragedies of the commons” in the coming decades.

Some of the world’s largest companies are leading projects to understand environmental resource scarcity and ensure that these resources are managed successfully to support generations to come.

The 2030 Water Resources Group, a collaboration between the International Finance Corporation, McKinsey, Coca-Cola, Nestlé, SABMiller, Standard Chartered and others, is a good example of a public/private partnership that aims high to tackle the clear shared risk of global water scarcity.

These businesses are involved because they can foresee the impact of widespread water scarcity across the world on their medium- and long-term growth prospects. They understand that the water challenge is a global and local policy conversation, much bigger than business, that has been going on for a long time already.

What the businesses bring is a different angle on the challenge, helping governments understand that water scarcity is not just a development or an ecological challenge, but also an economic growth challenge. It is an area of policy where not just the water or environment ministry need to be active and engaged, but also the agriculture ministry, the energy ministry and the overall planning or finance ministry.

Currently the companies are working with the World Economic Forum and governments to get into detail in key countries – such as India and South Africa – to improve water resource management locally, including within the companies themselves.

Challenges addressed through collaboration

Company/NGO philanthropic partnerships have existed for a long time, and there are also some longstanding supply chain standards collaborations. The Forestry Stewardship Council was one of the earliest of these.

Yet there is now a much more widespread and systematic approach to partnerships developing. A whole range of companies, NGOs and governments are not only establishing standards for different sectors but also building from the alignment that common standards create to try and resolve some of the most intractable social challenges we face.

When the potential role of internet companies in restricting freedom of expression and privacy first generated public interest the issue was presented in typically simplistic terms: large and powerful companies were putting their own commercial self interests ahead of the needs, rights and interests of their users. Internet companies such as Google, Yahoo! and Microsoft were no longer portrayed the purveyors of freedom; they were now the major villains in freedom’s demise.

Yet in October 2008 these very same companies joined together with major human rights NGOs, investors and academics to launch a new coalition, the Global Network Initiative, designed to take a collaborative approach to the protection of freedom of expression and privacy online. The GNI has been able to make significant progress in three main areas. First, GNI’s Principles and Implementation Guidelines offer valuable direction to companies across the whole communications industry on what to do when faced with difficult demands from governments that may lead to violations of user rights to privacy and freedom of expression.

Second, whole new avenues of collaboration on human rights issues among companies, NGOs, academics, and investors have opened up. In the face of increasingly significant moves by governments around the world that threaten user-generated content and privacy, a new coalition of networked and informed advocates has been created.

Third, and significantly, two new communities have emerged: communities of people inside internet companies who are now much more familiar with human rights, and communities of people inside human rights organisations who now have a much better understanding of the implications of new technology.

With communications technology increasingly pervasive in our modern lives – and with growing challenges to individuals’ human rights – this development is not one to be underestimated.

Being trusted has never been so important

When companies are exposed as having abused human rights or attacked for undermining environmental standards, nowhere is it more keenly felt than internally. Surveys of recent university graduates regularly cite the perception of the social responsibility of a company as a major reason for choosing a particular business to work for and this remains an important issue once people get into their careers.

Yet businesses often lead social change through innovation, and sometimes the process and perception of innovation can erode rather than build trust.

The debacle with genetically modified crops in Europe a decade ago is a good example of a failure to have that society-wide conversation. But a number of senior business people – including Peter Brabeck, chairman of Nestlé – have in recent years come out in favour of GMOs as a solution for the world’s growing food supply challenge.

This is a risky strategy given the history of GMOs, but it may be a more appropriate time to articulate what some of the benefits could be to the public at large. Population growth, climate change and water scarcity are all putting pressure on food supplies and GMOs do offer some benefits in terms of increased yields and crop resistance to harsher growing conditions, such as drought.

Many campaigners maintain that GMOs continue to present unacceptable risks to the environment. How do companies ask challenging questions without compromising the trust that is so critical?

The issue of nanotechnology provides some interesting examples. Nanologue was a collaboration between leading European environmental institutions such as the Wuppertal Institute in Germany and Forum for the Future in the UK, and funded by the EU. It held detailed consultations with a range of stakeholders and then developed potential scenarios for how the technology might develop and how the world might respond.

In a similar vein, the Innovation Society, a Swiss company, is the facilitator for an ongoing multi-stakeholder dialogue regarding the opportunities, risks and concerns surrounding the development of nano technologies.

Public policy changes

Changes in public policy to address sustainability challenges will increasingly shape the business operating environment.

Action from government to address global challenges is beginning to re-shape the regulatory and market context within which business operates. Despite some of the current delays in climate policy, this trend will likely accelerate as the urgency for action grows.

Leading businesses increasingly recognise that while there is often a strong business case for companies to take action on sustainability, in many cases public policy intervention is also needed. And in those cases, they recognise that it is far better to engage constructively in the co-creation of policy approaches that achieve sustainability outcomes consistent with business success than to shout from the sidelines and be subject to poorly crafted legislation.

Perhaps the most striking example of this shift is how leading companies are engaging the development of global policy to tackle climate change.

The Corporate Leaders Group on Climate Change provides one example of how companies are helping to support that government action and to define the kind of policies that will be both environmentally credible and economically efficient. It is based on the simple premise that businesses and government have been caught in a catch 22 when tackling climate change.

Governments have felt that their scope to introduce long-term policies, frameworks and financial incentives for emissions reduction are limited because they fear that lobbying by the business community will stand in their way. Companies have been unable to bring initial investments in low carbon solutions up to the scale required because of lack of long-term policy frameworks and financial incentives to support them.

At Copenhagen more than 700 major global companies, representing industrial interests in every sector, signed the Copenhagen Communiqué, calling for an “ambitious, robust and equitable global deal on climate change”, with cuts in carbon emissions for between 50 and 85% by 2050.

It is relatively early days still in terms of widespread corporate engagement in progressive climate policy. Major companies have an important role to play in trying to keep momentum behind globally aligned climate policy despite the short term political difficulties in some markets.

Sustainability as opportunity

The successful companies of tomorrow are treating sustainability as an opportunity for innovation, not as a risk to be mitigated. A decade ago, addressing social and environmental challenges was frequently viewed by big business as solely an exercise in risk management.

The contrast between this risk mitigation approach and the innovative approach taken by the leading businesses of today is stark. An increasing number of businesses view these global sustainability challenges not just as risks to be mitigated but also as opportunities to drive innovation.

The successful companies of tomorrow will not be those that carry on with business as usual, but those who view solutions to these global challenges as drivers of innovation and opportunities to develop the successful products of tomorrow.

An intriguing example is provided by China Mobile, the world’s largest telecommunications company by number of customers (over 500 million), size of their network and market capitalisation.

China Mobile serves two masters. On the one hand it is a Chinese state owned enterprise (SOE), 74.25% owned by the Chinese government. On the other hand it is quoted on the New York and Hong Kong Stock Exchanges with 25.75% of its stock owned by public shareholders.

To meet the expectations of these two masters the company needs to meet two potentially conflicting ends: the return on investment required by its public shareholders and the broader public policy objectives of the Chinese government. Yet so far the company appears to have successfully achieved both.

Focus on priorities

The Chinese government has prioritised economic development in rural areas and the modernisation of agricultural techniques. As a result China Mobile set about ways to meet these public policy goals through the provision of new products and services.

The company set up a rural information network that became a primary source of agricultural, market and business information in rural communities, established new pricing structures that were affordable in rural communities and expanded its network to the most remote areas of China.

But rather than viewing these activities as a supplement to its core business, expansion in rural areas became a key factor in China Mobile’s growth strategy – indeed, during this time around 50% of its new customers came from rural areas. Other global telecoms companies are following its lead.

We will continue to have conversations in the pub or at the dinner table informed by preconceptions about big business being bad all of the time. And we cannot deny that big business still has a way to go.

Yet the cases presented here show an approach and commitment from big businesses to resolving some of these challenges that was not evident ten years ago. Those working in this area day to day know that. But most people whose only engagement with such companies is as customers are often completely unaware of this change, and so their cynicism regarding big business remains.

We need a healthy dose of scepticism at all times, but given how much difference big business can make once it understands why corporate strategy and environmental and social challenges align, an accompanying sense of optimism wouldn’t go awry either.

Andy Wales is global head of sustainable development at SABMiller. Matt Gorman is director of corporate responsibility and environment at BAA Ltd. Dunstan Hope is managing director of the information and communications technology practice at Business for Social Responsibility.

Big Business, Big Responsibilities: from ‘villains’ to ‘visionaries’, by Andy Wales, Matthew Gorman and Dunstan Hope, is published by Palgrave Macmillan.



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