Who will clean up global commerce?

With natural resources diminishing, corporate profits are in the firing line. Should companies be doing more to introduce sustainable business practices and, if so, how should they go about it?

 

CEOs need to get hands-on: many business leaders are unaware how quickly issues like global warming will affect profits. Photograph: Jodie Griggs/Getty Images/Flickr RM

Few play the system better than big business. Whether it’s getting the lowest prices from suppliers, convincing us to buy their stuff or keeping the taxman at bay, corporations reign supreme.

But what happens when the system starts playing them? Corporate capitalism is getting closer and closer to finding out. By putting profits first and the planet second (at best), businesses are helping accelerate many of the most concerning “megatrends” of our age.

Corporations might not be overly concerned about climate change, resource scarcity, food insecurity and so on today, but you can bet they will be tomorrow when these planetary problems set their profits plummeting.

Finding ways to right this system before it’s too late formed the basis of a recent roundtable discussion, hosted by the Guardian in association with global financial services firm PwC. At the heart of the debate was one basic question: what role can and should companies play in changing the existing system of global commerce to make it more sustainable?

At the table

• Jo Confino (Chair) Executive editor, Guardian News and Media
• Mike Barry Head of sustainable business/Plan A, M&S
• Jon Williams Partner, PwC
• Chris Brett Global head corporate responsibility and sustainability, Olam
• Geoff Lane Partner, PwC
• Chris Cook Global sustainability director, AkzoNobel
• Louise Ellison Head of sustainability, Hammerson
• Wiebke Flach Head of membership, ETI
• Tim Haywood Group finance director and head of sustainability, Interserve
• David Meller Director of product integrity, The Fairtrade Foundation
• Katherine Teague Head of advocacy, AB Sugar
• Darren Thomson EMEA vice-president of marketing and chief technology officer, Symantec
• Estelle Brachlianoff Senior executive vice-president, UK & Ireland, Veolia
• Mark Wong Director of strategic communications and corporate affairs, Sime Darby
• Michael Beutler Director of sustainability operations, Kering

Delegates discussed how corporates can collaborate to address global problems. Photograph: Sam Friedrich

Three points became immediately clear. First, action is needed now. Everyone around the table, which comprised sustainability experts from the corporate and charity sectors, agreed about the urgency of the question at hand.

Second, a similar consensus emerged, regrettably, concerning the lack of business leadership. John Williams, a partner at PwC, put it most clearly when he argued that most chief executives have “no idea” how quickly issues like global warming and water scarcity will affect their businesses.

Finally, the idea that business can’t divest itself of responsibility won wide agreement. The private sector needed to step up and take a role in “rewiring” the existing system, Williams stated. And not just one business at a time: the need for collective action across industry was a core message from the debate.

Indeed, if one word characterised the discussion, it was “collaboration”. Chris Brett, head of corporate responsibility and sustainability at Olam, echoed the views of many when he said companies needed to sit down with their peers and determine a “joint roadmap for accelerating sustainability”.

The gap between what is competitive and “pre-competitive” has shifted, argued Brett. He added:

“To be able to sit with people and transparently talk about what your common issues are – and what the common solutions are – is really coming to the forefront now.”

If that sounds easy, it’s not. For companies operating in a competitive environment, it’s “not second nature just to connect and talk about this stuff”, admitted Darren Thomson, chief technology officer at US software firm Symantec. For this reason, he believes independent organisations have a vital role to perform, bringing key industry players together.

One such organisation is the Ethical Trading Initiative (ETI), a cross-sector coalition that seeks to promote workers’ rights. According to ETI’s head of membership, Wiebke Flach, effective collaboration takes leadership, clear responsibilities, transparency and, in the case of global supply chains, a reduction in the power of “certain middlemen”. Mike Barry, head of sustainable business at Marks and Spencer, pointed to the Consumer Goods Forum as a tangible example of how collaborative approaches can influence systems change. This cross-sector alliance brings together many of the world’s largest food manufacturers and retailers, he explained, and aims to make a “material difference” in two areas: curbing deforestation and eliminating HFC-based refrigeration.

Although the forum may not convince all the sceptics – big retailers are still flogging product as they always have done – it has, at least, enabled the food sector’s big hitters to trust one another enough to make have a meaningful, productive conversation, said Barry. “Think of it as version 1.0 of system change,” he added.

Opinions differed on the precise way progress should be achieved. In one camp sat those who held to a “linear” view of progress: if a business does A, B and C in sequence, then, the argument runs, D will ultimately come about (D being systemic sustainability).

Among those subscribing to this approach was Chris Cook, global sustainability director at Dutch paints and chemicals firm AkzoNobel. Businesses, he said, need to: set a corporate sustainability vision (“Planet Possible” in his company’s case); provide employees with the tools and incentives to embed it; measure progress; and celebrate success when it happens. “It’s good, sensible change-management stuff, but it takes a lot of grind,” he said.

The approach adopted by AB Sugar follows a similar path. Everything has to start with a clear idea of the end point, emphasised Katherine Teague, head of advocacy at the UK sugar producer. She said:

“We’re getting our people to think about what the future will look like and how we can deal with the tricky issues that will come along.”

In addition to the usual management tools, however, companies need to pick their priorities, she stated. “We can’t do everything. So we need to think at a local level about what we can do, but also at a global level about what we all need to do.”

In the other camp, some argued that systems aren’t linear, but complex and interdependent – so the solution couldn’t just be linear either. Estelle Brachlianoff, senior executive vice-president for Veolia in the UK & Ireland, argued that a circular (or “round”) mindset was required.

Companies are only one cog in a much larger wheel, her argument ran. Improvements to a company’s internal systems may be welcome, but they need to be linked to the efforts of others if we’re to see large-scale change. That may be “very difficult and very complex”, she conceded, but it is also “very exciting”.

Others objected to pursuing a linear “incremental” approach on the grounds of scale and urgency. Chipping away at a company’s carbon emissions here or cutting waste there simply won’t change the system fast enough, said David Meller, director of product integrity at the Fairtrade Foundation. His solution: a radical redesign. “The nature of the change,” he said, “needs to be so different that the system might have to look fundamentally different. So when we talk about systems thinking, we shouldn’t necessarily talk about the system as we know it. We should step outside it and almost redesign it.”

Nor is it necessary to map everything out at the start. Instead, we should “learn by doing”. Innovation and experimentation – not data sheets and strategy statements – are the engines of change, he argued. “We need to recognise that systems change is not a precise science,” he argued. “You need to take risks and be able to give things a go.”

Meller’s advocacy of a “systems doing” approach (as opposed to just “systems thinking”) chimed with Tim Haywood, head of sustainability at support service and construction company Interserve, who confessed to taking inspiration from his daughter, a climate change campaigner. He said:

“The idealism of youth is something we all need to connect back to, rather than being weighed down with all the reasons not to [try something].”

Many would assume that therein lies financial ruin. Not Haywood (who is also Interserve’s finance director). Despite being “new to the game”, his company recently tabled a bid for a £600m government contract to provide probation and rehabilitation services. Having gone back to fundamentals to consider the “root cause” of prisoner reoffending, they drew on the expertise of three major charities with expertise in combating drug addiction, homelessness and social exclusion – and produced a successful combined bid.

In an ideal world, businesses would realise for themselves the need to build a more sustainable system. After all, it’s in their interest – healthy profits ultimately require a healthy planet. Yet too few business leaders twig this. Even when they do, the commercial benefits are often not clear enough or immediate enough, said Mark Wong, director of strategic communications and corporate affairs at Sime Darby. “People on the ground say: ‘That sounds fine, but what’s in it for me?’”

Hence, the hesitancy among many to leave the private sector to fix the system on its own. As PwC’s Williams said by way of conclusion: “Most CEOs go through a risk assessment and they all conclude that it [systems change] is just too risky.”

An inevitable conclusion is that legislators need to step in. It fell to Louise Ellison, head of sustainability at property management firm Hammerson, to spell it out. “The problem is so big that at some point somebody is going to have to say: ‘Clearly there are solutions that can work in that industry, so you’re just going to have to deliver them.’ It will have to be mandated.”