Filed under: 11 Conversations, Corporate Citizenship, Multinationals, Predictions, Public Opinion, Trust | Tags: 2013, arctic, Aviva, banking, Banks, Corporate Citizenship, corruption, CSR, Disney, ESG, ethical investing, food waste, HSBC, Kenya, mobile money, Oxfam, predictions, Save The Children, Thomson Reuters
As the world of business gets to grips with how it can reconnect to society, here’s five big conversations that corporates can expect to find themselves having in 2013.
I always thought of corruption as a bit of a victimless crime – but my trip to Uganda really opened my eyes to its effects. It undermines everything: economic development, health services, education, the rule of law, democracy. There are plenty of potential good news stories in developing countries: a new tide of entrepreneurial energy, continuing aid support, trade flows from the fast-growing economies – but all of this is threatened by bribery and corruption. And nobody is in the front line of this problem more than global corporates.
→ In 2013, the big multinationals will need a solid narrative on how they deal with corruption – why it matters, and what they’re doing about it.
The global food companies – agriculture, processing, retail, etc – will increasingly find themselves having conversations about food waste. Currently, 1/3 of the world’s food is wasted – and this won’t have escaped the attention of major NGOs like Oxfam and Save The Children, both of whom are planning major campaigns against in 2013. Food gets wasted whilst growing, distributing and selling food – 1.3 billion tonnes goes to waste each year. This is also a massive waste of manpower, land, water and carbon emissions.
→ In 2013, big companies in the global food system will need to decide whether they’re going to be the heroes or villains of this story.
FUTURE OF BANKING
Just when you thought it couldn’t get any worse, 2012 delivered a fresh series of banking scandals: fraud, money-laundering, sanction-busting. This, combined with continued economic pressure, led The Economist to predict “the fall of universal banking” whilst Slate is predicting a busy year for banking reform. Meanwhile, new payment models are sidestepping the banks: already in Kenya mobile payments account for more than 10% of GDP – leaving the traditional banks to figure out their relevance.
→ In 2013, the big banks will need to explain why they are relevant to the future, and why it will be different from the past.
Rio+20 was the biggest fail of 2012 – but it did show that the corporates world is getting its act together, especially when it comes to measuring and reporting corporate impacts on the world. Forbes suggested Rio+20 was a “tipping point” in sustainability reporting. The Sustainable Stock Exchange Initiative and the Corporate Sustainability Reporting Coalition picked up pace, with leadership from the likes of Aviva, HSBC and Thomson Reuters. Meanwhile, the big accountancy firms all published thoughtful reports on sustainability reporting: Deloitte, PWC and E&Y.
→ In 2013, the bar will be raised on how companies measure and report their impacts on the world. It’s a chance to lead the pack – or get left behind.
Of course for business to truly reconnect with society, corporates need to act boldly – they need to disrupt the atmosphere of negativity and mistrust that has settled around the business world. The past year has seen some striking examples of bold action – such as Disney boss Robert Iger announcing a short-term hit by rejecting advertising of “junk” food and drink, and Total SA oil boss Christophe de Margerie coming out against drilling in the Arctic. Tough decisions like these send a strong signal that some businesses are responding to the expectations of society.
→ Hopefully in 2013 we’ll be talking about more hero companies who have taken decisive action on areas of social concern.
And of course if you want a complete overview of the big debates that corporates are in the middle of, have a look at The 11 Conversations.
Filed under: 11 Conversations, Development | Tags: 11 Conversations, anti-corporate, bankers, Banks, Dambisa Moya, development, jobs, skills, trade
So Dambisa Moyo is in London talking about her new book on resources – Winner Take All – which has been getting lots of attention. I enjoyed meeting Dambisa a few weeks ago, when we were pulling together perspectives for our 11 Conversations work. She talked about business and it’s role in development – particularly jobs, skills and trade.
Thinking about the big challenges facing the global economy today, what is the role that business can play?
I think we’ve forgotten that the most important thing businesses can do is create jobs. To me that is the central conversation we should be having. There are 81m young people out of work around the world between the ages of 18 and 25. Look at the unemployment rates around the world right now, whether it’s the United States hovering above 8 per cent, or Europe, in some countries, at around 20 per cent. What better value can companies add than to create jobs? For example, I’m on the board of a major brewer, and I see that in a country like Uganda there are about 30,000 farmers growing crops that we purchase. It is the most important discussion: how we are going to create jobs and how we are going to address income inequality and help people who are desperate to lead productive lives but are finding it difficult to find employment. How can we actually work with businesses so that they can increase employment?
Nobody would argue that creating jobs is not a priority – but exactly how should businesses be doing this in the developing world?
I am from Zambia, one of the largest copper producers in the world, heavily mineral- dependent. But to benefit from these minerals, you need skills and capital. You need money and you need people with the expertise. We have a great mineral endowment, but we do not have enough Zambian engineers to figure out how to extract the copper. Even if we did have those Zambian engineers, we need money. We need to buy the machinery to convert the raw mineral into copper wire to be able to export it. This is a very practical expertise that the mining business can bring to Zambia, but the same principle applies across the board, whether it is in financial services, consumer goods, or telecommunications. Companies should, and do, invest and provide capital and skills in order to create jobs in this country and around the world, and that really is super-essential.
What do you make of the wave of anti-corporate sentiment we have seen in the past year?
People have lost sight of the value of business specifically and of the capitalist model in general. It is a cycle of negativity. If you look at President Obama’s inaugural speech in 2008, he was very clear. To paraphrase, he said that capitalism has been the best system of delivering economic growth, creating jobs, and reducing poverty. There is no better system. We have more than 300 years of evidence around it. Is capitalism perfect? No, of course it is not. Is there a role for government? Absolutely. But we have forgotten the lessons learned. Whatever successes we are seeing in the emerging world, almost invariably they are mimicking the success story of Europe and the US in years past – I say that because these Western countries have definitely lost their way. If they really go back and look at what sparked the industrial revolution, what actually created these economies over the last 300 years of success, they will see this is exactly what China is doing, what India is doing.
You say there’s a role for government – what do you think it is?
I see three broad roles for government. The first role is to provide basic infrastructure and services – things such as roads, education and national security. These are public goods that we all need but are unable or unwilling to pay for ourselves. The second role is to provide a clear and efficient regulatory structure. Regulations should prevent and punish illegal activity and step in when necessary to correct market failures. The third role is to create a policy environment that incentivizes good behavior. For example, government needs to provide the incentives for people and for businesses to innovate, from discovering penicillin and electricity, to creating the next Google. In How The West Was Lost, I spend a lot of time talking about incentives, because this is what the West has done best.
The global economy is based on economic growth – but can we grow in a way that is sustainable?
There are going to be 9bn people on the planet in 2050. Economic growth means that in 2030 there are going to be 3bn new people in the middle class. There is simply not enough water, not enough arable land, not enough energy and minerals to support living standards the way that Westerners live today. Yet that is what everybody is aspiring to. There are more than 20 wars raging on the planet today with their roots in commodities, and many more are likely to come. It is barely even on the multilateral agenda, and to the extend that it is being added, countries are really responding unilaterally – whether it is America in Iraq or China striking commodity deals. I find it surprising that there is no single global body focusing solely on commodities. It is the one thing that affects everybody.
What about the role of financial markets in sustainable growth?
A major challenge for governments and businesses is to promote economic growth that is also socially responsible and environmentally sustainable. There are already many exciting and innovative businesses that have adopted sustainability as a cornerstone of their business model, but these businesses need capital. By helping to finance these companies, lending to small and medium businesses, and maintaining open credit channels, financial markets can play a huge role in driving growth. If liquidity and capital requirements become too stringent, this is less likely to happen. There is the ever-present question: will the financial services industry be willing to allocate capital preferentially to those businesses that can drive growth? Ultimately it’s not just about discussing bankers’ bonuses: there are much more fundamental issues at stake.
Image of Dambisa source.
Filed under: 11 Conversations
Lucy and I talking about the 11 Conversations and explaining some of the thinking behind the idea:
Filed under: 11 Conversations | Tags: 11 Conversations, Don Tapscott, transparency
We spoke to some really interesting people whilst putting together the 11 Conversations, including Don Tapscott, author of Macrowikinomics. It’s practically a decade since he wrote The Naked Corporation about transparency – a book slightly ahead of its time. Now that Communications is one of the world’s big conversations, I asked him how corporates are really dealing with transparency.
Here’s a Q&A from the conversation, published in the latest edition of the Brunswick Review:
The past few years have seen companies moving towards more open and transparent ways of doing business. What’s driving this?
There are several powerful forces behind this – it’s like a perfect storm. The first is the technology push coming from the web, which is comparable to, and probably more important than, the printing press when it was invented. The printing press gave us access to the written word; the internet enables each of us to be a publisher. The printing press gave us access to recorded knowledge. The internet gives us access to the knowledge contained in the minds of other people on a global basis. So many people get this wrong – they think this is an information age. It’s not: it’s the age of major network intelligence and collaboration.
The second driver is a demographic one: the first generation to grow up in the digital age. They’re the net generation and these kids are different. They have no fear of technology, because it is like the air tothem. They are digital natives. I’m a digital immigrant, I had to learn. They think differently, learn differently, and they are the smartest generation ever.
The third one is a sort of social tsunami. Social media is now becoming a new means of production. In the private sector, it is changing the way that we orchestrate the capability to innovate, to create goods and services. In the public sector, it is changing the way we create public value – and the nature of democracy itself. Just as the internet lowers the cost of transacting and collaborating, it also lowers the cost of dissent, which is why we have these revolutions happening.
So you put all of that together and it is creating a pull for a new kind of enterprise, a new kind of institution. It’s creating a burning platform for change – and that analogy means that the cost of staying where you are is all of a sudden greater than the cost of going somewhere else or doing something radically different. So the industrial age is finally running out of gas and, on the other hand, we can see the contours of new institutions that are emerging.
How should companies go about developing a transparency strategy?
We need to look at the stakeholders – customers, employees, business partners, shareholders and communities – and we need to decide what information is pertinent to these stakeholders. Then we need to look at what information we are currently not disclosing that we could disclose, and what would be the benefits to us of disclosing this information, and what would be some of the dangers or unintended consequences. Then, how do we go about disclosing this information – through what media, through what process? Finally, how do we evaluate the effect of what we’ve done?
Some companies still treat transparency instinctively as a threat. Why do you think that is? I always say if you are going to be naked, you had better be buff. If you’re not buff, then transparency is a threat. But I think companies are increasingly concluding that the transparency train has left the station, the cat isoutofthebag…
The toothpaste is out of the tube … ?
Right. There is no going back, so you might as well get used to it, you might as well figure out how we need to change our behavior and make integrity part of our DNA and everything
And so how is transparency a positive opportunity for business?
For each of the main classes of stakeholders, transparency creates value, so every one of them is a separate story. Take employees: we found that when you increase transparency with your employees you get better trust, you get lower internal transaction and collaboration costs, you get better loyalty, you get a decline in office politics and game- playing and you get a higher-performance organization. So it pays off. This is not about somehow being a good company for altruistic reasons. It’s about being an open company so you achieve higher performance and competitive advantage.
Some people think that transparency is changing the way that companies act in society – making them better citizens. What do you think?
There was the traditional notion of Corporate Social Responsibility – that you can do well by doing good. I don’t think it was true. Lots of companies did well by being really bad – by having terrible labor practices or exploiting the developing world, or by externalizing their costs on to society. But increasingly I think, because of transparency, that idea of social responsibility is becoming true. We know for sure that you can do badly by being bad – look at the banks on Wall Street. Increasingly, I think, companies are going to have to build integrity into their business models.
You use the word “integrity” a lot. What is integrity in business?
Integrity is about being honest, considerate of the interests of others, and accountable – abiding by your commitments. Together with transparency, integrity is the foundation of trust.
And what is trust, in business?
I’ll give it to you in a sentence. Trust in business is the expectation that the other party will have integrity and transparency. The expression, “What are they hiding?” shows the relationship between transparency and trust. It’s very important to have these clear definitions: what is trust, what is transparency, what is integrity?
So what exactly is transparency, anyway?
Well, it took us about two months to come up with this definition: transparency is the opportunity and obligation for institutions (not individuals) to communicate pertinent information to stakeholders – pertinent, meaning it can help them if they receive the information, or hurt them if they don’t.
Filed under: 11 Conversations, Corporate Citizenship | Tags: 11 Conversations, Corporate Citizenship, CSR
So this week we finally launched the 11 Conversations – something we’ve been working on for a while now – basically the idea that just like there are only seven basic plots in drama, there are really only 11 big conversations about the challenges facing the world. We talked to an interesting bunch of people – Unilever CMO Keith Weed, ARM CEO Warren East, out-going World Bank president Bob Zoellick, economist Dambisa Moya, author of How The West Was Lost, and a plenty of others. It’s just been published in the Brunswick Review. Here’s an overview:
The Age of Conversation
It is often said we live in the Information Age – although it might more properly be called the Age of Conversation. Take an average day in 2012. More than 2m blog posts are written – which would be enough to fill Time magazine for 770 years. Meanwhile, 526m people check Facebook every day and upload 300m photos. On top of this, each day there are 3.2bn comments and “likes” on Facebook. That’s a whole lot of liking going on. And on YouTube, 86,400 hours of video are uploaded, and 14m people like, share, and comment on these videos. It is a continuous cycle: post, comment, upload, view, like, respond, share.
Our modern world is an ever-expanding mass of burgeoning conversations: TED Talks, Do Lectures, RSA Animate, MIT World, SXSW, PopTech, the Skoll World Forum, the World Economic Forum, Google Zeitgeist, Clinton Global Initiative, Fortune’s Most Powerful Women Summit, The Times CEO Summit, The Wall Street Journal CEO Council … hardly a week goes by without a high-level global summit, platform, conference or forum. What on earth is everyone talking about?
Where’s the heat?
In spite of the noise, it is possible to pick out some big themes. We have looked at the agendas taken on by the global NGOs, and by global institutions such as the United Nations and the World Bank. We analyzed the talking points of government depar tments and leading multinational companies. It struck us that there is a finite number of themes. Just as journalist and author Christopher Booker once said that there are only seven basic dramatic plots, so we think that there are 11 big conversations – ranging from Population to Education & Skills.
We look at each of these conversations. We begin by asking: what are people actually talking about when they discuss Health, or Security, or Human Rights? Where are the points of contention in the big debates about, say, Population or Communities? In other words, where’s the heat in these conversations today? At any one time, there are areas of real friction. Where the heat is may change over time, but the big conversations stay the same.
Joining the conversations
By the very nature of what they do, the activities of every big corporate inevitably make them relevant to one or more of the world’s big conversations. The most forward-looking of today’s business leaders get that. They are proactive in joining the conversations – because they know that the knowledge and expertise embedded within their business puts them in a position to make a contribution. Time and again we see that when companies do engage, it isn’t just good for society, it’s good for business. When it comes to tackling the world’s big challenges, business has a unique contribution to make.
Here’s the full 11 Conversations graphic with all the topics (click to view):