Globalization is not only here to stay, but is maturing to a next phase - earlier phases being typified by outsourcing and supply chain shifts from "Western" economies to emerging markets. But this next phase will show a marked increase in global integration with China and India in particular being new drivers of demand - not only supply.
The McKinsey study concluded that expectation around adherence to sustainability by companies will become even higher as a result of our entering this next phase. Why? Greater service integration across national boundaries would make intangibles more valuable, and Chinese and Indian companies will need to find ways to demonstrate their "local" loyalties in parallel with their efforts to build globally integrated value systems.
CEO's seemed to agree. When asked which trends would be most important in influencing society's expectations on business "increasing environmental concern" scored highest - a whopping 61%. This was followed by a cluster of three responses scoring in the 30's - Greater demand for and limited supply of natural resources (38%), Emergence of China and India in the global marketplace (37%), and increasing technological connectivity (33%).
There were 7 other responses to this question, all scoring between 6-18%, and included decreasing trust in business, pressure from NGOs, globalization backlash, and overburdened public sectors.
Thursday, July 26, 2007
Tuesday, July 24, 2007
The green business case in Europe
Sometimes a committment to sustainability at the heart of your business pays off - big time. The headlines of the Financial Times in Europe this past weekend read "France an UK push for green tax cuts". Seems that the new leaders in charge of France (Sarkozy) and the UK (Brown) have wasted no time putting the environment first and foremost.
Their main plan is to implement lower Value Added Tax (VAT) on emergy saving goods and services.
Sarkozy was quoted "It is unfair that a polluting car costs less than a car that does not pollute."
The business case cannot get any clearer. Now let's see how long it takes, and how many hoops have to be jumped through for this scheme to actually be implemented!
Their main plan is to implement lower Value Added Tax (VAT) on emergy saving goods and services.
Sarkozy was quoted "It is unfair that a polluting car costs less than a car that does not pollute."
The business case cannot get any clearer. Now let's see how long it takes, and how many hoops have to be jumped through for this scheme to actually be implemented!
Thursday, July 19, 2007
What do CEO's say about sustainability? (Part 2)
Building on yesterday's discussion about perceptions of CEO's about the expectations of society regarding the public responsibilities of companies, today I move on to who CEO's think are having influence on their companies.
The 400 CEOs surveyed by McKinsey & Co cited that not fulfilling sustainability obligations would lead to declining market shares and loss of talent. It is not surprising to find that employees ranked highest (48%) when asked which stakeholder group will have the greatest impact on the way companies manage societal expectations. I was happy to see that customers was the second most important group following closely behind with 44%. Customers need to start voting with their dollar!
Local communities, regulators, media and NGOs came next, all scoring in the mid-20% range. Also interesting from GRI's perspective at the moment as we are going to focus the next year on engaging with report readers, such as the stakeholders listed above, to find out if they are indeed using report information to advance their relationships with companies.
Interestingly investors scored fairly low, only 16%. This doesn't bode well for the hope that many of have about the mainstream investor world waking up to the value of sustainability information. At the moment CEOs seem to think that environmental and social risks and opportunities are not on the minds of investors. A harsh wake up call that we have a long way to go still.
The 400 CEOs surveyed by McKinsey & Co cited that not fulfilling sustainability obligations would lead to declining market shares and loss of talent. It is not surprising to find that employees ranked highest (48%) when asked which stakeholder group will have the greatest impact on the way companies manage societal expectations. I was happy to see that customers was the second most important group following closely behind with 44%. Customers need to start voting with their dollar!
Local communities, regulators, media and NGOs came next, all scoring in the mid-20% range. Also interesting from GRI's perspective at the moment as we are going to focus the next year on engaging with report readers, such as the stakeholders listed above, to find out if they are indeed using report information to advance their relationships with companies.
Interestingly investors scored fairly low, only 16%. This doesn't bode well for the hope that many of have about the mainstream investor world waking up to the value of sustainability information. At the moment CEOs seem to think that environmental and social risks and opportunities are not on the minds of investors. A harsh wake up call that we have a long way to go still.
Wednesday, July 18, 2007
What do CEO's say about sustainability? (Part 1)
My boss (Ernst Ligteringen, GRI Chief Executive) handed me a publication by the consultancy McKinsey & Co today - he picked it up at the recent Global Compact Leaders Summit in Geneva. Its an interesting look at how tides are definitely changing in the mainstream business community. I will feature a few of the most interesting findings over the next few days.
400 Cheif Executive Officers of leading companies worldwide were surveyed about the emerging new rules of competition.
Question: Percent of CEO's that believe society has higher expectations for business to take on public responsibilities (environmental and social) than five years ago: 97% of CEO's from public companies, and 91% of CEO's from private companies agree.
When asked to motivate this, the CEO's cited the rapid erosion of public trust in companies as one indicator that expectations have and will continue to change. Another factor was the shifting emphasis on the creation of long-term shareholder value - and the need to maintain or boost their legitimacy in socitey as one key way to ensure this.
400 Cheif Executive Officers of leading companies worldwide were surveyed about the emerging new rules of competition.
Question: Percent of CEO's that believe society has higher expectations for business to take on public responsibilities (environmental and social) than five years ago: 97% of CEO's from public companies, and 91% of CEO's from private companies agree.
When asked to motivate this, the CEO's cited the rapid erosion of public trust in companies as one indicator that expectations have and will continue to change. Another factor was the shifting emphasis on the creation of long-term shareholder value - and the need to maintain or boost their legitimacy in socitey as one key way to ensure this.
Friday, July 13, 2007
Goldman Sachs links corporate responsibility to market leaders
The study came out late last week at the UN Global Compact Summit in Geneva - those of us not used to seeing the GS name associated with corporate responsibility took note! Mainstream investors have always been wary of sustainability and sustainability reporting - could it be that we are witnessing the winds of change?
The study's main finding is that companies that are considered leaders in environmental, social and governance (ESG) policies are also leading the pack in stock performance—by an average of 25 percent.
More specifically, in an analysis of more than 120 ESG leaders from five different industries—energy, metals and mining, food and beverage, pharmaceuticals and European media—Goldman found that companies in four of the sectors for which it had published reports (energy, mining and steel, food and beverages, and media) outperformed the MSCI world Index by an average of 25 percent since August 2005. 72 percent of the companies on the list outperformed industry peers.
This is a significant result for those of us trying to convince companies that a commitment to sustainability is indeed rewarding!
Interstingly, the main complaint Goldman researchers had was that disclosure remains an issue, the data is hard to get and is not consistent. Sarah Forrest, head of the research project said "We call on companies, industry groups and regulators to address this challenge."
Look no further, GRI Guidelines are here!
The study's main finding is that companies that are considered leaders in environmental, social and governance (ESG) policies are also leading the pack in stock performance—by an average of 25 percent.
More specifically, in an analysis of more than 120 ESG leaders from five different industries—energy, metals and mining, food and beverage, pharmaceuticals and European media—Goldman found that companies in four of the sectors for which it had published reports (energy, mining and steel, food and beverages, and media) outperformed the MSCI world Index by an average of 25 percent since August 2005. 72 percent of the companies on the list outperformed industry peers.
This is a significant result for those of us trying to convince companies that a commitment to sustainability is indeed rewarding!
Interstingly, the main complaint Goldman researchers had was that disclosure remains an issue, the data is hard to get and is not consistent. Sarah Forrest, head of the research project said "We call on companies, industry groups and regulators to address this challenge."
Look no further, GRI Guidelines are here!
Thursday, July 12, 2007
Anniversaries: Halfway to 2015
I read today that July 7th 2007 was the official halfway point in our long journey towards achieving the Millennium Development Goals - or MDG's as they are affectionately known. Back in 2000 the UN convened governments of the world and managed to reach agreement that we would commit ourselves to an agressive agenda to rid the world of its worst development problems by 2015.
The goals include:
- Halve the number of people living on less than a dollar per day
- Ensure ALL children complete primary school, and educate boys and girls equally
- Significantly reduce child mortality rates, and maternal mortality rates
- Halt the spread of deadly diseases like HIV
- Havlve the number of people who do not have access to water and sanitation
- Increase aid and improve governance
By most accounts these goals won't be met by 2015 - at least if we continue along the rate we are going today. Enormous strides have been made on some of these issues in specific countries, but on the whole it is an uphill struggle. One school of thought that has been surfacing lately is that governments cannot possibly do all of this alone. The private sector has a role to play - but what?
Economic value-added is the main contribution a company can make - provide jobs directly or via the supply chain, pay taxes, and invest in infrastructure. Many companies that operate in emerging markets are actively playing a role here and are conscious of the MDGs and their role as a key partner. But what about maternal mortality and childhood education? Most companies do not see themselves as having a responsibility to provide social services or infrastructure that typically falls into the domain of governments.
Will we remain in this stalemate, or is there a future where the public and private agendas could be more closely linked?
The goals include:
- Halve the number of people living on less than a dollar per day
- Ensure ALL children complete primary school, and educate boys and girls equally
- Significantly reduce child mortality rates, and maternal mortality rates
- Halt the spread of deadly diseases like HIV
- Havlve the number of people who do not have access to water and sanitation
- Increase aid and improve governance
By most accounts these goals won't be met by 2015 - at least if we continue along the rate we are going today. Enormous strides have been made on some of these issues in specific countries, but on the whole it is an uphill struggle. One school of thought that has been surfacing lately is that governments cannot possibly do all of this alone. The private sector has a role to play - but what?
Economic value-added is the main contribution a company can make - provide jobs directly or via the supply chain, pay taxes, and invest in infrastructure. Many companies that operate in emerging markets are actively playing a role here and are conscious of the MDGs and their role as a key partner. But what about maternal mortality and childhood education? Most companies do not see themselves as having a responsibility to provide social services or infrastructure that typically falls into the domain of governments.
Will we remain in this stalemate, or is there a future where the public and private agendas could be more closely linked?
Wednesday, July 04, 2007
Anniversaries: The Universal Declaration of Human Rights is 60
... well, it's still only 59. But we got an email from Mary Robinson (former Prime Minister of Ireland, and currently the head of the Ethical Globalization Initiative)and Chris Avery (Director, Business & Human Rights Resource Centre) asking for our ideas about how the 60th anniversary of the Universal Declaration of Human Rights in 2008 might be marked.
We couldn't resist but to suggest that the 60th Anniversary should be the year of transparency. How can things start to change if we don't even have a good understanding of what is happening, the cause and effects, and the roles and responsibilities?
Worldwide, the human rights agenda has reached a cross-roads. Stakeholders agree that human rights are a core necessity – but the roles and responsibilities of governments, business, and civil society towards achieving these goals remain less defined.
At the global level, Professor John G. Ruggie was appointed Special Representative of the UN Secretary-General on Business & Human Rights in 2005. Under this mandate, extending until 2008, Professor Ruggie is convening a multi-stakeholder process for the UN-High Commissioner for Human Rights to draw out the current “state of play” on stakeholder responsibilities on human rights. This process will result in a set of recommendations on the roles different groups play towards achieving human rights.
The GRI’s own multi-stakeholder approach is part of the current global dialogue on human rights and will make a contribution to the greater understanding by business, civil society and governments about expectations, roles, and responsibilities.
Human rights disclosures in the G3 Guidelines will need to evolve in step with these changing expectations. We are just starting with the process to evolve the indicators, so if you want to get involved, please do!
We couldn't resist but to suggest that the 60th Anniversary should be the year of transparency. How can things start to change if we don't even have a good understanding of what is happening, the cause and effects, and the roles and responsibilities?
Worldwide, the human rights agenda has reached a cross-roads. Stakeholders agree that human rights are a core necessity – but the roles and responsibilities of governments, business, and civil society towards achieving these goals remain less defined.
At the global level, Professor John G. Ruggie was appointed Special Representative of the UN Secretary-General on Business & Human Rights in 2005. Under this mandate, extending until 2008, Professor Ruggie is convening a multi-stakeholder process for the UN-High Commissioner for Human Rights to draw out the current “state of play” on stakeholder responsibilities on human rights. This process will result in a set of recommendations on the roles different groups play towards achieving human rights.
The GRI’s own multi-stakeholder approach is part of the current global dialogue on human rights and will make a contribution to the greater understanding by business, civil society and governments about expectations, roles, and responsibilities.
Human rights disclosures in the G3 Guidelines will need to evolve in step with these changing expectations. We are just starting with the process to evolve the indicators, so if you want to get involved, please do!
Tuesday, July 03, 2007
Anniversaries: The Brundtland Report is 20
The year was 1987 and Gro Harlem Brundtland was the Prime Minister of Norway - and busy chairing the UN's Commission on Environment and Development. The findings of this Commission were captured in a handy little booklet called "Our Common Future" where the term "sustainable development" was first coined.
I read an article by Bill Baue recently and he reminded readers that "Sustainability is an ancient concept, best articulated in the Gayaneshakgowa, or the Great Law of Peace of the Six Nations Iroquois Confederacy: "In our every deliberation we must consider the impact of our decisions on the next seven generations."
Fast forward to 1992 to find this blogger up to her eyeballs in an undergraduate degree where every single course related to sustainable development assigned an essay asking us to define, debate, justify, or reject the term "sustainable development" - I remember thinking how ironic it was that we were expending all our brain cells trying to define and re-define this new term (or prove it to be an oxymoron) when all I really wanted to know was how I could put it into practice.
And here we are in 2007 and this blogger is still trying to find ways to put sustainability into action. Looking back over the past 20 years we seem to have concluded that the term "Sustainable Development" is not infact an oxymoron, which is a good start, and we have indeed found some great ways to put the concept into action - but that it still remains on the fringes of our economy, society, and environment - the very things the concept was meant to lie at the heart of.
What do you think?
I read an article by Bill Baue recently and he reminded readers that "Sustainability is an ancient concept, best articulated in the Gayaneshakgowa, or the Great Law of Peace of the Six Nations Iroquois Confederacy: "In our every deliberation we must consider the impact of our decisions on the next seven generations."
Fast forward to 1992 to find this blogger up to her eyeballs in an undergraduate degree where every single course related to sustainable development assigned an essay asking us to define, debate, justify, or reject the term "sustainable development" - I remember thinking how ironic it was that we were expending all our brain cells trying to define and re-define this new term (or prove it to be an oxymoron) when all I really wanted to know was how I could put it into practice.
And here we are in 2007 and this blogger is still trying to find ways to put sustainability into action. Looking back over the past 20 years we seem to have concluded that the term "Sustainable Development" is not infact an oxymoron, which is a good start, and we have indeed found some great ways to put the concept into action - but that it still remains on the fringes of our economy, society, and environment - the very things the concept was meant to lie at the heart of.
What do you think?
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