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?

GRI Book Club: The Wal-Mart Effect

The Financial Times ran a news story yesterday with the headline "Wal-Mart postpones its green report." Seems that a draft circulated to its main stakeholders "was rejected as inadequate" according to the journalist. The world's largest company had originally promised a sustainability report by mid-2007 - a promise made back in 2005 when shareholders and advocacy groups put Wal-Mart under fire on their sustainability practices.

I see a real opportunity for Wal-Mart here - they have the chance to revolutionize the practice of reporting and make real strides towards understanding their sustainability footprint and reinforcing the global movement toward a common language for reporting. Fingers crossed they also see it that way.

No one really knows how Wal-Mart sees such things claims Charles Fishman - author of "The Wal-Mart Effect". Its an easy-to-read book which I am about 3/4ths of the way through. Mainly it's about the economic impact that Wal-Mart has on communities and its suppliers, but just last evening I came across a case study on the Chilean Salmon industry which highlights the power Wal-Mart could weild on workplace and environmental conditions if it so desired.

Fishman outlines the boggling growth in aquaculture in Chile, and the fact that about 1/3rd of that country's total output is bought by Wal-Mart. The problem is that this intensive fish farming is causing coastline damage and is polluting the sea beds underlying hundreds of pens jammed with millions of Atlantic Salmon (incidentially - the species is not native to Chile). Processing factories have sprung up and replaced subsistence agriculture as the main form of employement for people in the region. For the price to remain as low as $4.85 per pound of Salmon at Wal-Mart you can imagine that rehabilitating the environment or providing up-to-code working conditions for factory laborers are not on the priority list for these suppliers.

All I know is less than $5 a pound for Salmon sounds a bit fishy :-)

But imagine if Wal-Mart demanded low priced fish but produced via adherence to basic environmenal and labor rights codes? Fishman points out that "the result could be a completely new kind of Wal-Mart effect - Wal-Mart using its enormous purchasing power not just to raise the standard of living for its customers, but also for its suppliers."

From G3 to G8

Guest blogger: Debbie Dickinson

There’s been quite a buzz throughout the GRI network over the past two days, as the GRI was mentioned yesterday in the official results from the G8 summit in Germany.

You really can’t help but feel the momentum gaining when eight of the world’s most influential leaders join together and formally encourage organizations to use the GRI framework.

The organizing principle of this year’s G8 summit in Germany is “Growth and responsibility”. Yesterday afternoon featured a session on corporate responsibility and transparency and sustainable growth, in which the reference to GRI was made:

“The development of a consolidated set of principles and guidelines… would help ensue that the [mining] sector contributes to development while at the same time providing a clear and more predictable set of expectations for investors.” The G8 said. As a means to achieve such goals the G8 members said “We encourage mining sector companies to undertake regular reporting using inter alia the Global Reporting Initiative (GRI) framework.”

As well as highlighting mining companies, G8 members also referenced GRI in relation to SMEs, investors and the contribution of transparency and good governance to sustainable development, especially in emerging economies. The GRI network has been something of a buzz since this G8 reference was made.

It strikes me how fast the agenda is changing. A few years ago, we were aiming for mainstream acceptance of sustainability reporting. Whilst challenges still lie ahead it’s nonetheless hugely encouraging to receive political backing and leverage from an international event of as significant as the G8 Summit. To imagine that corporate responsibility and transparent reporting is being linked with good investment and strong development outcomes in as high-profile arena as the G8 summit is a pretty strong indicator that the “old” ways of doing business really are fast becoming outdated. These ideas are some that the network has spent years evidencing – and sometimes on unresponsive ears.

That corporate responsibility and the GRI is amongst the G8 agenda of hard-hitting issues like climate change and African development (two of the major themes of the Summit) is also hopefully a strong signpost for the seriousness with which governments, companies, civil society and others respond to the issue now and in the future.

Perhaps the scale of momentum is causing the buzz through the network at the moment…

Check out the press release, and news story on this event. All the latest happening from the Summit can be found on the G8 2007 website.

Assessing futures: where is globalization leading us?

Many people think that globalization in a new phenomena, but I would say it has been simmering under the surface for centuries since the times of early traders and explorers. Technology, for the most part, has lead to an unprecedented acceleration of interconnectivity between people and goods in the last decade or so. Most experts agree that "globalization" is HERE rather than HAPPENING now that 20% of the world's GDP is made up of global trade - and this is only set to grow.

The consultancy SustainAbility has put out an innovative report looking at four different scenarios for how the future might unfold. It's a complex report and the scenarios are all somewhat rattling - even the most optimisitc which results in a world where demography, politics, economics and sustainability all gel - but only after a terrible pandemic nearly paralyzes the world but yet shakes us into accepting a new way of living and working together.

I have found in my career thus far that it is wise to heed SustainAbility's recommendations, as they are usually on target. Here are the seven recommendations for business they come up with after playing out four very different potential scenarios:

-plan for the unexpected
-engage in the South
-Don't expect "nice" companies to come first
-co-evolve Earth's eco systems
-think opportunity and innovation
-reach beyond comfort zones to find new models
-take a stand and exercise vision, leadership and courage

It's long, but it's worth a read!

Hungary: gearing up for privitaization

Since visiting Slovakia last week, my curiousity about Central and Eastern Europe has been peaked. It's 17 years now since the 'iron curtain' fell and some countries have been fairing better than others in their journeys to establish democracies and stable economies.

One that is slightly ahead of the pack is Hungary. I was speaking to some Hungarians that traveled over to Slovakia for the G3 Breakfast event we held last Friday and they had an interesting story to tell about how sustainability was playing a role in business suceess there. They warned me that we can expect 5-10 new sustainability reports this year out of Hungary. I asked why.

They answered that many Hungarian companies are gearing up for privitization after decades of public ownership and governmental control. Some of the country's most important utilities, service providers, and national brands are opening up for private investors - from within Hungary and from abroad. Many are producing a sustainability report as a part of the package they are preparing to attract the most competitive offers. Showing that they adhere to high standards of environment, health, safety, product responsibility, labour practices, anti-corruption, and governance seems to help improve the value of the company.

That's a concrete business case if I've ever heard one.

Slovakia: Just getting started

After two days here in Bratislava as the guest of Pontis Foundation and the Business Leaders Forum I can say that I think we have successfully infected the local business community with the sustainability bug!

The economy is booming - nearly 10% growth per year - yet all business people I met felt that even this rate was too slow and the country had much to do to catch up. With such rapid growth of Slovak companies, the introduction of multi-nationals (I met representatives from Orange, Daimler, HP, Tesco, etc) and urbanization on the rise, everyone is trying to ensure that all this growth doesnt happen at a cost to the future economic vitality of the country.

Yesterday's full day conference attracted over 120 participants who were engaged in sessions on everything from the business case for sustainability, the GRI, the Global Compact, community investment, cause related marketing, employee and gender issues, and philanthropy. This morning we gathered about 40 people where I walked them through a more in-depth look at the GRI Guidelines. Guests from Czech Coal and Denso Hungary who have used the Guidelines for a few years now were able to present their company's business case for reporting, along with the challenges and benefits that reporting has brought them.

The prognosis? I think we will start to see some country level reports here in Slovakia - many country units already contribute to the parent company report so putting something out for the national audience won't be a difficult first step. Important will be to engage and build capacity for smaller enterprises to start with reporting. This will happen as Slovakia is held to the same standards for environmental and social performance as its other counterparts in the European Community, and pressure will be on for greater disclosure.

All in all a great trip and a facinating first look at one of Europe's newest members and how sustainability is taking shape here.

Emerging markets: suppliers differentiating themselves

I appreciate Stephen's reponse to yesterday's post (check it out -its a good one!) and here is his key point which I didn't articulate as clearly "I would find it counter-productive to promote relaxed standards for emerging markets, meanwhile promoting the idea of embracing progressive CSR principles as a way of creating both social and economic value."

This conversation is reminding me of my trip to Sri Lanka in December 2005. I joined my colleague Naoko from the secretariat to attend a working group meeting of the Apparel and Footwear Sector Supplement hosted by a supplier to many major brands called MAS Holdings in Columbo. Besides being a personally emotional trip due to the one year anniversary of the deadly tsunami, it was also a professionally inspiring trip.

It seems the business community had decided that it simply could not compete with its massive neighbours India and China on labor prices, so it had no choice but to compete on quality instead. As a result the government ratified nearly 30 international conventions on environment, labor, and human rights, and is on an agressive time frame for implementation. Interesting to note that Sri Lanka has ratified many conventions that leading economies such as Australia and the USA have not even ratified - where the customer base for most Sri Lankan produced products are located!

Leading Sri Lankan businesses are already shifting their practices to reflect these new higher standards, and they are positioning themselves as uniquely competitive in the marketplace as they are able to deliver quality goods at a good price but within the context of the environmental, labor, and human rights conditions that European and North American discerning consumers expect.

Governments, businesses, and workers seem to be united behind the strategy for Sri Lanka as a whole to develop a reputation for quality based on their environmental and social commitments - thereby making it worth that extra few cents for fabrics sourced there and helping to improve working and living conditions for an entire nation in the process. My understanding is that Sri Lanka is already being rewarded under trade agreements from 'Western' nations as a result.

From GRI's perspective, the public disclosure aspect is a vital ingredient in this picture - companies must prove they are performing to higher social and environmental standards through the use of a credible public disclosure standard.

Emerging markets: Held to the same standards?

One of the big topics in the GRI network is whether or not the Sustainability Reporting Guidelines as they stand today are applicable - and should be expected for use - by companies and other organizations in emerging markets.

Some say that the bar should be lowered and the standards made 'easier' for companies as a way to entice them to just get started, especially in regimes where the laws for environmental and social conditions are not as stringent as they are in OECD countries and therefore companies have a longer way to go to get up to par with competitors elsewhere.

But in a recent conversation with Mervyn E King, the new chair of GRI's board, an expert in corporate governance, and a native of South Africa, I heard a different story.

King says attracting investment – including foreign investment – in the private sector is a key to energizing economies in some of the poorest nations worldwide. This will only happen if there is both real and perceived adherence to best practice in business management and corporate governance since investors must feel confident.

A study in 2000 published by McKinsey & Co in their Investor Opinion Survey illustrates the point. The survey found that 84% of the more than 200 institutional investors questioned are willing to pay a premium for shares in a well governed company, over one considered poorly governed but with a comparable financial record. The actual premium varied from country to country, for example, a well governed company in the UK would see investors willing to pay 18% more for shares than a poorly governed company. But importantly, the premium went even higher in emerging markets. For example, investors would be willing to pay 27% more for a well governed company in Indonesia or Venezuela versus what they would pay for a poorly governed company with similar financial performance in those same countries.

From his perspective one of the drivers behind the use of international standards, including the GRI Guidelines, is to raise the standards of business management and governance quality worldwide, thereby strengthening the economy and society as a whole. One way a company can prove it is well governed and worthy of investment is to be transparent about its risks and opportunities related to sustainability.