The prevailing mood of crisis management, short-termism and populism has led to a crisis in leadership and the need for business to deliver collaborative solutions to global challenges. It’s time for business to exercise leadership.
In these uncertain and tumultuous times, forward-looking leadership is high in demand but too often short in supply. In the face of historic challenges, I fear that widespread leadership for the long-term collective good is in a deep freeze. Several trends are especially troubling.
First, people and countries are more dependent than ever on each other, yet our willingness and ability to cooperate is diminishing. Science, technology, the free flow of ideas, trade and investment have improved the lives of people around the world on a scale never seen before. However, the very system that has supported global integration is under stress and shows serious cracks. Crisis management, short-termism and populism characterise much of our fragmenting world. Walls are going back up and so is the prospect of nationalism, populism and protectionism – all leading to an inability to cope with global threats.
Further, narrowly defined national interests are gaining the upper hand. The institutions and ideas that have supported interdependence no longer have the required political endowment. The vision held by the post-war architects that durable peace and prosperity can only be built on the foundations of interdependence no longer enjoys universal support. A vision of trade, investment and entrepreneurship to create and spread wealth is being eroded, as is a vision of political freedom and social fairness. To abandon multilateral cooperation and rule making would allow a downward spiral that could lead to economic chaos such as in the 1930s.
The case for collective solutions to shared challenges in a globalised world seems obvious. Yet, despite plain evidence, agreement and solutions have not proven easy to find – whether on global trade, climate change or financial restructurings. And while we have stalled on the leadership front, our problems have not only moved ahead at rapid pace, but also become more connected and complex due to globalisation.
Our world is at critical juncture – economically, socially and environmentally. Over one billion people lack access to food, electricity or safe drinking water. Most of the world’s ecosystems are in decline. Inequality and widening gaps between rich and poor are global phenomena. Climate change and population growth are expected to make these challenges even worse. The negative implications for natural resources, health and security fundamentally threaten the prosperity and productivity of economies.
With systems ill-equipped for the long-term, most politicians focus on delivering within election cycles and markets remain obsessed with short-term returns, meaning that corporate sustainability is not properly valued. Billions of people still are just trying to survive on a day-to-day basis in these tough economic times. It’s no wonder that we are in paralysis when it comes to collectively solving problems that exist beyond our borders. In a world driven by urgency, there simply is not enough appetite by politicians, the private sector and people to look beyond their own interests.
A clear case for corporate sustainability
With the stakes this high, we should all be concerned, but business leaders in particular. Business’ ability to innovate and grow depends critically on the collective system to support peace, prosperity and basic human freedoms. While we face a political paralysis on global challenges, the business case for sustainability has strengthened substantially.
Leading executives understand that our global marketplace requires a stronger ethical orientation, better caretaking of the common good, and more comprehensive management of risks. There is growing recognition from all corners that when companies embed universal sustainability principles throughout their organisations, it is good for both business and society.
Companies are increasingly putting corporate sustainability on their agendas in financial, social, environmental and ethical terms. Corporate leaders see that global environmental, social and economic challenges can, and do, affect the bottom-line. Market disturbances, social unrest or ecological devastation have real impacts on the supply chain, capital flows, public opinion and employee productivity. Over 7,000 companies have already committed to embrace universal values advocated by the UN Global Compact, contribute to market stability and act on critical issues.
This is a great start but too many companies are still doing nothing. Universal values have not penetrated business strategy and leadership, nor have we seen the depth of action needed. With an estimated 80,000 multinationals and millions of smaller enterprises, much remains to be done to reach critical mass.
It is time for business to step up its efforts. We must reach companies that have yet to embrace corporate responsibility; motivate less-advanced companies to deepen their commitment and efforts; and spur front runners to lead the way to the next generation of sustainability performance.
Potential for transformation
Corporate sustainability, if practiced by a critical mass of companies, can be a transformative force for change. It is a collaborative and innovative space that is not waiting idly for direction, but is charging ahead based on the risks and opportunities at hand.
While working towards the common good remains integral to the corporate sustainability agenda, it is no longer the ‘selling point’. Today, sustainability issues – as covered by the Global Compact principles – are understood to be real factors in the long-term viability and success of companies, whether small suppliers or large transnationals. With participants in more than 140 countries and Local Networks in more than 100 countries, corporate sustainability is a concept understood globally. Businesses come from nearly every industry and sector, and from developed, emerging and developing economies.
The Global Compact and others have developed guidance and best practices to advance implementation. We have also established platforms for business to lead the way on key issues such as climate, water, gender and children’s rights. For example, through the Caring for Climate initiative over 400 business leaders have pledged to advance low-carbon solutions and help make the green economy a reality. The CEO Water Mandate provides a framework for water sustainability policies and over 450 companies have endorsed the Women’s Empowerment Principles, which help the private sector advance gender equality.
Other key areas of sustainability are also progressing. Transparency is on the rise, as companies increasingly communicate with stakeholders on their sustainability work annually through public reports. NGOs and companies, and corporate competitors are partnering in ways not previously imagined to fight collective challenges – such as corruption and climate change. And mainstream investors and business schools are driving companies to act, thanks to the work of groups such as the Principles for Responsible Investment – with 900 investors managing assets up to US$30 trillion – and the Principles for Responsible Management Education initiative – with more than 400 academic institutions.
At the UN Conference on Sustainable Development (Rio+20) in June 2012, the private sector showed that it is willing to be part of the solution and is moving ahead with force. Our Corporate Sustainability Forum, held on the sidelines of Rio+20, provided the largest private sector track ever for a United Nations event. The goal was to bring business and other stakeholders together to put forward the most promising pathways for transforming markets in ways that will contribute to a more sustainable world. With hundreds of commitments to action announced in Rio, business proved that corporate innovation and collaboration on sustainability are gaining pace – exemplifying a larger effort underway by thousands of companies around the world.
Georg Kell, Executive Director, United Nations Global Compact
Key architect of the Global Compact since its 2000 launch.
Oversaw launch of Principles for Responsible Investment (PRI) and Principles for Responsible Management Education (PRME).
Being at the leading edge of the UN’s private-sector engagement since 1987.
New York, USA
WHAT IS THE UN GLOBAL COMPACT?
Launched in 2000, the United Nations Global Compact is a both a policy platform and a practical framework for companies that are committed to sustainability and responsible business practices. As a multi-stakeholder leadership initiative, it seeks to align business operations and strategies with ten universally accepted principles in the areas of human rights, labour, environment and anti-corruption, and to catalyze actions in support of broader UN goals. With 10,000 corporate signatories in 145 countries, it is the world’s largest voluntary corporate sustainability initiative.
Founding Partners of the Global Compact Network Australia include: Accenture, Allens Arthur Robinson, Australia Post, KPMG, Nestlé, St. James Ethics Centre, Westpac and Woolworths. Gen.a is also a UN Global Compact participant.
WHAT BUSINESS CAN DO NOW
Companies everywhere now must do more of what is sustainable and put an end to what is not. Chief executives must show leadership and actively orient their business towards corporate sustainability in a number of ways:
Ensure that corporate governance systems recognise environmental and social issues as critical to long-term business success, for example strengthening directors’ abilities to understand and oversee social components.
Integrate sustainability issues across the organisation – from the Board, through the organisation and subsidiaries, and into the supply chain. Join Global Compact issue platforms to drive performance and impact.
Goods and services that respond to the growing demand for more sustainable solutions should be encouraged and rewarded. Consumers and markets are ready for them, but incentive structures have not kept pace.
Make a commitment to action – individually or in partnership – on a sustainable development issue with clear targets and accountability measures in place. Transformative public-private partnerships can have lasting positive impacts on policy, market structure and social norms.
Turn to civil society, local communities, employees and academia for input and feedback on practices and plans. Collaborate with governments, other companies and civil society in partnerships that address collective challenges – where combined efforts are more powerful than going it alone.
Heed the call of a new generation of investors by publicly reporting on sustainability performance.
Ensure that lobbying actions do not conflict with your company’s stated values and do not take a lowest common denominator approach. Appeal to governments to adopt smart regulatory frameworks and incentives that reward business for environmental and social performance.
Spread this message to your peers, partners and customers that have yet to act – those sitting on the fence or even actively opposing change. It is time for us all to wake up to the urgency of sustainability; scale up our actions; and speed up the delivery of collaborative solutions.