Sustainability Watch: Trust and the triple bottom line
Nooyi took combative position on behalf of the corporate sector
Reflecting their growing significance to businesses across all sectors, issues around sustainability, climate change, food security and the like are now much discussed at the World Economic Forum's (WEF) annual get-together in Davos.
Last month's meeting proved to be no exception and, in particular, witnessed an interesting debate about the current low levels of public trust in corporations, entitled Doing Business the Right Way.
In any debate about public trust in business, it is usually the financial sector that is firmly in the line of fire and it was notable, if predictable, that no representative from a major banking corporation was prepared to stick their head above the parapet on this occasion.
The food industry has its trust issues too. The fallout from the horsemeat scandal is still radiating, whether the industrialised food sector is acting responsibly with regard to global agricultural resources is examined constantly and food companies are always in the frame when it comes to debates about diet and health and the global pandemic in non-communicable diseases.
But, gratifyingly, the food industry was well represented. PepsiCo chairman and CEO Indra Nooyi, Richard Goyder, CEO and managing director of Wesfarmers, the Australian diversified retail group and owner of Coles, as well as Feike Sijbesma, CEO and chairman of food ingredients group DSM, taking part.
Where this debate broke not necessarily new but certainly less trodden ground was in the direct linkage between the task of restoring public trust and notions of corporate sustainability and the triple bottom line.
Basing his view on a survey PricewaterhouseCoopers had just completed of 1,300 CEOs from around the world, Dennis Nally, chairman of PwC International, said public trust in business is at "an all-time low". He also pointed to the relationships between governments and business being at their "lowest point".
As the debate progressed, all the panellists linked the task of restoring that trust with a sustainable, long-term approach to business. Aron Cramer, president and CEO of Business for Social Responsibility, said in today's world it is necessary for companies to "tie strategy to the big challenges we face".
Sijbesma added: "We should realise that the role of business in society has been changed. A hundred years ago it was about running the economy, providing jobs. Today, the boundaries between what is public interest and what is private interest has been blurred."
Companies, he continued, have a public responsibility towards the environment and social issues, and need to make clear that they recognise that responsibility to "create value on three axes, people, planet and profit, and not only profit". Unless they do so, Sijbesma said, "distrust will remain".
So, whatever caused the distrust, the solution lies in companies redoubling their sustainability efforts.
Nooyi took a rather combative position on behalf of the corporate sector. In fact, from the start her position might be characterised as relatively unapologetic. That may well be indicative of her confidence that her company - and perhaps her industry - does not have too much to apologise for. One wonders whether she would have been quite so bullish had she been stationed in the UK over the past 12 months.
Nevertheless, she maintained it was necessary to indentify which areas of business are truly responsible for the erosion of trust, "because 90% of business is still doing things the right way". Citing an improvement in the Edelman Trust Barometer, Nooyi said trust in business was in fact moving in the right direction.
And what Nooyi had to say with regard to that wider responsibility businesses have for the greater good was particularly interesting. She not only believes business has to be engaged but companies are in fact the only organisations that can bring about change.
"I think, today, businesses are the only functioning entities around the world. They create the jobs, they are the engines of efficiency," she said, adding that without business economies cannot be successful, "especially at a time when governments are unable to enact policy within countries or on a coordinated basis around the world". Nooyi said NGOs had a role in terms of raising issues but they don't create jobs, ergo they cannot provide the solutions.
For Goyder, the breakdown in trust is regrettable because he too believes business to be a "big part of the solution" to problems facing society. In the current environment, however, "policymakers are seeing it as their role to make it in a sense harder for business and put in more constraints", and are failing to put policies in place to "sustain and support" companies and allow them to grow.
In other words, businesses are the only organisations that bring about change, and governments should therefore be empowering them rather than hampering them.
The idea of companies being prevented from doing the right thing for society and the planet by misguided governments would not be a picture recognised by many NGOs, let alone followers of the Occupy movement and their ilk.
But, leaving that polarity of perspectives aside, would companies be allowed to do this by investors narrowly focused on the short term? Another key theme from the discussion is the way in which the increasing focus on short-term financial return is militating against sustainable business strategies.
However, Nooyi said short-term investors were a minority, albeit a vocal one. She also criticised the media for giving too much prominence to an already vocal minority and "amplifying the bully-pulpit" of short-term investors. She insisted many in the investment community share the long-term vision.
Echoing Sijbesma's view, Goyder says business "understands that our role is far greater now than just creating wealth for our shareholders".
He said: "We need to create wealth for all our stakeholders, our employees, our suppliers, our customers, the environment and the communities in which we work and our shareholders." This is, of course, one of the recurring questions in any discussion of sustainable business, and it was no surprise that it surfaced once again in this debate.
Cramer seemed to think the problem did not lie just with short-sighted investors, but with the system. "We currently have public markets that over-emphasise short-term returns, and it's very hard to deal with these systemic questions if you've got that," he said. "And so business has a huge stake in advocating for a trading system that places more value on long-term decisions."
Sijbesma also spoke of providing value and improving the lives of all stakeholders, not just stockholders, and suggested systemic change was required.
Returning to the nub of the debate, if trust in business is at "an all-time low" and a proactive approach to sustainability is seen as a critical component in gaining or regaining public trust, it should follow that the coming few years will see a further ramping-up of activity around sustainability, for reasons of self-preservation as much as the global imperatives around the environment and health that are also acting on the corporate sector.
However, if there is one thing that characterises the sustainability arena it is good intentions and this was a discussion about sustainability at Davos where some would say words speak louder than actions. So, we will have to wait and see.
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