Guest Article #8

Time to Bring Corporate Sustainability to Scale

Never before in recent history has there been such widespread uncertainty about the future. Major developments are shaping our world, raising important questions about the proper role of business and the legitimacy of markets.

First, while the adoption of austerity measures has been a painful adjustment for countries in many parts of the developed world, a good portion of the world's economic might and growth has gradually been shifting from Europe and the West to the East and South.

At the same time, rising inequality and widening gaps between rich and poor have become global phenomena. Income gaps in OECD countries have reached the highest levels in 30 years and are even more pronounced in many emerging economies.

As a result of rapidly eroding trust in markets, institutions and leadership, citizens are demanding more equality, freedoms and accountability. Popular protests from Wall Street to Moscow are expressions of global discontent that cuts across economic, social and political spheres.

And continued stress on natural resources threatens to disrupt economies and societies around the planet. More than one billion people lack access to food, electricity or safe drinking water. Climate change remains a critical issue, and ecosystems are in dramatic decline.

Many argue that business is at the heart of many of these problems. But this sweeping indictment fails to see the potential of business, if properly channelled, to produce many of the solutions needed to drive positive and transformative change.

The good news is that thousands of companies already incorporate environmental and social issues into their agendas. The UN Global Compact alone counts nearly 7,000 corporate signatories in 150 countries driving innovation in areas as diverse as energy and climate change, women's empowerment and anti-corruption.

However, most companies simply aren't doing enough. Sustainability as a value proposition has not yet gained global acceptance. With an estimated 80,000 multinationals and millions of smaller enterprises, much remains to be done.

This June's UN Conference on Sustainable Development, commonly known as Rio+20, will be a unique chance to move the corporate sustainability agenda to global scale, but it will require government and business to deliver on a variety of critical fronts:

  • Corporate governance – at the Board level – must recognize environmental and social issues as critical to long-term business success. Companies must strengthen their boards' ability to understand and oversee social components as a complement to their roles in assessing business strategy, risk management and legal compliance. Such oversight will ensure that implementation will cascade throughout the value chain.
  • Businesses must also heed the call of a new generation of investors and other stakeholders and report publicly on their sustainability performance. While there is great appetite for increased disclosure, investors typically find reporting in the environmental or social realms to be insufficient. A global policy framework to disclose sustainability information in line with annual financial or other reports would go a long way in helping business to communicate more transparently on these issues – or explain why they do not.
  • While governments are ultimately responsible for developing institutional frameworks, they cannot solve the world's challenges alone. Transformative public-private partnerships that engage governments and society at all levels build on the relative strengths and competencies of each actor and can have lasting positive impacts on policy, market structure and social norms.
  • Responsible lobbying and advocacy must be supported at the highest levels. Lobbying actions often conflict with a company's stated values and take a lowest-common-denominator approach rather than pursuing long-term interests. Governments should adopt smart regulatory frameworks and incentive structures so that the dinosaurs of business are not rewarded above environmental and social performance.
  • 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 with shifting values and preferences.

The courage to deliver what we call a new contract between business and society will help generate and restore balance and boost growth in the marketplace. Of course none of this can happen without strong political leadership. But as a growing number of companies embrace the sustainability challenge, political leaders will be encouraged and inspired to do their part.

The UN Global Compact will host the Rio+20 Corporate Sustainability Forum from 15-18 June in Rio de Janeiro. More information: www.compact4rio.org.