16th January 2015
BUSINESS WITH PURPOSE – PUZZLING OUT THE ORGANISATIONAL JIGSAW
As the influential Financial Times columnist Martin Wolf wrote in 2014 in a typically thoughtful and trenchant piece: “Almost nothing in economics is more important than thinking through how companies should be managed and for what ends. Unfortunately, we have made a mess of this. That mess has a name: it is “shareholder value maximisation”.” (Financial Times Aug 27 2014)
In our October 2014 paper for Coca-Cola Enterprises Combining profit with purpose we endorsed the argument of Charles Handy that each business should define its purpose for itself.
Implicit in the work of Corporate Responsibility coalitions like Business in the Community in the UK and similar business-led coalitions which now exist in almost all of the world’s 100 largest economies, is the notion that businesses should take responsibility for their social, environmental and economic impacts, and, therefore, have a purpose other than simply seeking to maximise shareholder value. These coalitions do important work in helping to change the business zeitgeist, contextualizing the need for responsible business and developing the agenda for more responsible business practices.
Mark Goyder from the think-do tank Tomorrow’s Company has drawn on the experience of family and other types of business to develop a process which he describes as a board mandate:
“A mandate captures the ‘essence’ of the ‘character’ and distinctiveness of the company, in terms of: its essential purpose; its aspirations; the values by which it intends to operate; its attitude to integrity, risk, safety and the environment; its culture; its value proposition to investors; and plans for development. It is a living statement about what the company stands for and how it wishes to be known to all of its stakeholders.”
An important new tool which can provide a practical framework for companies wishing to define their purpose, is the “Blueprint for Better Business” . By fostering dialogue and supporting companies, this charitable initiative encourages businesses to adopt Five Principles of a Purpose Driven Business:
• Has a Purpose which delivers long-term sustainable performance
• Honest and fair with customers & suppliers
• A Good Citizen
• A responsible and responsive employer
• A guardian for future generations.
Once companies have used a framework like the board mandate or the Blueprint, it is even more important that they have the metrics to measure performance, drive continuous improvement and account to stakeholders. The Global Reporting Initiative and Integrated Reporting, now supplemented with an increasing volume of sector specific and material metrics from the Sustainability Accounting Standards Board provide frameworks and tools for reporting. Used effectively, they can also facilitate benchmarking. Given continuing low levels of trust in business, companies need greater transparency and accountability on some of the really tricky “wicked issues” that defy neat, simple answers such as responsible executive compensation or corporate tax strategy. Here particularly, the process of stakeholder dialogue, external scrutiny and transparency offered by Responsible100 is especially useful.
John Elkington (@volansjohn) recently asked in a GreenBiz blog: “are we nearly there yet on sustainability?” (www.greenbiz.com/article/john-elkington-are-we-nearly-there-yet-0 ) Patently we are not, but we will surely make more progress if we recognise and embrace this growing eco-system of organisations with tools and approaches helping businesses to become more sustainable and to adopt societal purpose.
David Grayson is director of the Doughty Centre for Corporate Responsibility.
14th January 2015
A Manifesto for Responsible Business * - David Grayson, director of the Doughty Centre for Corporate Responsibility
A quick checklist for companies wishing to see how far they are yet embedding their commitment to corporate sustainability and responsible business.
Companies should be encouraged to:
- Build corporate responsibility into their business purpose and strategy, in a way that makes sense to the particular business, ending adherence to the notion that the purpose of business is to maximize shareholder value – when optimizing shareholder value for the long term should be the consequence, not the purpose
- Ensure there is effective board oversight and governance of the company’s commitment to corporate responsibility – with whatever structure (dedicated board committee, extended remit for existing board committee, mixed board/ executive or executive committee reporting to board, or otherwise) that suits the culture and governance philosophy and requirements of that business and its business circumstances
- Review the management skills and perspectives the company needs going forward. Ensure that if the company’s leadership believes sustain- ability, stakeholder-engagement and partnership-building skills are critical areas of competence, these are evaluated as part of talent-management and succession-planning, rewarded in performance and compensation reviews, and specified in the executive education commissioned by the company from business schools and other providers. And ensure that recruiters from the company understand these requirements – there is little evidence that they do today
- Ensure that investor relations departments are capable and confident in explaining how improving ESG performance is integral to overall corporate strategy and contributes to long-term value-creation, and that they are proactive in explaining this, especially to their institutional investors
- Build sustainability into R&D, innovation and new business development strategies so that the commitment to corporate responsibility is leading to new products and services, access to new or under-served markets or new business models on a regular basis, and collectively leads to business transformation
- Scope regularly their most material ESG risks, opportunities and impacts and prioritize action to minimize negative impacts and maximize positive impacts
- Report publicly on the company’s performance against these ESG priorities, ideally with independent, third-party verification
- Ensure close functional and operational alignment between any dedicated corporate responsibility or corporate sustainability function and other business units and support functions rather than operating in isolation. Companies should create senior-level cross-functional committees that include senior business unit leaders and other key corporate functions as well as the sustainability and corporate responsibility leaders to drive the company’s strategy and priorities.
*From "Corporate Responsibility Coalitions: The Past, Present & Future of Alliances for Sustainable Capitalism", David Grayson and Jane Nelson (Stanford University Press and Greenleaf Publishing, 2013)
16th January 2013
One Word of Truth – David Grayson, director of the Doughty Centre for Corporate Responsibility on Michael Woodford’s “Exposure” (Portfolio Penguin, 2012)
“One word of truth outweighs the whole world.” Those words, from the Russian novelist Alexander Solzhenitsyn’s Nobel Prize speech, resonated with me back in the early 1970s as a teenager with an emerging political consciousness. Indeed, geek that I was, I learnt the entire speech by heart!
I was reminded of “One Word of Truth” when I read the new book, “Exposure” by Michael Woodford, ex CEO of the Japanese headquartered company, Olympus. I was given the book by a good friend as a Christmas gift. I had been intending to buy it since it was first published but somehow had not got round to getting it. If you are in a similar “good intentions situation”, don’t delay! Get “Exposure” and read it!
“Exposure” is the story of Woodford’s lonely campaign to expose a massive cover-up at Olympus designed to hide losses on an industrial scale from high-risk trading on financial instruments, which had gone spectacularly wrong.
Reviewers have previously commented that “Exposure” reads like a John Grisham thriller. Indeed, as the scene shifted regularly from Tokyo, to London, to Southend (where Woodford’s family lived) and to New York and back, you could easily imagine the screen-play for the already planned movie.
Michael Woodford experienced a dramatic transformation from Olympus’ golden boy, to CEO, to whistle-blower and outcast. He fought hard to get back the CEO role that the Olympus board had stripped him of for “disruptive management practices”. It was not to be. For now, he is writing and describing his experience in interviews and talks around the world. Will he bounce back into another CEO role or become unemployable, as some previous high-profile whistle-blowers have found? Time will tell. Meantime, “Exposure” provides important lessons for board directors as well as would-be whistle-blowers.
Woodford was ultimately able to expose the fraud and cover-up at Olypmus, by being able to show a meticulously annotated and documented audit trail of memoranda to the Olympus board. A powerful reminder to any NED (non-executive director) about the importance of keeping careful contemporaneous notes of telephone calls, meetings etc.
Woodford’s experience also shows the importance of persistence and of trusting your instincts and not being easily fobbed off by nominal superiors. For Woodford, this was especially hard because it meant confronting the man who had been at Olympus and who had selected Woodford as his successor as CEO.
There are echoes of Greek Tragedy as Woodford wrestles with the realisation that his work father-figure is deeply implicated in a multi-billion fraud and cover-up.
For fans of the transformational potential of social media and the implications that this has for the “Naked Corporation” (Don Tapscott’s argument that the new communication technologies compel organisations to be transparent), “Exposure has some compelling examples of Woodford’s use of social media, such as an on-line chat forum for a Q&A with employees.
Previous reviewers have commented on the stresses and stains that Woodford’s whistle-blowing put on his marriage and his family. Whilst this is true, it is also striking how Woodford emphasises how crucial were old friends in supporting him and his family through the tough times.
Finally, being interested in what makes the “whole person” tick and what individuals think is important to count life a success, it is instructive to see that, even as a busy CEO, Woodford still made time to campaign for road safety. A cause he explains, close to his heart as a result of witnessing a fatal road accident in his youth.
6th November 2012
Just back from the annual Asian CSR Forum (AFCSR) in Bangkok. As with last year's event in Manila, the sense of dynamism and optimism about the future, that one experiences in Asia Nowadays, was palpable - particularly by contrast to a more sclerotic European scene. Years ago, I used to head regularly to the USA to get a top-up of "can-do"spirit. Today, I head east!
Over 550 delegates and more than 50 speakers from thirty countries across Asian and beyond, spent two days debating corporate social innovation. This was a more sophisticated and rounded discussion than last year's infatuation with shared value. Both, however, represent an advance on Asia's previous focus on "CSR" as corporate community involvement.
The conference recognised that corporate social innovation requires collaboration with NGOs, international development agencies and academic institutions as well as other businesses. Collaboration was seen as an instinctive Asian characteristic. I found myself wondering: if that is indeed the case, does this mean that this creates yet more competitive advantage for Asia, if Asian business can successfully exploit corporate social innovation?
Several Western governments are active in promoting an "architecture for corporate responsibility" - the enabling environment for responsible business - across Asia. The Canadians, for example, are doing this in Vietnam. The German development agency GIZ has been active across Asia with a significant programme to promote corporate responsibility on China, which is now winding down after a number of years.
A whole conference track on heavy "footprint industries", i.e. the extractives sector, was a powerful reminder of how politically and socially disruptive mining can be , in countries like Indonesia and the Philippines.
In the conference corridors, I heard frequent discussions about how businesses enter or re-enter Myanmar (Burma), in a responsible manner. Organisations like the Institute for Human Rights clearly have an important role to play here, and this is the subject of another blog.
Awareness of corporate responsibility - or CSR as it is still generally referred to in Asia - seems to be developing fast in Asia, at least amongst leading multinationals - closely linked to ideas of business having responsibility to contribute to national development priorities in areas like access to education and tackling major health challenges like TB or HIV/AIDS. Younger, better educated and more demanding consumers and employees are seen as a particular driver.
18th October 2012
I shared a platform with Baroness Susan Greenfield, the scientist and broadcaster, in Belfast on October 17th, for Business in the Community Northern Ireland Responsible Business conference. Susan gave a fifteen minute master class on the brain, how it adapts and is adapting. she challenged us all to reflect on whether we are content with the directions the brain appears to be evolving. specifically Susan questioned our over dependence on and over-use of screen-based devices and social media to keep in touch at the expense of human interaction. Important philosophical and practical questions. Her analysis also raises important issues of Corporate Responsibility, in particular for the ICT sector and for video-gaming and similar businesses. Do they have any responsibility for over-use of their products and services. For example, for Ringanxiety where sufferers worry when their mobiles don't ring for a few minutes? And for companies generally: are we condoning, encouraging or even forcing employees to over-use computers and mobile devices? Are we explicitly or implicitly expecting employees to be "on-call" for the business too much?
David Grayson is Professor of Corporate Responsibility and director of the Doughty Centre for Corporate Responsibility at the Cranfield School of Management, UK.