JohnElkington.com - profiles

Pressure, Politics and Prozac

Nearly a decade ago, SustainAbility co-founder John Elkington began tracking what he calls "waves" of societal pressures on government and business. In the wake of each wave, business has paid closer attention to its impact on the environment and society, either because of stricter government regulations or because of competitive and other market pressures.

Elkington predicts the latest wave of public pressure - focusing on issues like globalization and governance - is about to subside. But business leaders would be mistaken, he says, if they think they can sit back and relax.

We recently spoke with Elkington about the pressures on business and how leading corporations have become increasingly sophisticated in their response to calls for greater social responsibility and accountability.

Pressure waves

Center: How do you identify these waves of public pressure?

Elkington: We study trends. The upwaves flow from environmentalist campaigns, the growing interest in human rights, issues like child labor, corporate governance, those sorts of things. But we also look at the way those concerns translate through media coverage, public pressures, political activity, regulation, socially responsible investment activity and so on.

Center: Will you give us a brief history of the waves of public pressure that you have tracked?

Elkington: Our tracking begins in 1961, the year before Rachel Carson's book 'Silent Spring' was launched. 1962 saw the environmental revolution begin to take off. The first wave, which peaked from 1968 to 1973, fell away after the first Arab oil shock, largely because of the recession expensive oil triggered. You then had a downwave lasting13 or 14 years, resulting in an easing of public pressure on companies. People feared losing their jobs, but the earlier pressure triggered a secondary wave of regulation and enforcement across the OECD region.

The second wave's peak period ran from 1988 to 1991 (following such disasters as Bhopal in 1984 and Chernobyl in 1986.) SustainAbility was founded in 1987. A year later, we published 'The Green Consumer Guide'. That book and its various editions sold around a million copies in the space of 18 months. It was an extraordinary, energetic and quite exciting period. I suppose if there was a dynamic that stood out from the welter of things that were happening at that stage, one of them was that ordinary citizens were getting to the point where they simply didn't want to simply subcontract their concern for ozone depletion, or whatever the issue was, to campaigning organizations. They wanted to do that, of course, but they also wanted to do things for themselves.

The second downwave began in 1991 with the Persian Gulf War and began to lift towards the end of the 1990s.

Center: What forces were at work to cause the third wave of public pressure to begin?

Elkington: There were a lot of issues through the '90s. Think of companies like Shell, and Nike, and Monsanto getting into trouble for various reasons. But it was in 1999, with the protests against the World Trade Organization in Seattle, that you really started to get a sense there was a very different agenda coming through. Interestingly, we had predicted that third wave as far back as 1994, arguing - at a time when many campaigners expected a new wave any time - that the next one wouldn't be along until the back end of the '90s.

Center: Has that third wave of public pressure crested yet?

Elkington: We think it's just beginning to break now. We think we're about to go into a third downwave period triggered by the collapse of the New Economy, recession and the prospect of the Iraq War.

Center: Does that mean corporations can stop paying attention to these issues?

Elkington: Some people will hear the message that we're about to go into a downwave period and say, 'Great. The pressure's going to go off.' That's not what we're saying, at all. The underlying set of dynamics is that the public gets excited and, to a degree, concerned about particular issues for a period. But the public can probably only sustain really deep concerns for only a few years at most. That's why we get those peak periods, then things fall away. But the activity doesn't stop when the down wave starts.

Center: I guess it takes awhile for business to catch up?

Elkington: And government. Think back to the first downwave. After the wave of public pressure went through, there was a period of political and governmental reactions. That's when the US Environmental Protection Agency was set up, for example, in 1970. The equivalents in other countries were set up through the middle to late '70s. There was a huge amount of regulation that went through in the same period, particularly in relation to environmental issues.

After the second upwave peaked in '91, you had another period of intense work trying to deal with the implications of that second wave agenda. You had new standards coming through like ISO 14000, Accountability 1000, and SA 8000. There was a lot more interest in internal management and supply chains. Some of the big issues around companies like Nike spotlighted how vulnerable companies with globalized business models were to issues that were deep down in their supply chain. You also had the whole link to management systems and lifecycle work that was happening through that period.

Much of this wasn't driven by regulation, although that provided a framework. Much of this was moving beyond compliance. Companies were now acting because they feared risks to their reputations and brands. . Another factor was that suppliers feared there was a real risk that some of their big corporate clients would switch on to this new agenda, which was market driven, and that they would then require of their suppliers certain things. For example, if a Ford Motor company adopted - as it did - ISO 14000, it would then require the same of its thousands of suppliers. So the dynamic in the second downwave was very much more market driven and less visible than the sort of changes you saw around new government policies and regulations that we saw in the first downwave.

Center: Do you have any predictions for what companies will be focusing on next?

Elkington: All predictions should come with a public health warning, but we think the next downwave period is going to see consolidation focusing on a series of new agenda items. For example, new thinking around globalization and new approaches to global governance and to corporate governance, both of which came up very strongly in the third wave period. The protests against institutions of global governance signaled a very strong concern that globalization was proceeding in something of a vacuum in terms of governance - that companies moving into different parts of the world are not always necessarily doing the right thing.

On top of that, there were obviously growing concerns around globalization being little more than Americanization. I think over the next four to five years we'll see a downwave period really shaking up company thinking in areas like accountability and governance. The focus will increasingly be on boards; what they do, how they do it, who's around the table. The first wave agenda focused on regulation and compliance; the second wave concerned issues around lifecycle management, auditing, disclosure, and reporting. Those agendas haven't gone away, but they will increasingly be the platforms from which leading companies stretch to meet some of the new requirements.

A New Complexity

Center: What are the societal issues driving companies in this direction?

Elkington: Some of the really big agenda items for the next four or five years were signaled by the Johannesburg World Summit. For one thing, there are hugely powerful cross connects beginning to form between the environmental agenda, the human rights agenda, the corporate governance agenda and so on.

This is proving incredibly challenging for even very thoughtful leading companies that are trying to respond. The new hyper-linked agenda cuts right across departmental or business unit silos, which make it very difficult for companies to respond in an integrated way. That's one of the reasons we think the new agenda is pushing these issues up the board level. Currently, a company may have a community relations department, an environmental policy department and an investor relations department, and yet none of those on its own can deal with the full complexity - nor with the political implications of what's being demanded. So the agenda is shunted up to boards. Boards, of course, don't always know what to do with this stuff, but some are beginning to recognize that this is a real and legitimate set of challenges and that they're going to have to work those through.

My own view is that human rights have started to be redefined in quite different ways, ways that will be fundamental to the third downwave period and to what comes after that. The human rights agenda is not now just about torture and abuses by tyrannical regimes, but we see a whole set of new issues emerging, which you can stick a label of 'access' on. Access to clean water; access to affordable energy; access to drugs for HIV/AIDS, TB, malaria; access to finance, including micro finance; access to technology (think of the 'digital divide'); and so on. These trends have the potential to radically expand the human rights (and responsibilities) agenda.

It's going to be messy because the implications are huge and many of the early reactions will be intensely political. In the first wave and downwave periods there was a lot of pressure, for example, on oil companies and chemical companies. As we've seen with the Prestige sinking in Spain, you've still got those sorts of sectors under pressure. But the issues then were largely to do with pollution and explosions - think of Chernobyl and Bhopal, but the challenge now is pushing deep into the business model level. For example, pharmaceutical companies are suddenly being asked for instant, affordable therapies for terrorism-linked things, such as anthrax or smallpox. But much more importantly, the access agenda is also now surfacing in rich countries. With an aging population, you're beginning to get people saying, 'We don't see why the pharmaceutical industry shouldn't give us the drugs we need, and they shouldn't do it at an extortionist price.' That brings questions about whether the pharmaceutical sector's generic business model is sustainable. In short, I think we're moving into a very different era that has at least as great a set of implications for major companies as either the two previous waves or down waves did.

Center: It seems these issues require not just a cross-functional approach within individual companies, but cooperation among industries as well.

Elkington: Exactly. The Responsible Care movement in the chemical industry is one early example of an initiative at the horizontal level. They've been recently trying to expand that to sustainable development. The bigger companies want to do it because they recognize the challenge, but many of the smaller and medium-sized companies don't because of economy of scale issues. If you're big you can afford to do these things, if you're small, it's much more complicated. So now there are huge internal political disputes within industries. And that's different. In the first wave, for example, you had companies aligning together through their industry federations to stop the regulators. Now it's much more complex. You get some players who see the inevitability of this and want to get ahead of the trend. You get others who see real risks and costs and don't want to get involved, and you can see another set, though often less noisy, who see real opportunities in what is beginning to happen. Business is much more split now than it used to be. But I think that's both inevitable and, potentially, productive.

Drivers to Sustainability

Center: We're seeing companies change their practices to meet the demands of their corporate clients who are practicing social responsibility. It seems an additional motivation will be to remain competitive in the marketplace.

Elkington: Yes. That's been true of previous waves, particularly the second and third, but if and when we get a fourth wave, it's likely to be driven by a new sense of urgency. By then, I suspect, we'll see very clear signals on climate change, the same way we did in '85 to '87 on the Antarctic ozone hole. That will drive public, political and increasingly business urgency in that area. You will see companies recognizing that while the issue isn't always linked to competitive advantage, there will often be competitive advantage to be had.

Take Unilever, which has been doing a lot of work around the sustainable food area. Chris Pomfret, who runs the frozen peas side of Unilever's business, said sustainable development is about three things if you look at it from that company's point of view: The first one is supply chain security. If you have your fisheries collapsing around your ears, you can't really sell frozen fish the way you might want to. The second thing is quality. Citizenship, corporate responsibility, sustainability, these are all now aspects of the customer and consumer perception of what it takes to make a quality product. And thirdly - and only if you do it cleverly -- all of this can be about competitive advantage.

So, increasingly you'll see a much more differentiated corporate response to these sorts of issues. People are thinking about them in a more sophisticated way than they would have say, 10 years ago.

Center: The environment in which businesses operate is much more sophisticated, not to mention litigious, than in the past. If nothing else, that should provide incentives to adopt socially responsible models.

Elkington: Sure, but there are other dynamics at work, too. Issues may build, but the behavioral changes -- particularly in business -- are much slower to engage. Some of these really big shifts in cultural priorities take at least a generation to work through. One key reason for that is the people who were brought up in the pre- and post-Second World War period had a very different set of priorities than the sorts of priorities that started to emerge from the '60s onward. For all of those people, particularly if they had fought their way up through companies to become chief executive officer or senior executives, environmentalism and the human rights movement were concerns of the same people who opposed the Vietnam War. These people were basically enemies. It wasn't simply that they had long hair, but that they were anti-capitalism, anti-business, anti-profit, anti-growth, indeed they seemed to be anti just about anything you care to name. That labeled a lot of this agenda in ways that gave alibis, which meant that business brains could, to a degree, turn off, tune out - at least until regulators or new laws forced them to clean up their act.

And the pressures have hit different people in companies as they have evolved. It started with PR people and lawyers and it's gradually worked its way up to chief financial officers and boards. In parallel, what we've seen is one sector after another, one company after another, finding a whole set of new risks surfacing. Historic liabilities are coming home to roost in very powerful ways. In the UK we have a large insurance and reinsurance market -- the Lloyds market -- which almost went bust a few years back. If you look at why, 20 percent of the lawsuits that almost destroyed that insurance market were linked to environmental liabilities in the United States around asbestos, contaminated land, nuclear waste, and so on.

What you're seeing are not just the big issues like Chernobyl, but systemic challenges coming up through markets. You get asbestos, you get tobacco. You get the same lawyers who developed the tobacco class actions starting to focus on McDonalds and the linked issues of fast food, obesity and diabetes. Some of the lawyers there are saying, 'It took us 700 cases to break the tobacco industry open. It's going to take us a long time to get the fast food people, but we're going to do it. Really bright minds who are moving up now to the top of companies are beginning to recognize this is a much more perilous landscape than some of the people they're replacing would have imagined.

Center: It seems there's a momentum that is created when businesses begin to operate with an eye toward social responsibility.

Elkington: We're basically herd animals. We hold out as long as we can, but when the move becomes inevitable we all tend to break into a trot. Increasingly, company to company and business to business pressures legitimize a lot of this. People may not want to do it, but if it's coming at you from one of your very large customers, you think of that very differently than if it's coming from the EPA, the streets or politicians. One of the things we discovered with the Green Consumer period is if you're in a regulatory model or a compliance model, you find that business fights against that, and quite successfully. Often they can slow down new regulations, in some cases for many years. If instead you're using a market model and you can get a particular company to switch onto a new agenda, things can go radically faster. The best business brains are concerned about risks, liabilities. They want to drive those out of the supply chain as fast as they possibly can. It's a much more energetic, much more active approach. I think that's helped frame some of these issues in a very different way for top people in business.

Center: What about when the business benefit isn't clear? Are companies being asked to do too much?

Elkington: It's interesting. At SustainAbility we have done a lot on the business case front over the last couple of years. It's coming together, although there will always be areas where there is no - or even a negative - business case. Where that's true, we have to say so. The answer may be to reshape markets with pricing mechanisms, trading instruments or whatever. I see the NGOs as continuing to play an enormously important role - alongside the media - in terms of crystallizing out of a complex agenda particular issues that business is forced to respond to in a relatively short order. The problem companies are going to face, particularly those that have globalized their operations, is that there's going to be so much pressure on them to do so many different things, particularly in those areas where the government's role is weakening. Inevitably, we're going to see a push back from the business community.

The contrararians who dispute that there are problems at all are part of that. Incidentally, I'm not against contrarians. Just as sharks or lions clean up ecosystems, the sustainability movement also needs to be kept under pressure. The opportunity costs in these areas are too large to allow sloppy thinking. But a few decades from now some of those contrarians risk being viewed in the same light as apologists for Hitler in the 1930's.

Like it or not, the agenda's gone global. You're already beginning to see a few far-sighted companies saying that if globalization is going to continue we need much stronger international institutions. We will need policing and enforcement internationally. Think of what happened when the Montreal protocol came in relative to chlorofluorocarbons - CFCs. A huge black market then sprang up. We'll see the same thing in others areas.

My hope is that we're going to relatively quickly get to a stage where business is part of the lobby for very different government frameworks to be established internationally. The reality is that most business people are as shortsighted as the rest of us. Conclusion, while we may see programmatic initiatives dealing with some of these issues in efficient, effective and, above all, democratic ways, too often we're going to see the political and market momentum coming from out-of-the-box surprises. Progress will be made, but anyone who expects the 21st century to see the end of History - note the big 'H' - should stock up on Prozac.