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Q & A with John Elkington, president of SustainAbility

Posted on September 30, 2000

http://edition.cnn.com/SPECIALS/2000/yourbusiness/
stories/elkington/index.html

LONDON, England (CNNfn) -- SustainAbility is a British consulting firm which calls its approach to corporate responsibility and sustainable development the "triple bottom line," factoring in society, economy and environment, and describing those forces as independent but interconnected.

John Elkington co-founded SustainAbility in 1987. Two years later he was elected to the UN Global 500 Roll of Honor for his 'outstanding environmental achievements.'

CNNfn Producer Jim Boulden: Sustainability, with a small "S" -- in your mind, what does that mean?

Elkington: Sustainablity is a political concept, but it's also economic and environmental. It has three dimensions -- it has an economic dimension, it has an environmental dimension and increasingly it also has a social dimension. And that's one that some big international corporations are finding harder to deal with, but it's a complex agenda.

Boulden: But sustainability means what, in your mind?

Elkington: Sustainability is basically about taking care of the planet and all of its resources and its communities, so that future generations have at least as good a prospect of a sensible, reasonable lifestyle as we've had.

Boulden: Give me, in your mind, the concept of sustainability with a small "S."

Elkington: There are plenty of complex definitions of sustainability around, but the one I really like is treating the earth as if we intended to stay. And SustainAbility... we talk about a triple bottom line when it comes to business. It has an economic dimension, it has an environmental dimension, but it also has a social and ethical dimension and that scenario is where some big international corporations are finding this agenda perhaps most challenging.

Boulden: And that's where you come in, isn't it?

Elkington: We tend to operate right the way across that triple bottom line of the sustainability agenda because increasingly, what more companies are finding is that they can't just do the environment piece or the social piece or the ethical piece or whatever. They've increasingly got to do all this in a joined-up way.

Boulden: So what is your objective, then, when you go into a company?

Elkington: We have a number of objectives. The first is just to get a sense of where the company is genuinely committed to changing in what we believe to be the right directions, and secondly, has the capacity to do so. And unless we are reassured on both of those fronts, we probably wouldn't work with that company.

Boulden: So you work with the large multinationals. Is that because, the obvious answer is, because they're the ones doing the most damage?

Elkington: The reason we work with the very large companies is partly because they're doing most of the damage, but it's also... We could spend all of our lives working with some very small companies and make very little difference. The big companies have the leverage, they have the economic muscle, the political muscle and they have huge supply chains. So if we can turn them around, we can change the context within which many of the smaller- and medium-sized companies operate.

Boulden: But you say you won't go unless they already have in their minds an agenda, or they want to change. But I remember talking to you before about the fact that most of them are not willing to change as much as you think even when you start going in, in the beginning. Go through that with me.

Elkington: One of the things that we've learned is that any large company is a complex organization. There are going to be some people who see the world as we see it, there are going to be many that do not. The processes of transformation and culture change inside corporations don't happen in months, probably in some cases don't even happen in years. It can take as long as a decade or more. So we're trying to identify those companies which really have the capacity to transform themselves. This isn't simply driven by environmental or social pressures -- they're doing it for market reasons as well.

Boulden: We'll go into that in a bit. Some companies you've decided not to stay with; you've left them. Who and why?

Elkington: We don't resign contracts with any great joy. We genuinely go into companies wanting to help them do the right thing. We have on occasion found that, in our judgment, things are not headed in the right direction. The most recent corporate contract that we resigned was with Monsanto....

The key issue there was around genetically modified foods, which was playing out very differently in Europe than it was, at that time, in the United States. I think there was a real problem in getting that company at that time to see the world in the same way that Europeans saw that world.

Boulden: Go through the triple bottom line again with me, in just a little more detail.

Elkington: Throughout the '80s and '90s, many companies were encouraged to focus on the environmental performance agenda. In the late '80s, early '90s, the idea of sustainable development came through, and with it the notion of the triple bottom line. That has an economic performance aspect, it has an environmental performance and a social performance aspect, too. It's easier to measure some of the economic and financial, perhaps even in many cases the environmental, performance areas than it is as yet to measure the social and ethical areas. But that's evolving rapidly, too.

Boulden: Could you say that social and ethical are the hardest parts for companies?

Elkington: I think there are two areas that are particularly hard. One is this social and ethical agenda which is evolving very, very rapidly at the moment. But the other is the integration side. For example, Nike is finding that particular issues are coming up, in their case in Asia, around child labor. But the outside world is linking these issues to all sorts of other issues. There are human rights things but there are environmental ones, and other ones as well. And companies are being asked to respond in a much more coordinated, integrated way than many of them currently have the capacity to do. So I think that that integration challenge is also an enormous problem for the companies.

Boulden: Some companies would say they're not politicians and they shouldn't have to deal with the political and military aspects of some of these countries, such as oil in Nigeria. What do you say to that?

Elkington: I think that ... a sustainable development agenda has many technical aspects that technical people are happy to deal with, but it also has very, very strong and I think increasingly important political dimensions and I think one of the things that companies have not realized is that in signing up to sustainable development, they're undertaking to do some things on the political front. Now, they've been told for decades to stay out of politics and now, suddenly, some of the same people are saying, we need you in politics to push particular agendas, to address climate change, or whatever. And they're not finding that easy, either.

Boulden: Describe the reasons Shell came to you, to your organization, and when was that?

Elkington: Shell first approached us, I think, in 1995, which was the year they had the Brent Spar controversy and also their Nigerian controversy. We had written a letter to the Times newspaper in this country, just explaining why we thought Shell was making a fundamental mistake on the Brent Spar. Very rapidly after that, one board director approached us, but we refused to work with them for two years, mainly because we felt that the top management in the company did not yet properly understand what society was trying to say to their company.

Boulden: You say you refused. Do you think they came to you for PR [public relations] purposes?

Elkington: I genuinely don't think that Shell came to us in the first instance for a public relations exercise. I think very much what they had in mind was our response to these really difficult challenges that they were having to face. But we felt that they were not thinking it all through sufficiently well and not recognizing that this had huge structural implications for their business. So that if they were going to deal with it properly, they would have to deal with it right the way through the organizations, not just in terms of, as you say, public relations.

Boulden: So, after two years, you felt what?

Elkington: We felt after a couple of years, and during that time we'd given some of our time free to the company which drove them up the wall, we felt that some of the top managers were beginning to not just talk about some of these issues in a knowledgeable way, but to signal the fact that they recognized that this was a fundamental new agenda for the, not just the energy business, but everyone with whom they were doing business, and that they needed to understand it in very much greater depth and they did at that point.

Boulden: Shell has a unique structure, in how it's run. Was that a problem?

Elkington: Many years ago, somebody in Shell told me that Shell would never produce, in those days, a corporate environment report because it was too big, it was too opaque, it was too fragmented. There were hundreds of different businesses. Well, it's now producing one of the best report series in the world, but it had to go through these sort of shocking series of experiences in the mid-'90s to get to that point. It is a complex company, it is quite difficult within it to take an agenda like this and drive it right the way through the system, because a lot of the business units have their own game to play. They don't want the headquarters dictating to them how they do their business, but the message is now coming through loud and clear from headquarters.

Boulden: Have you been impressed with what Shell has been doing?

Elkington: One of the things that we at least thought we saw within Shell, and you see it within many other companies, is that there is an age gap, a generation gap and that the different age groups tend to have different values and this whole sustainability agenda is a real problem in this respect, because the older people tend to think that they understand it, because they talk to regulators and politicians and they think they know it at that level, but there's something very different happening out there and the young people tend to understand that much better. Our experience with Shell was that the younger people understood [and] wanted to address it, but felt that the senior managers were a bit out of touch and really weren't going to address it effectively.

Boulden: The idea for sustainability and oil production, in your mind. Is there a contradiction in that?

Elkington: Absolutely, there has to be. There is a huge contradiction between oil and sustainability and sustainable development, and I think that the notion that we would have a fossil fuels industry of the size that we have it today and the dominance that we have it today, 50 years from now, just strikes me as nonsensical. But I think that we will have fossil fuels. We will have an oil industry. The key issue is which companies are still involved and how they're running their operations.

Boulden: It's said that the great threat to sustainability in our world is our dependence on oil. You say we won't have that, but is that a good thing that we won't have that in 50 years?

Elkington: I believe that we will have a huge appetite for oil even in the year 2050, because I think countries like India and China as they switch on to our forms of development, which they inevitably will, will drive a huge demand for oil and oil products. That said, I think that there will be an accelerating shift away to other more climate-friendly fossil fuels like natural gas and also, as Shell and BP are signaling, growing interest in, growing investment in and growing use of renewable energies.

Boulden: You talk about 'beginning to invest,' but it's a very, very tiny amount of money.

Elkington: For outsiders, this sort of money that Shell, $500 million, or BP are now investing in renewable [energies] sounds big, it sounds like a lot more money than renewables would have got five, 10 years ago, but in relation to the other expenditures these giant companies are making, these are still relatively small. The problem is, there aren't that many prospects or opportunities out there to really invest the money to make a difference and to make a real commercial return. That will come, but they're not there yet.

Boulden: But it will have to come if, as you say, we're running out of fossil fuels.

Elkington: I think that the problem is you need to force the technology, and the problem that these companies have is that there's probably a five- or a 10-year period where you've got to do small-scale stuff before it starts to explode out into mass market applications. And even that's being a little bit optimistic so you've actually got to grow it from a small base.

Boulden: Does that mean the impact won't be positive because they're not spending enough money -- is that what you're saying?

Elkington: In terms of the impact that the oil companies can have on climate change, a lot of people are looking to the renewables prospect as the way of dealing with that, but there's a lot the companies can do in the short to medium term in terms of moving to more carbon efficient fuels, things like natural gas and spending more on energy efficiency, making sure customers make better use of what oil they do use.

Boulden: But renewables are coming down, they've got no choice. Are they spending enough now, or should they be spending more?

Elkington: I think it's tremendously exciting that the oil majors have at last woken up to the renewable energy agenda and are beginning to spend serious money. When you hear $500 million from Shell, that sounds like big funding, but when you compare it the other spending that they're doing, it's relatively small. But this is an area which is going to have to be developed very rapidly, but it's coming out of a very small base, and therefore I think the levels of funding which we see at the moment are quite reasonable.

Boulden: Reasonable, but do you think they know they need to spend more, and they indeed will?

Elkington: I think that some people in these companies do recognize that they need to spend more and I hope that they will, but that depends on external pressures.

Boulden: Like you.

Elkington: Yes.

Boulden: These renewables, in your mind, [is this] the way of the sustainability wheel continuing...

Elkington: In terms of sustainable development for the energy industries, there is absolutely no doubt in my mind that the renewable energy field is the key to a sustainable future. No doubt at all. But we've got a real problem in the next 30 to 40 years, which is that a lot of the world is going to start using energy and there's not going to be enough renewable energy to go around. Therefore we've got to learn to use fossil resources, oil resources, much more efficiently than we currently do.

Boulden: Will these companies make as much money from that?

Elkington: I'd bet the big question for these companies is whether they survive, because as climate change pressures continue to build, what we're going to see is real competitive pressures on the Exxons, Shells and BPs of this world to use this stuff infinitely better. Those who do, will survive. Those who don't, will go out of business.

Boulden: When you're meeting with Shell, something called selective discomfort. Can you describe that for us?

Elkington: Companies are echo chambers, it's not hard to find people who will tell you things that you already know, or you're very likely to agree with. It's our role to be a bit like the grit in the oyster. We are there to cause active discomfort, we're there to tell people -- in particular, senior management -- things they very often don't know and, under some degree, things they don't want to know. But if you're prepared to do it in a reasonably friendly and a fairly factual way, a grand portion of these people are prepared to listen.

Boulden: Prepared to listen? Does that mean they have to do anything about it when they listen to you?

Elkington: We held them to account to a degree and so if we find that we're working with a company that is listening but not doing anything, we probably would resign the contract. They tend to bear that in mind, but that's only one pressure among a lot of other societal pressures that are coming to bear on the big energy and other companies.

Boulden: I would imagine for a CEO or chairman, listening to the yes men or yes people right below them, you come in and give a different answer than maybe they've been told, is it just they don't want to hear it or they just haven't been told or they're just not listening?

Elkington: We all have a problem in today's world and that is that there is a huge amount of information being thrown at us. The background noise is phenomenal. Trying to pick out some of these weak signals and particularly when these are messages that you don't particularly want to hear, because they have major implications for your business, that's a real challenge. Now some of these CEOs and board members could reach down in their own companies to younger people, they'll find that that understanding, those messages are already there and sometimes what we're doing is closing the circuit between the top people and the younger people in the same company.

Boulden: Do they not want to hear because they think it's a threat to their business, or simply because they think it's going to cost them money?

Elkington: I think that they see some of these challenges as a threat in a number of ways. It will, in a short to medium term, cost them money, but equally they recognize, like some of the new information technologies, a major structural threat to their business and to their markets and they don't totally know how to deal with that.

Boulden: Are they coming to you because they know they have to deal with it in the end?

Elkington: They know they've got to start thinking about some of this stuff, so the reason they would come to an organization like ours is that they want to get out of the box, to start thinking about some of these things in a new way and also to engage. One of the really interesting things now is that some of these really big companies are genuinely, actively trying to engage groups like Greenpeace, Friends of the Earth, World Wildlife Fund, these sorts of people, in ways that they wouldn't have done in a few years back.

Boulden: But you're not outside complaining, you've decided that it's better to do it from the inside.

Elkington: We're inside complaining very often, and in fact we often say when we're asked inside companies that we support wholeheartedly many of the things that the activist groups, including Greenpeace, do out there, because that creates the middle ground in which people like us can operate. So, and if we have to decide with cooperation or the world of campaigners, my hunch is we probably side with campaigners in the end.

Boulden: That must really annoy Shell sometimes, I would think.

Elkington: I think the reason why Shell took us on is because they recognized that as a characteristic of ours. They had to think long and hard before taking us on. But to me, if a company will seriously consider working with an organization like ours, and a growing number of other ones doing similar things, that's quite a good signal, that the top management, even if it doesn't know all the answers, is seriously considering and thinking some of the stuff through.

Boulden: And you don't think it's a PR exercise for Shell or for anyone else?

Elkington: There's always a public relations dimension to what companies do, they're always going to try to put a spin on the early phases of what they're doing in the sustainable development area. Shell has been doing a big advertising campaign, BP has just started another one, "Beyond Petroleum." I think that's inevitable, but there's a real risk for these companies at the same time and Monsanto discovered this with the Life Sciences area. You talk about sustainable development publicly, you build expectations, you fail ... and "bang," your reputation can go into a hole.

Boulden: And, of course, that's when Shell came to you, was when they were in a hole. What was their goal, do you think, at that time?

Elkington: I think Shell in 1995 was seriously confused, I think that the world was behaving in ways in which Shell had very little experience of. In the past they had done a lot of good work with nature conservation, for example, and knew all the nature conservation groups, but they didn't really know the environmentalists, they didn't know the people driving these new human rights campaigns and part of the reason they came to us was they wanted to bridge, they wanted an interface between these really quite different worlds, where at that time it was very difficult for them to have their voice heard.

Boulden: You talk about the Shell report and implementation of trying to get the company at all levels to understand. Is Shell to you a success in that area, the fact that such a large [innovation] was to get this through their report and get this through their internal communications, as it were?

Elkington: Shell is a success in some ways already. You can look at the work that they've done on the sustainable developing management framework, which I think is a stand-out innovation; there is a real challenge in putting it through into the business units. Their success in terms of the work they have done on reporting, the first three sustainable development reports they have done, [is] absolutely leadership class. But it's far too early to say whether Shell is going to be a success in this area longer term, in reporting, in management systems, in renewables, whatever. It's going to take years or decades to determine that.

Boulden: And, in your mind, have they done anything beyond the internal communications side, or is this still an internal communications issue, or do you actually see implementation of this outside the company?

Elkington: This is way beyond the communications agenda for Shell now and they recognized that in 1995. But trying to turn a very large company like this, people often say, it's like trying to turn a supertanker. It really does take quite some time. They are extremely lucky in having Mark Moody-Stuart as their chairman, who is basically somebody utterly switched onto this agenda, and when their profits took a dive recently, he just stuck right to it and said, no, this is not peripheral, this is mainstream. Now people are getting that message, but it takes time.

Boulden: 'Cause there are still plants that people complain about, there's still the Nigerian issue, issues in Louisiana that are pretty serious. . .

Do you think in some places Shell has had it trickle down? Can you give us some examples of where it actually has made a difference?

Elkington: One of the earlier examples of a Shell initiative which I think really tried to incorporate these new styles of thinking, these new styles of operating, was the Camisea project, where they developed a new oil field in South America, put all their plans up on the Internet, an extremely open and transparent way of doing that, sort of project development. Unfortunately for them, the economics then went to the wall. But I think it's an early model of the right approach, it's a very good one.

Boulden: And it didn't go to the wall because of what they did.

Elkington: It didn't go to the wall because of the additional costs of dealing with sustainable development issues, it went to the wall because the local government insisted on a higher tax return, as I understand it and the nature of the reservoir proved to be more problematic than they originally thought.

Boulden: Do the small, little, individual business units have to pay for this sustainability, or have they actually given money from the top down so the business units don't feel that 'I can't afford that'?

Elkington: To some extent in a company like Shell or BP or Ford or whatever, you'll find that there is a central fund from which people can draw to and extend, but in the end most of the stuff has to be funded by the individual business units and that's one of the reasons why you get the heads of business units, pushing back and saying you know this is really going to compromise some of the other things that we want to do, so you actually have an internal form of politics which at times can get quite interesting, not to say vicious.

Boulden: Do you find within a company like Shell that you find some people are working with you very clearly and some people are clearly not working with you?

Elkington: There are always allies and there are always opponents of any new program, whether it's health and safety, total quality management, sustainable development, that you have to expect, I think. One of the things that we find, though, is that the allies in this area cut right the way across, whether it's nationality, whether it's business unit, whether it's professional status, or whatever, you find your allies right the way through, but equally you find proponents, too.

Boulden: And the allies you find, are a generational thing, mostly?

Elkington: It's not exclusively a generational issue, I mean, you will actually find older people who get this and want to do something, but if you're really looking for the critical mass, it's coming from those age groups, 20s, 30s, early 40s.

Boulden: You were talking about India and China demanding more oil. In your mind, does that mean that Shell is going to continue to develop a new oil industry, and can look for oil in places like Nigeria. Will they continue to look for new oil ... How much more into these controversial areas might Shell be going, and have they even thought about stopping or slowing that process down?

Elkington: I think one of the big shocks for an environmentalist of my generation is just to find out how much oil there still is out there still to be found, and I think it's no surprise when you hear these big companies saying they're going to be looking for those really big reservoirs, new reservoirs on the scale of the north slope of Alaska, because that's relatively easy money. I mean, there's a huge profitability there in a way that, to date, there isn't in the renewables area, so it's going to be hard to wean these people off oil.

Boulden: So no medium-term company is going to become less of an oil company; they're going to remain oil companies.

Elkington: I don't think that anyone who's currently in an exploration or a production role in an oil company need fear for their jobs in the next 20 or 30 years (laughs).

Boulden: You actually think the changes that are taking place is a good time scale, you actually think they've done what you'd expected in this time frame.

Elkington: With Shell, I'm reassured to see that they've stuck with this agenda because it's a politically and, to some degree, emotionally difficult agenda to work with. They have stuck with it. I'm reasonably impressed with the level of effort that they've put in to date, but I think any company working in this area recognizes that this is one where there are going to be step changes and any company that is really going to drive toward sustainability is going to have to invest massively to make that happen. It's still open to question whether Shell or other oil companies will be prepared to make that investment.

Boulden: But the steps are going up, in your mind; they're not leveling off.

Elkington: I don't think there's any way in which the level of investment needed to achieve sustainability will level off any time soon.

There will be efficiencies, there will be a cost savings, there will be new market opportunities which will offset the growing levels of investment, but there's no question that growing levels of investment will be needed.

In a way, one result of that is that the really big companies, the well-funded ones, in the immediate future, have a real role to play.

Boulden: Our producer in New York talked to a lot of stock analysts who cover Shell and they seem to, as a group, dismiss this whole thing. They found it to be posturing, they said, 'Of course a company like Shell have XXX to say.' These are the ones who have to dig information from a financial perspective. What's your response to that?

Elkington: I think it's a very interesting sort of feedback loop between stock analysts and the companies that they monitor; the analysts are enormously cynical about a lot of this stuff, they tend to work with chief financial officers and other people in companies [like themselves]..., partly because the analysts themselves are deeply cynical. They're in a self-conviction loop. You start to see some really interesting initiatives, people like the Dow Jones group started an account with a Swiss sustainable development asset management group. You start to see early stages of the financial world waking up to the fact that sustainable development could well be a market differentiator in some of these sectors, so I think some of these analysts who are treating all of this in a totally skeptical way are going to have some really uncomfortable surprises.

Boulden: I think it comes down to ethical investing as well. I don't know that anybody who thinks of ethical investing is going to look at Shell yet.

Elkington: I think we're some way off [from] ethical investment funds, as we currently know them, investing in a Shell. But what you're seeing is ethical investment, tools methodologies, approaches, spreading to some much larger funds, and they are perhaps a paler green or they're prepared to take a higher level of ethical, social or environmental risk. I think that they will invest in the Shells and BPs of this world because they see them trying to make a difference, trying to move toward sustainable patterns of energy use.

Boulden: How much of what a Shell does is so they can stay where they are, in the sense of they don't get kicked out of Nigeria, they don't have all their oil wells blown up. How much of this, in your mind, is about keeping the business they have and hopefully moving forward?

Elkington: Keeping the business that keeps a company like Shell in operation is an enormously important consideration so if a Shell were kicked out of Nigeria, that would be a huge dent in their profitability. So clearly they want to stay in there, and a lot of this work on sustainable development is trying to maintain that license to operate. The license to operate is given to them internationally, not so much in Nigeria, all of that's true.

At the same time, there are other levels to it. There are other parts of the business case for addressing sustainable development, and some of them are values-based that there are people in even in a company like Shell who are persuaded that this is the way forward and they want to see their company do the right thing. That's why they're supporting these sorts of initiatives.

Boulden: But we look at some place like Nigeria, we see people dying where they're trying to soak up oil, we know that pipelines are getting ambushed all the time. It's still not a situation there that people would term positive.

Elkington: I would find it impossible to work in Nigeria. I think that things have got to such a state that it would be very, very difficult for any company now to turn things around in any sensible order. It is pretty much a war situation for companies like Shell.

One of things that we have raised with Shell is the notion that they might withdraw from Nigeria. They don't view that with any great favor but I think one of the things that we need to see companies committed to seeing sustainable development doing is doing things that really cut across their immediate business interest on the basis that we don't think what's going on in Nigeria is currently ecologically or socially or politically sustainable. Therefore, we're not going to be part of it. I think we're quite some way off of that sort of point but that's part of the constructive discomfort that we bring to bear, perhaps.

Boulden: To someone like me, from the outside, that kind of commitment in Nigeria would say something huge about Shell. The Nigerian issue for Shell is, to me, the hallmark but you're saying they're nowhere near even thinking about pulling out. So that is a barrier, isn't it?

Elkington: For outsiders and campaigners, the Nigerian involvement with a company like Shell is a real make-or-break issue. If things don't radically improve there, these sort of organizations are not going to trust Shell. I think that's a problem that the Shell top executives are going to have to wrestle with, very seriously indeed, in the coming years.

Boulden: But to you it's not a make-or-break [issue]. I mean, it's not, 'You must think about this or we may pull back.'

Elkington: For me, and for our organization, SustainAbility, it's not a make-or-break issue because we recognize that oil companies are going to be involved in these sorts of regions in the world which are highly politically unstable. There seems almost to be a direct correlation to where oil seems to be placed in this world; to some extent we see no escape in the short term from that. But we genuinely want to see these sorts of companies taking a very, very serious look at some of these areas and in some cases, yes, withdrawing.

Boulden: In your mind it's good that Shell is there because you're able to work with Shell. If [someone else] comes in instead of Shell, you may not be able to work with them.

Elkington: I think it's very difficult to say that a company should be in a country simply because it's keeping people in jobs, it's feeding into the tax base and the rest of it, and that helps health care or whatever. But there is a real argument. If a company like Shell or BP pulls out of a particularly problematic country, who's going to replace them? And the answer, in most cases, is that they're not replaced by companies that are more sensitive, they're replaced by people who are less sensitive to this whole agenda and I think that's a bad thing.

Boulden: And it's not just the big international multinational corporations coming in. I mean, local groups, you've said you would find it difficult if you had to deal with a local Nigerian oil company, a local diamond manufacturer in Sudan. I mean, in some ways you're happier to deal with a larger company who's in all these places.

Elkington: One of the paradoxes of this whole area, and it's true of the oil sector and it's true of many others, is you're often dealing with a pyramid and you have companies who are internationally renowned, brand-name companies, Shell, BP, Exxon, whatever. They're highly visible, but some of the people who cause the worst problems are state oil corporations and we just don't know their names in most cases so it's a very unfair world. But what people like us are trying to do is to use the leverage that we do have with some of these highly visible companies to get them to push for change in some of those state oil corporations because one of the ways these companies operate now is through joint ventures with those sorts of state oil corporations.

Boulden: So you don't see globalization necessarily as a negative for the environment, as it were; it's just a sidelight. There's a dichotomy there.

Elkington: I think globalization has many aspects, I think the sort of nature of the CNN world is being created and satellite remote sensing and so on, has been a huge positive for the environment. There are many aspects of the globalization of world capitalism which I'm extremely uncomfortable with, but I see some of these corporations that we're talking about as having a really important role in shaping what sort of capitalist world we will live in [in] the future, and it will be a capitalist world, it will not be a command and control global economy -- there's no way that's going to happen.

Boulden: When you look at someone like Shell, the exploration money that they're spending and they're going to continue to spend a lot, and billions of dollars every year, a tiny fraction into sustainability and the renewables side, when do you see that switching? You keep saying decades, but when will we get away from a dependence on oil, when will the balance redress itself?

Elkington: Shell recently said that they could see a future whereby the year 2050, 50 percent or around that figure of the world's energy would come from renewable resources. They subsequently slightly backed off that and said that was a bit optimistic in terms of renewables, but I think we may surprise ourselves. If we really push this hard enough, there are areas like, for example, fuel cell technology, that is coming up in the automotive area, where we may suddenly find ourselves switching to a totally different form of fuel for automobiles. Things could go quite quickly but it's not going to happen in five years or perhaps even in 10; we're talking 20, 30 years.

Boulden: When you look at consumers these days for a company like Shell, have they woken up to the fact that consumers do have a choice, that the consumer is important? How much of that is important is all this?

Elkington: The consumer is sometimes enormously powerful and enormously important, but it varies very much between different markets and over a period of time. As far as the oil companies are concerned, most people, most motorists really don't think about environmental and social issues ever when they go into gas stations. There may be a particular moment where a particular issue is in the headlines and then they will. In the case of Shell, they lost 40 percent of their sales in Germany in the space of a couple of days during the Brent Spar issue, so that really focused their minds, but that's unusual. So if you're simply trying to sell sustainable development on the basis that you will appeal to consumers, that's not going to drive this.

Boulden: Do companies still make the argument that if they do the sustainable thing that you're going to pay an extra 10 pence or 10 cents a gallon?

Elkington: There are a lot of people who expect to have to pay a green premium or sustainability premium, [that] if the company is doing the right thing then it is inevitably going to be more expensive, but the real trick is going to be [to] deliver what society will increasingly come to respect, which is climate neutrality and energy efficiency and all of these other things that would be nice to have, but at the same price or even cheaper. That could well happen.

Boulden: I see a parallel here with the IT world 10 years ago.

Elkington: Yes.

There is a hugely interesting parallel that is just beginning to be explored between what happened with the information technology world and now the shift to the dot com world. And what we're dealing with in sustainable development, because initially most people saw information technology as just one more damn headache, it was incredibly expensive, great lumps of kit, you had to strap it on operations which weren't designed to cope with that technology. What you have now is completely different business models, completely different concepts of how you would build and operate a business. Sustainability is very likely to do exactly the same thing to business over the next 20 or 30 years.

My sense very strongly is that the Shells and the BPs of this world are poorly prepared for what's likely to come, because they're big, they're invested in the way that oil and other forms of energy have been handled in the past. It is very unlikely that ... the people who currently dominate energy markets will be knocked to one side by people who just do things in a radically different way. Enron is one early example of a company that's beginning to think about energy markets in a very different way from the way the BPs and Shells and Exxons are doing.

The role of the BPs and Shells is that they will almost become like the banks, they will be in the role of having to spot some of the people who are coming out with new business models that have the capacity to both be profitable and contribute to environmental and social sustainability priorities and then investing in those. I think they will have a very important role in that area.

I'm schizophrenic on advertising and marketing. On the one hand, I think it's enormously important that companies that are starting to transform their operations do communicate with the external world, with their consumers, with investors, with the wider stakeholders in the community. At the same time, I think there's a real risk for companies that are beginning to communicate in this way, which is that they raise expectations way ahead of their capacity to deliver. And, paradoxically, one of the real risks there is that their own people can become enormously frustrated, it can become a real morale denter when you see a company making claims in public when you're inside that same company and you see it's not measuring up to those promises.

Boulden: And it's something that Shell went through, certainly, didn't it?

Elkington: I think that Shell has had that experience. I think that in certain parts of the company, people saw the ads which looked wonderful, made some very, very ambitious promises, and they were not convinced that the company would be able to measure up.

Boulden: Are there steps Shell is taking along the way, even in the way of how they explore, in the way they drill? Are changes happening at the level like we may see in the marketing?

Elkington: One of the things that people expect environmentalists to say is that an oil company is really got to shift to renewables overnight and if they don't, then they're not credible. As far as we're concerned, it's equally important at least in the short to medium term, by which I mean the next 10, 15, even 20 years, that some of these oil companies start to do everything that they do from exploration to production to refining to shipping to selling these products in the market, cleaning up any messes that may be caused along the way, in radically more efficient ways, in ways that are increasingly carbon neutral and moving in that direction, and that they are rewarded by governments, rewarded by markets for doing that and in the process, competing companies that do not clean up at that sort of rate are not kicked out of the market. Now the question is, how do we get there, how do we make markets signal and reward companies in that sort of way? That's the real challenge in the next 10 years.

Boulden: But you do see a shift happening. Go through that with me.

Elkington: I think one of the things that we're seeing is the environmental signals are getting more powerful the whole time, even the states, which has been really quite resistant on the climate change issue are starting to see companies peeling off the global climate coalition which was there really to protect the interests of the big oil and auto companies. That's a very early stage, and what it signals is people are uncomfortable in being seen in that sort of company.

The next stage is for people to say, this is strategic, this is potentially to our competitors' advantage, if we get this right, this is something that we will be not just respected for but rewarded for through markets, and if we can get ahead of our competitors, that has real value to our shareholders.

Now most shareholders, most financial analysts do not yet see that prospect, and there are very good reasons for that. One is markets do not yet reward companies for making those sorts of changes, and that's why I say that the restructuring of markets and not just nationally, internationally, is the biggest challenge that we face, but it's not beyond us. We will achieve it. We have to.

Boulden: In that sense, companies are ahead of governments, aren't they?

Elkington: Governments are going to have to play an important role in all of this, and there's a real vacuum in all of this, that the Shells and the BPs and the Exxons and the other big oil companies are playing on an international scene, whereas most of the government institutions or governance institutions are incredibly weak or non-existent. Even some of these companies are beginning to recognize that they need to help build some of these international governance institutions and so part of our challenge, as we would see it, is helping them move in that direction.

Boulden: What is this fundamental shift you're witnessing on a day-to-day basis?

Elkington: There are fundamental shifts in a number of sectors -- the oil companies are lagging a bit, but we're even here you're seeing companies like BP and Ford starting to form strategic alliances and the question for those two companies is, sustainable development, sustainable transport, that's real, but what's it going to mean? What do our two companies, what can we do together that we can't do separately and the answer is, there's a great deal that they can achieve when they start to work together. And not just those two companies. I think it's an incredibly exciting time in that respect, and I think that CEOs like Sir John Browne and Sir Mark Moody-Stuart are right in the vanguard of that movement.

Boulden: You've said that John Browne "impresses the socks off you." Why is that?

Elkington: John Browne at BP is an extremely unusual business leader. One of the things that I've noticed about him is that, although he now talks about sustainable development very easily, with real interest, really wanting to debate the issues, this isn't something new, this is something that's been part of the way that he does business, and each role that he's taken within BP for a decade and more, so he's somebody who's absolutely determined to make this happen.

I think that one of the problems that people like him are beginning to have is that they find that some in their peer group, their sort of board members in their own company, are just a little bit recalcitrant; they don't want to go as fast as the CEO does. So I see some of those leaders, and I think John Brown is an example, recognizing they have to reach out to some of the younger people in their own companies to build the critical mass for the level of change that they know increasingly will have to happen.

Boulden: BP has a new ad campaign, Beyond Petroleum. How true is that?

Elkington: I think there's nothing wrong with a company expressing its aspirations of where it wants to go and leading its customer and consumer base to that trend and I think that's what BP is doing, it's trying to stake out a piece of territory. It's saying we know that sustainable energy, sustainable transport, all these things are coming, we want to be part of that so when you're thinking of strategic partners, when you're thinking of people who might be suppliers or people to talk to in this area, remember us, and I think that's competitive and I think there is no mistaking the fact that Shell and some other companies are firstly surprised by this and we've got to rack up, wind up our own activities in this area.

Boulden: Why is [the spending on solar energy] so tiny?

Elkington: When a company like BP talks about 'beyond petroleum,' they are almost certainly thinking in time scales of decades, they are thinking even 50 years out and this is a path that they recognize that they're going to have to move along. In the short term, if you pick apart how much money these companies are spending on renewables, it looks relatively small, in some cases it looks even pathetic. What you start to see is companies like BP pulling in from when they took over Arco -- Arco had quite a solar background, Amoco as well, pulling these elements together into something with a bit more critical mass. We're still at a very early stage in all that, but I think it's going to develop fairly rapidly. It has to.

Boulden: BP had some problems in Alaska, with Northstar and Greenpeace. Thirteen percent of the board voted against it.

Elkington: Which was a big shock to them.

Boulden: Talk about the impact that kind of thing can have on a board.

Elkington: One of the things that board members in these big energy companies really do pay attention to is the shareholder community. They don't pay THAT much attention to the annual general meeting, and quite often these things are a little bit of a formality but if you have a shareholder motion which is put up and attracts more than a few percent, you tend to pay attention. In BP's case, or BP Amoco as they then still were, with the Northstar issue in Alaska, they had the problem of Greenpeace mobilizing a shareholder motion which attracted 13 percent. Now that's getting to a level where any sensible board is going to say there's something going on here, we really have to pay attention even if we don't like the message that we're beginning to receive.

Boulden: What was the impetus for all this for BP?

Elkington: One of the things that BP has done very clearly, and John Browne has been right at the forefront of this, is to say, "Climate change is becoming increasingly real, we're going to have to act on it, renewables is one part of that but there's lots of other things that a company like ours can do. That starts to raise expectations. People start to say, but you're still exploring for oil and yet you're talking about climate change, there's a disconnect here, and it starts to open up a debate even more powerfully which companies are going to have to learn how to address.

Boulden: Let's wrap it up with a philosophical question. You told me you're an eternal optimist. You continue to be optimistic as you work with more and more companies?

Elkington: I choose to be an optimist. The one reason why I am optimistic is I started working with the business community over 25 years ago -- at that time you were extremely lucky if you first were allowed through the factory or through the front door, and if you got inside, you met a lawyer or a public relations person and they would basically try to keep you basically as far away from the company's basic interest as they possibly could.

There's been a dramatic shift in the level at which these issues are debated in companies that have been exposed to public pressures and I see the oil and energy companies as right in the forefront of that movement. Although I think there are huge forces for tradition and for business as usual, in these companies, there are really interesting salients of change and we're going to put our shoulder to that wheel wherever we possibly can.