Profiles
Business Voice
This interview first appeared in Business Voice, the magazine of the CBI, November 2004.
What do we mean by sustainability?
For me it's about how business activity and wider forms of development can
meet today's needs without undermining the interests of future generations.
The implicit question is: are we stealing from our kids? From a business perspective,
this means focusing on the "triple bottom line", the economic, environmental
and social value that business can add - or destroy.
Is sustainability itself a sustainable concept?
People think about climate change and species loss when they hear about sustainable
development. But it goes much further than that. By 2050, there will be another
three billion people on the planet, and there is limited capacity to sustain
them. Look at the public healthcare sector, already struggling with limited
resources and now stretched further by an ageing population and falling infant
mortality. Or the pensions sector. Corporations, along with just about everyone
else, misestimated how long people would live. They can just about meet their
commitments to this generation of pensioners, but there is a real risk that
we will have little left for the next generation.
How does UK business stack up against the rest of the world?
It's mixed. The UK is a hot-bed for new initiatives. Take the Operating and
Financial Review, which will require all quoted companies (where appropriate)
to include information about environmental, social and community matters.
Or the number of companies based wholly or in part in the UK that are seen
as pioneers, such as BP - with John Browne taking a leading role on climate
change. And there are probably more socially-responsible investment funds
per square metre in the City than anywhere else in the world. Yet, when it
comes to something like London's congestion charge, it's Toyota, not a British
company, whose cars receive a clean emission dispensation on entering the
zone.
What is the most pressing issue on SustainAbility's agenda?
Corporate governance. The Enronlike scandals, and ensuing Sarbanes-Oxley legislation
have meant that attention has refocused on financial integrity, to some extent
pushing aside the wider non-financial issues.
But there are growing cross-connects between the corporate governance challenges
that companies face and the triple bottom line agenda.
What will move the evolution of sustainable corporations
along - the carrot or the stick?
You need both. Most companies are pretty unimaginative. They think short term,
hemmed in by market pressures. Many need to be poked and sometimes beaten.
Once it was mainly NGOs putting the pressure on, backed up by government regulations.
But now, market forces are coming into play. Climate change is playing a crucial
role in driving this issue into mainstream financial analysis. The insurers
- and particularly reinsurance companies - are increasingly anxious about
its impact.
Are sustainable indexes fair, given that companies in "unattractive"
industries such as tobacco or defence will always be penalised?
Ratings information is required by investors. Mainstream rating methodologies
focus on a relatively small number of factors that can be linked to financial
performance. But it's changing. I think tobacco companies, for example, are
extremely questionable in terms of ethics but are also financially vulnerable
in the long term. By moving into new markets such as China they are trying
to fund growing liabilities elsewhere. In short, they're passing the financial
burden from one generation of shareholders to the next. Defence technology,
on the other hand, is necessary, even if the industy is often wildly corrupt.
The 21st century risks being just as bloody as the 20th, not least because
of the unholy combination of demographic pressures and problems like climate
change. Overall, indexes may not be fair, but they give a sense of where markets
may be headed.
What was the most heartening thing to come out of Global
Reporters 2004?
We do this international survey every second year. In 2004, for the first
time, we have worked alongside not only the UN but also Standard & Poor's.
We took the 300-400 most interesting annual reports from around the world
and honed them down to a Top 50. We have a large number of new companies breaking
into the rankings, which is very exciting. They are reporting in ways unimaginable
a decade ago. And we are also seeing more reporting in emerging economies,
which is encouraging.