‘Most
CEOs Don’t Understand Sustainability’
The number of Indian companies publishing sustainability reports is on the rise, with telecom majors Bharti Airtel and Vodafone India the latest to do so earlier this month. However,
one of the early champions of sustainability and the creator of
the term ‘triple bottom-line’— measuring a corporation’s financial, social
and environmental performance—says companies, across the world, have not
understood sustainability. On the sidelines of the CRY Corporate
Responsibility Summit 2013 in Mumbai recently, the executive chairman of
Volans Ventures told Ahona Ghosh where companies were falling short and why he
will be tracking the Indian government’s CSR directive with curious interest.
Why do companies use the language of sustainability, but fail to practice it?
Many companies use the sustainability language due to peer pressure. In 2010, the UN Global Compact group of companies published a report by Accenture, polling 766 CEOs around the world. About 92% said, “sustainability is now important to our company”. What quickly became clear is that they understood sustainability very differently than us. They understood it as reporting, having a chief sustainability officer, understanding problems around the supply chain—88% said they would drive it through their supply chains. What really worried me was that 81% said, “we have already embedded sustainability in our organisation”. That was the moment I realised they don’t really understand what this is about. They don’t understand the nature and scale of the climate issue, water issue, natural resources issue, poverty and all these things. They are seeing it as efficiency issues and transparency. They are doing a lot compared to what companies were doing 25-30 years ago. But still, for most companies we deal with, it is still an incremental change agenda. Another problem is they are trying to address these issues, but they lack skills beyond their core expertise to tackle sustainability.
Is it the same with Indian CEOs?
I haven’t worked with many Indian companies, except Ford India and the Tata Group, and visited companies like Infosys. What I have seen is MNCs bringing elements of what they do globally into India. One of the companies I have worked with in Denmark is Novo Nordisk. I hear they have struggled to bring to India all that they do globally because the culture is so different. If I look at a company like the Tata (Group), I see an extraordinary corporate history and family values. But I also see, until relatively recently, a very strong skew towards the social agenda and not so much the environmental agenda. Even people within the Tata Group I have spoken to admit that. It’s the same phenomenon as the Global Compact survey—people want to believe they are doing the right thing and use the appropriate current labels.
The Indian government wants companies to spend 2% of their net profit on CSR. While Indian companies have been building businesses, they are yet to develop a mindset to invest in social projects. How will they develop these skills?
What would worry me enormously is if the Indian government required companies to make these investments all at once. As long as funds are being accumulated and can be spent at some point on building expertise and manpower, and not doing it simply in the old corporate philanthropy way—we are rich, you are not; we feel uncomfortable; so here is some money and then go away. Instead, have a vested interest in the economy and an inclusive approach to all this. Engage with social entrepreneurs at the edge of social innovation and learn from them. Don’t just pour money in these projects because too much money, too quickly could blow apart a lot of these organisations. It could drive various forms of inflation. It is an exciting development other countries might sensibly follow at some point. The defined mandate still strikes me as unusual.
How do other countries drive this agenda?
Taxation by governments. You are given tax benefits if you invest up to certain points. But this sort of forced contribution, I’m not sure I have seen anywhere else. One of my concerns is how do you sustain this. If things get difficult in the economy, will this be cut back? Is it vulnerable to government changes and political priorities? It is a fascinating opportunity to run a sort of national experiment and I will watch it with great interest.
Will this force the private sector to work with NGOs (non-government organisations)? Will this lead to cross learnings?
None of us like to be forced into marriage or anything else in life. So, sometimes when you are forced to do things, you do them because you have to, not because you finding it exciting or inspirational. In the 40 years I have worked with business, the key shift was the mood through the 60s to the early 80s, where companies were being forced to do what they didn’t want to do; they did it with a compliance mentality. I hope this (CSR) directive does not come in the way of creative responses. Companies that respond in a creative way would be well-advised to engage with leading-edge NGOs, not every NGO. One of the things that will happen is a consolidation and shakeout in the NGO space. Certain NGOs will be able to professionalise better and come up the curve, and just be interested in working with corporate partners. A lot of NGOs aren’t. There is always a mutual mistrust, which is very difficult to remove. It’s a huge opportunity, but will take 5-10 years to see if it will start working or not. There are always unattended consequences.
Why do companies use the language of sustainability, but fail to practice it?
Many companies use the sustainability language due to peer pressure. In 2010, the UN Global Compact group of companies published a report by Accenture, polling 766 CEOs around the world. About 92% said, “sustainability is now important to our company”. What quickly became clear is that they understood sustainability very differently than us. They understood it as reporting, having a chief sustainability officer, understanding problems around the supply chain—88% said they would drive it through their supply chains. What really worried me was that 81% said, “we have already embedded sustainability in our organisation”. That was the moment I realised they don’t really understand what this is about. They don’t understand the nature and scale of the climate issue, water issue, natural resources issue, poverty and all these things. They are seeing it as efficiency issues and transparency. They are doing a lot compared to what companies were doing 25-30 years ago. But still, for most companies we deal with, it is still an incremental change agenda. Another problem is they are trying to address these issues, but they lack skills beyond their core expertise to tackle sustainability.
Is it the same with Indian CEOs?
I haven’t worked with many Indian companies, except Ford India and the Tata Group, and visited companies like Infosys. What I have seen is MNCs bringing elements of what they do globally into India. One of the companies I have worked with in Denmark is Novo Nordisk. I hear they have struggled to bring to India all that they do globally because the culture is so different. If I look at a company like the Tata (Group), I see an extraordinary corporate history and family values. But I also see, until relatively recently, a very strong skew towards the social agenda and not so much the environmental agenda. Even people within the Tata Group I have spoken to admit that. It’s the same phenomenon as the Global Compact survey—people want to believe they are doing the right thing and use the appropriate current labels.
The Indian government wants companies to spend 2% of their net profit on CSR. While Indian companies have been building businesses, they are yet to develop a mindset to invest in social projects. How will they develop these skills?
What would worry me enormously is if the Indian government required companies to make these investments all at once. As long as funds are being accumulated and can be spent at some point on building expertise and manpower, and not doing it simply in the old corporate philanthropy way—we are rich, you are not; we feel uncomfortable; so here is some money and then go away. Instead, have a vested interest in the economy and an inclusive approach to all this. Engage with social entrepreneurs at the edge of social innovation and learn from them. Don’t just pour money in these projects because too much money, too quickly could blow apart a lot of these organisations. It could drive various forms of inflation. It is an exciting development other countries might sensibly follow at some point. The defined mandate still strikes me as unusual.
How do other countries drive this agenda?
Taxation by governments. You are given tax benefits if you invest up to certain points. But this sort of forced contribution, I’m not sure I have seen anywhere else. One of my concerns is how do you sustain this. If things get difficult in the economy, will this be cut back? Is it vulnerable to government changes and political priorities? It is a fascinating opportunity to run a sort of national experiment and I will watch it with great interest.
Will this force the private sector to work with NGOs (non-government organisations)? Will this lead to cross learnings?
None of us like to be forced into marriage or anything else in life. So, sometimes when you are forced to do things, you do them because you have to, not because you finding it exciting or inspirational. In the 40 years I have worked with business, the key shift was the mood through the 60s to the early 80s, where companies were being forced to do what they didn’t want to do; they did it with a compliance mentality. I hope this (CSR) directive does not come in the way of creative responses. Companies that respond in a creative way would be well-advised to engage with leading-edge NGOs, not every NGO. One of the things that will happen is a consolidation and shakeout in the NGO space. Certain NGOs will be able to professionalise better and come up the curve, and just be interested in working with corporate partners. A lot of NGOs aren’t. There is always a mutual mistrust, which is very difficult to remove. It’s a huge opportunity, but will take 5-10 years to see if it will start working or not. There are always unattended consequences.
They don’t understand the nature
and scale of the climate issue, water issue, natural resources issue, poverty
and all these things. They are seeing it as efficiency issues and
transparency
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