Imagine…there’s a world where companies truly care for their longevity

First Impressions from Frank Bold’s Creating Sustainable Companies Summit

By Theresa

“Imagine” by John Lennon is one of the most iconic songs for world peace. World peace is the global, very idealistic objective to which the predecessors of today’s Business and Human Rights practitioners have adhered. In today’s world of ever-persistent globalisation, the idealistic practitioner does not want less than putting an end to corporate human rights abuses – much in the same way the generation before took the streets against imperialism and wars. Though today’s political activism may seem less visible, both generations are closely intertwined. Idealism and the willingness to see potential for radical changes in human conduct are uniting past John Lennon fans and today’s activists who have never heard him live.

Current Business and Human Rights practitioners are often more obsessed with corporate than state conduct. Or corporate omissions. Or both. Intrigued by this obsession, the obvious questions are: what is ‘the corporation’ – and what is its actual purpose? From an idealistic point of view, the immediate reply is: “well, the actual purpose of companies should definitely not be harming individuals and groups like many do today!” This definition is charming. It defines by exclusion and nicely sums up the feelings shared by many towards companies. It has one huge drawback: we remain in the idealistic world and avoid looking the ‘monster’ deep into its eyes. It is much easier to mystify – or better said ‘monster-fy’ something or somebody if you fully rely on your own sentiments instead of taking the risk of being challenged by the diversity of potential facts surrounding the issue or person. But does monster-fying the corporation really help us solving the human rights issues caused by companies? Without wishing to delve into decades of unsuccessful campaigning against specific companies within capitalist societies, I reject monster-fying as a strategy to create change as much as I reject smart-ifying companies.

Smart-ifying is my expression for all those instances in which a company is assumed to have exclusive problem-solving capacity. The thinking goes along these lines: “let’s privatise our banking/health services/water/electricity systems because a huge legal person can clearly – i.e. no evidence is needed – provide better services than publicly elected representatives supported by technical experts. Obviously – i.e. there is no visible evidence -, this huge body will still be willing to adhere to state demands and not employ numerous corporate lawyers to put pressure on our politicians. After all, look at it! It is so professional, and smart and clearly better than state bureaucracy”.

In between monster-fying and smart-ifying, there lies the wide and grey area where we can choose to look at reality in all its contradictions. Once we have established what the corporation actually is and what its purpose is supposed to be, we can engage our imagination with that reality to create feasible steps towards human rights respect in business.

Pursuing the Purpose of the Corporation

report-coverThe question ‘what is the corporation?’ has been pursued by Frank Bold for the last two years. Usually, this law firm and civil society organisation presents itself as a provider of “legal expertise in corporate accountability and corporate governance to the European institutions as well as to civil society, municipalities, and businesses.” Together with the Modern Corporation project at Cass Business School, Frank Bold initiated the Purpose of the Corporation Project. In the framework of this project, they realised the ‘Corporate Governance for a Changing World Roundtable Series’ in six European cities and New York. This series of roundtables engaged more than 260 minds from business management, investment, regulation, academia and civil society since 2014. One of the major findings is the emerging consensus that corporations should pursue so-called “long-term sustainable value”. The experts debated how corporate governance could create this desired long-term sustainable value. They also discussed what the role of stakeholders is and what it could be in this process. Stakeholders are more than those holding shares. Most importantly, the roundtable participants also exchanged minds about which incentives to short-term decision-making by corporate actors exist in law, voluntary agreements and practice.

Wide and diverse fields are opened by these questions and their diverging answers.  It must have been a challenge to write the Global Roundtable Series Report on the findings and recommendations of this Roundtable Series. Launching the report was the occasion of the ‘Creating Sustainable Companies Summit’ in Brussels on Wednesday, 28 September 2016. My reflections on the report will need to wait for another post. If you cannot wait, read the executive summary. This post is dedicated to a suggestion offered by Filip Gregor during the concluding panel. He asked everyone in the audience to write an article or blog post. I seize the opportunity to express my first impressions before they are pushed to the background by the passing of time.

First Impressions from the Summit

Arriving at the event, I realised: the topic of the summit was publicly listed companies! It surprised me that I had completely forgotten this fact. Publicly listed companies are a corporate type which is not as dominant in my country of origin and residence, Germany, as it is in countries like the UK where I studied Corporate Governance. I realised that in my day-to-day work –  lobbying for a strong German Action Plan on Business and Human Rights, and in campaigning for a national law binding German companies to exercise human rights due diligence – transnational companies were my targets. There are differences. For instance, the textile company KiK which is currently sued for damages in a German court for its part in the Ali Enterprises fire is not a company which offers its shares at any stock exchange. The main reason why I stopped making this distinction is: companies such as KiK appear as profit-driven as publicly listed companies like Nestlé and Coca Cola. For the latter group of stock-exchange inhabitants, the science and language of corporate governance expresses a range of ideas, concepts and recommendations on how they are and ought to be operated by shareholders, the Board, and other stakeholders.

Maximising the value of a corporation for the benefit of those who hold shares in this corporation is called ‘maximisation of shareholder value’. It falls in the same line like my thinking about KiK: whoever puts money in this undertaking wants to get as much out of it as possible – no matter what the consequences are for fellow humans and the environment. This idea of maximisation was promoted by academics and continues shaping corporate actors until today. Very often the line of reasoning is: sorry, green & fair guys, we are here to make business – not to save humanity and the planet. Making money, not feel-good sentiment is what we are tasked for by those who own the company. The Purpose of Corporation project which Frank Bold initiated questions this understanding and offers alternative approaches to corporate governance models.

Discussing the findings of the report was the main programme of this summit. Instead of taking you through its agenda, I wish to focus on those aspects which gave me most food for thought.

“Social and environmental issues will eventually become financial issues.”

These words are said to belong to the CEO of Novo Nordisk according to Susanne Stormer, its Vice President of Corporate Sustainability. She holds that the Triple Bottom Line still works. In the context of a debate on shareholder value where money is the objective and the benchmark, these statements from two people working for a company are very interesting.

If companies were to adopt this attitude, this would be especially encouraging for shareholder activists like those fighting that BASF and Lonmin pay restitution to the survivors of the Marikana massacre or inhabitants from Kodai and their supporters who demand that Unilever cleans up the environmental pollution from its mercury production. Both activist groups push social and environmental issues on the agenda of companies’ AGM to coerce corporate representatives into looking at the consequences of corporate actions on people and planet. One of the preferred ways powerful companies react to this societal pressure is by pushing their own weight on politicians. A good example is Sofia Ashraf’s explanation of Unilever’s reaction to activists demanding a clean-up of the mercury factory in the Kodai case.

Many initiatives and projects dedicated to enabling companies and those working within the corporate world to pursue higher respect for human rights and the environment somehow never manage to become effective. They end up leading their lives as paper tigers. At the Purpose of Corporation summit, John Kay summed it up by stating that the biggest problem is companies doing too much in the political sphere. Having this statement at the first plenary session of the summit is crucial to ensure that the debate covers all relevant issues.

After acknowledging this core problem of Corporate Governance, it was a pleasure to listen to Marcello Palazzi at the same session. Mr Palazzi co-founded B Lab Europe. I will spare you a detailed account because Sofia has already explained the B Corp system in greater detail and I have placed it in context with the general arguments against change by companies. It suffices to say that B Lab Europe’s work is of particular relevance for changing the way we use companies since B Lab creates space for purpose-led companies like Thread International. These companies then impact other companies to become greener and fairer.

Chasing the Elephant – How Can We Help Companies to remain viable?

My favourite take-away from the conference was Mr Gregor’s reaction to a statement from the audience. During the closing remarks, somebody who identified himself as a corporate lawyer suggested giving rights to the corporation because it was facing such a high number of demands by so many people. Indeed, many of the recommendations discussed at the summit targeted the corporation and its actors. My gut reaction was to point out: the longstanding power asymmetry in our world has led the great majority of laws on the topic of corporate duties and international trade to be much more favourable to legal entities than to human beings.

Whilst my answer would have fallen in the category of ‘monster-fying’ the corporation, the reply given by Mr Gregor, who sat as a representative of Frank Bold at the panel, avoided both monster-fying and smart-ifying: agreeing that the corporation has a right to be viable, he offered the question how stakeholders and shareholders would need to act in order to help the corporation to be sustainable in the long-term i.e. viable. Thus, Mr Gregor played the ball back to everyone in the room, encouraging us toy firstly, imagine the desired result and then, immediately, start wondering what actions would be necessary to get to there.

(c)

If we want this paper tiger to jump into action, new techniques are required. © Nils

This solution-orientated thinking technique was part of Dr Katrin Muff’s presentation at the Breakout Session on Strengthening Stakeholder Voice, and I have written about this in greater detail as the concept of ‘The Moral Imagination’ by John Paul Lederach. At the core of Mr Gregor’s and Dr Muff’s reply is a specific understanding of the company: not an anonymous black box, but individuals interacting within and around it. I feel safe in assuming that they would both agree that the purpose of companies is to respect human rights and the environment in order to be viable in the long run. Most people at the summit would share this opinion. It appears that all ethical questions have been exhausted.

The remaining question is: “how can we get people – those making the calls within the company and surrounding it – to act in the way they increasingly claim to support?” At the concluding panel education was presented as the key to this conundrum – how to teach corporate governance issues in better ways from an ethical point of view at business schools, for instance.

“The acquisition of knowledge doesn’t mean you’re growing. Growing happens when what you know changes how you live.”

(Marc & Angel Chernoff: ‘1,000+ Little Things Happy Successful People Do Differently’, p.285)

Although I agree with the importance of education, I think it ignores a simple fact of human nature: knowledge does not automatically translate into action. Anyone who ever wanted to quit smoking, or take up a good habit like regular sports has encountered a silent wall of inaction or even active resistance within him-*/herself. Absent any counter-evidence, I have concluded that the rule “knowledge ≠ action” forms part of human nature. If we apply Mr Gregor’s question to ourselves – as company employees, leaders, academics, consumers and holders of many other roles – we need at least one answer to this question: how can we ourselves grow in order to enable companies to become sustainable actors i.e. be viable in the long-term?

On our quest for answers, we need to focus on the individual instead of the company. For ordinary citizens struggling to translate knowledge into desired action, the scientist Dr Maja Storch and others have developed and tested for decades the Zürcher Ressourcen Modell. In her book “Mein Ich Gewicht” (literal translation: “My Me Weight”), Ms Storch walks the reader in very clear language through all steps necessary to align the unconscious with conscious reason in order to discard whatever is blocking us from pursuing a specific goal. Slightly misleading, the book cover claims to treat issues around weight loss and healthy lifestyle. But, as many a reader has discovered: the methodology is about discovering your personal weight, and your personal needs rather than how to fit with the advertised body ideals. My assumption is that with this book title, Ms Storch pursued the most efficient way to bring her academic findings on human motivation to the largest possible number of readers. Bad news: unfortunately, the book is only available in German.

Starting with the Hardest Part: Ourselves

For the purposes of this blog post, I cut the wonderfully structured book short and enumerate the most central findings for our question (pp. 154-164) in my own words:

#1 Find the Right Form of Motivation
  • If people have the right form of motivation, they seek help, gather information, learn new skills and meet the right people. Whatever it is they are lacking to pursue the desired objective, they organise themselves to get their hands on it. Plus, they seem awfully cheerful and are enviably persevering in pursuing their goals.
#2 The Right Motivation is linked to the Big Questions in Life
  • This strong motivation emanates from the individual’s identity: her/his* own understanding of self and of purpose in life. Fundamentally, it is one’s values and one’s attitude towards life which are the source of strong motivation: why am I doing that?
#3 Individual Answers to the Big Questions Can Change
  • The answers to the fundamental “why?” can change within the span of life.
#4 Tools to Achieving Goals Are Not the Right Motivation (surprise!)
  • While identity and purpose-driven motivation is basically unstoppable, tactics, measures, timelines and other tools for achieving a (prescribed) objective are linked to reason-based motivation: you should stop smoking because it is bad for your health. All smokers know: this form of motivation is error-prone.

Let’s now apply these findings to our question: Our desired objective is creating and then mainstreaming a sustainability policy within a company. How can we get the responsible actors within the company to adapt the policy? Instead of prescribing each department a timeline and benchmarks, the process would start at what might see a very ‘esoterical’ level: asking employees what values they identify with, and how they would imagine pursuing these values within their respective role at the company. Doing good work in order to keep oneself and fellow colleagues employed is only one aspect. Very often, in day-to-day operations a painful amount of waste takes place: paper, electricity, food and time are wasted. Additionally, most if not all organisations have some sand in their machinery – little points where the ‘big system’ is not running as smoothly as it could due to strange rules for power display and ‘we have always done it that way’ habits.

The fact that an individual’s consideration of what matters to him/her can change is crucial in this regard. It means that the factors which create strong motivation within an individual are not set in stone. I remember fellow participants at the summit telling me about the Breakout Session A on Revise Executive Pay. Apparently, one man got up and said that he would be willing to accept a pay cut if all of his competitors would also accept one. During my corporate governance studies in 2013/2014, we read studies indicating the same for UK Boards.

If You Want Different Output, You Need to Change The Input

If you think I am a lonely dreamer, remember the B Lab/B Corp concept, and check out Jim Bignal’s idea of a Triple Purpose Company. Underlying Mr Bignal’s idea is the concept of a company where not only the legal body, but also and “most importantly” all employees pursue more than profits. They accept individual responsibility for regarding social and environmental aspects.  Initiatives like B Lab/B Corp and Triple Purpose Company underpin that there is space in business for the messy, less predictable and human-centric technique called ‘Zürcher Ressourcen Modell.

Ms Storch’s method to create stronger motivation appears much more difficult to implement and definitely harbours more uncertainties than a timeline with benchmarks and measurable goals. After all, the reigning business principle is “what gets measured gets done”. The method does, however, pay regard to the hard truth that just because you are continuously weighing a pig it does not get fat. I heard this expression at the 2015 UN Forum on Business and Human Rights when somebody criticised the auditing industry. Nobody should be surprised if 30-minute audits of companies fail to state corporate misbehaviour which later turns out to be obvious. There are thousands of smart people employed and very busy in creative compliance in companies worldwide. For instance, they hunt for unclear definitions or loopholes in legal texts which allow abiding by the letter of a progressive labour law, but not its actual spirit. This renders the law’s effects close to zero. Current strategies to stop this process of nullifying political efforts to pursue public interests regularly treat a lack of control as main issue – but total control is unachievable if you want companies to actually run. Would it not be more efficient to target the underlying lack of motivation that encourages the huge investments made in creative compliance?

If You Want to Change The Input, You Must Leave Your Comfort Zone

Corporate Governance has a long-standing tension between those who wish to use it to push a social and environmental agenda, and those who wish to create governance structures which serve other interests than those of people and planet, thus often also hurting long-term profit. Past decades with their different-but-similar corporate scandals and the great influence companies have over political and legislative decision-makers indicate that we need to look beyond creating an ever-growing set of rules. I am not saying we should give up the instrument of legislation. Neither am I saying that voluntary measures and the whole cloudy world of CSR are the solution. Instead, I suggest that it would be worth our time and energy to look at a deeper, more psychological approach to those whose individual and combined actions give life to the corporate world.

I do not suggest this because I am 100 percent certain that it will deliver the human rights friendly solutions I desire. Just as human individuals are usually neither ‘all evil’ or ‘all good’, applying the Zürcher Ressourcen Modell may confront us with answers which are uncomfortable and which tells us more about our societies than we would have wanted.

For instance some employees of KiK in Germany may regard their work as socially valuable since KiK advertises itself as “basic provider” which allows the German population to get fully dressed on a budget of 30 Euro. Yes, there may be people who could afford to fully dress in outfits which carry price tags of fair and green clothing. But there are, even in a very affluent society like Germany, a growing number people in low-paid jobs. As a matter of fact, many people depend on companies like KiK to dress themselves and their family; read on poverty in Germany 2016. This may lead to the painful question: what message does a societal system deliver if the provision of basic services and goods to one part of the society depends on the exploitation of workers and environment elsewhere? Maybe KiK is not the problem, but just the symptom. Considering this is crucial to avoid monster-fying the company.

Interviews with the two founders of KiK Stefan Heinig and Karl Erivan Haub display two individuals who openly speak about values that influence their work. Simultaneoulsy, they avoid any discussion of the hard human rights aspects of their business activities. It appears that corporate communications have already understood: by presenting the public corporate leader who speak about social aspects in their private lives, they can create the impression that their business actions would be equally value-based. Asking about the big value questions, attributing them to the speaker’s identity –what they aim for in their self-presentation – and then check with their actions helps us avoiding the smart-ifying trap door: we do not hand the debate over to the smarter, better educated corporate actors who may or may not have public interests at heart.

These two examples take us outside of our comfort zone. They are also based on the conviction that is in the interest of the longevity of companies to neither monster-fy nor smart-ify them, but to engage them in considering social and environmental factors. In concrete terms, we need to take companies or, better said, corporate individuals and groups outside their comfort zone. This may take many forms. Civil society actors use protests and negotiations to nudge and push companies into changing their past behavior. For instance, in September 2016 KiK agreed to pay over 5 million US-Dollars in pecuniary damages as a result of the ILO proceedings which are distinct from the pending trial. The proceedings have taken years and will now cost KiK a lot of money, in addition to possible damages arising from the court trial.

In the best interest of long-term existence, corporate actors should not wait for civil society’s push to leave their comfort zone. The Creating Sustainable Companies Summit indicates that companies have more than enough brains to start posing the necessary questions to grow from knowledge to action.

 

* has confused you? Get a crisp introduction to gender diversity.

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2 comments

  1. Thanks for a really interesting and insightful blog post. Your comments on considering the psychological aspects of individual and group action is very compelling. This angle seems to be much more constructive than the “monster-fying” approach that you refer to as it tries to target the root motivation of individuals within organisations. By better understanding personal and group motivations, managers, shareholders, regulators, consumers and civil society organisations can better target the mechanisms which can promote pro-social change. In contrast, vilifying firms for their actions (although certainly warranted in many cases) is likely to lead to reactions which are unconstructive as the natural tendency will be for firms to push back against their accusers.

    The other point that I would highlight is the important role of capital in this discussion. It seems that much of the discourse has been focused on the “rights” of capital owners (eg shareholders, owners of private firms) and less on their “responsibilities”. Part of the cause of this imbalance is due to the power afforded to capital owners in the current political climate. It is questionable whether democratic systems should permit such imbalances. As you rightly point out with KiK’s owners, understanding the psychological drivers of this group will be a good further step to addressing this imbalance. By doing so, the stakeholders of firms (in the broadest possible sense) will be able to identify ways of emphasising the responsibilities of capital owners and bring commonly shared values back to the heart of the corporation.

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    1. Thank you very much for sharing your thoughts with us! We have also been discussing the concept of responsibility because we also think that with companies’ great power comes great responsibility.

      Regarding the vilifying (monster-fying), one risk of companies pushing back against their accusing consumers is the economic/market logic of demand and supply: if consumers stopped demanding certain products, the logic says that companies would stop offering it. Usually, when consumers are confronted with this argument, they feel trapped and give up critising because they think the company is right and nothing can be done about it. One may claim that consumers should indeed stop consuming, or at least consume less (degrowth movement). For most products used in the daily lives of average consumers this may not be feasible. Moreover, it is usually not in the best interest of the actual producers at the beginning of the supply chain to lose their source of income. Learning new and better skills which enable us to render ourselves, fellow citizens and corporate actors aware of responsibility without suffocating the natural desire to know and understand with ubiquious guilt and shame is definitely a core challenge

      Like

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