Takeshi Niinami, CEO of Lawson and GAC chair, on why “doing the right thing” will lead to sustainable growth.
In the 21st century, diverse societies are globally connected due to transportation and technology and all share concerns related to energy, climate change, poverty, healthcare and human rights. One country, region or sector of a society cannot on its own provide the solutions to address such a complex web of issues. Thus, the engagement in global agendas must be multiregional and multidisciplinary.
The establishment in 1999 of the UN Global Compact was a clear sign that corporations needed to realize that engagement in global agendas is the pathway to their sustainable growth in the 21st century. Profits cannot be maximized, unless it is sustainable. The engagement of business, not just government, in global agendas is not about just doing something “nice”, but rather about embracing diversity to maintain a course for sustainable growth. A business’s true value is the ability to create sustainable growth to continue providing goods, services and employment to society.
Fourteen years on, the recognition that the role of business should extend beyond simply optimizing short-term returns does already exist. However, a further conceptual framework for corporate action and governance is needed, whereby sustainable long-term value creation is also recognized as an important cornerstone for a business.
We now know that businesses “should” engage in global issues, but we need further understanding of how businesses “can” engage. This new form of action hinges on a shift from a shareholder-focused model toward a more multistakeholder approach. For business leaders, their stakeholders include not only their debt and equity shareholders, but also their customers, employees, business partners and communities at large. The new, integrated approach must mobilize businesses and their stakeholders in creating change.
Thus, the World Economic Forum’s Global Agenda Council on the Role of Business has chosen to focus its 2012-2014 work on the following four pillars of action:
Transparency and reporting: To change company expectations and behaviours, it is necessary to change the areas on which they are required or asked to report (by the board, government, regulators, the public), to include environmental, social and governance components. A compelling incentive structure must be put in place for inclusion of this type of reporting.
Investor responsibilities: Investors are an influential stakeholder, and their decisions of whom to fund can be a strong incentive to companies to comply with certain norms and behaviours.
Governance: Boards and chairs are instrumental in changing business models. There needs to be an incorporation of the long-term view and stakeholder considerations in both strategic planning and reporting processes; boards and chairs can be positioned as a driver of this shift.
Business as a collaborative stakeholder: Business is increasingly asked to play a stronger role as a collaborator with government and civil society in seeking solutions to global challenges. There is a need to think further about how this manifests, what business has to bring to the table and where it can have the greatest impact
Top management must always be sensitive to the realities of their business at hand, as well as to the changing of tides of time. When short-term needs and long-term objectives collide, an important criteria that dictates priorities for a business is integrity and the unwavering belief that “doing the right thing” will lead to sustainable growth.
Engagement of businesses in global agendas is a win-win proposition.