Can corporations, even the most responsible ones, lead the way to a sustainable future? Or should people who care about social and environmental problems instead focus on politics and government?
On Thursday, executives from some of the world’s most admired companies met at the United Nations to discuss the “The Future Corporation,” as part of the UN Global Compact’s Lead program. A spirited debate unfolded about the potential – and the limits – of corporate sustainability.
On one side, a corporate critic: Joel Bakan, a law professor and author of a book and documentary film called The Corporation, who argues that voluntary corporate responsibility efforts won’t solve the world’s big problems.
“At least from the perspective of sustainability, the corporation of the past has been a failure,” Bakan said, and that’s unlikely to change: “As a model for solving the big problems that the earth is currently facing … it’s not a good model.”
On the other: L Hunter Lovins, an author, activist, and professor of sustainability who has advised such progressive companies as Patagonia, Interface and Clif Bar, as well as big firms including Unilever and Walmart.
Smart companies, she said, understand that they need to transform themselves, not merely to become sustainable, but to become regenerative, repairing damage to the earth.
“You cannot do business on a dead planet,” Lovins said. “Reality is a driver of change.”
This is more than an academic debate. Should companies invest in efforts to protect factory workers in poor countries, or leave that to governments? Is the US’s obesity epidemic a problem for business, a regulatory issue or a matter of personal responsibility? Can markets and clean technology drive a transition to a low-carbon economy, or are government mandates required?
Bakan argues that it’s a mistake to rely on even the best businesses to do good, since at least their self-interest does not align with the public interest. “When conflicts exist between sustainability and the value to the business, the value to the business must prevail,” he said.
The Coca-Cola Company does admirable work around packaging for its soft drinks and bottled water, among other things, but you can’t “expect the company, in the name of sustainability, to stop producing bottled water altogether,” he said. Nor can Coca-Cola be expected to support taxes on soda or high-calorie foods to curb obesity. That’s the government’s job, Bakan said.
Corporate commitments to sustainability “are necessarily defined and limited by the imperative that they serve or at least don’t sacrifice” their obligation to deliver shareholder value, he argued. Nor are companies accountable to the public, as are elected officials.
“We can rely on corporates to regulate themselves and to take leadership roles in social and environmental issues,” Bakan said. “Or we can rebuild – and help build in the developing world – democratic, public and impartial institutions.”
In response, Lovins asked the business people in attendance to raise their hand if they believe they can rely on government to solve the world’s big problems. No hands went up.
She argued that influential corporate leaders now recognize that business as usual cannot continue, citing the Risky Business report about the risks of climate change, commissioned by Michael Bloomberg, Hank Paulson and Tom Steyer. “We are losing billions of dollars every year because climate change is here today,” Lovins said.
“The future of the corporation will be corporate leaders who have the guts to do what is needed,” said Lovins. When asked how companies should deal with pressure from investors to deliver short-term earnings growth, she shot back: “Get better investors.” The idea that companies must act short-term, with a narrow focus on shareholder value, is a myth, she said.
Young workers especially will insist that their employers take an expansive view of their role. “You will either enable them to feel like they are working for a responsible company, or they will work somewhere else,” Lovins said.
Ole Hansen, who works with the 55 companies that make up the Lead groupwithin the UN Global Compact, said voluntary actions by corporate-responsibility leaders can influence the mainstream and then, eventually, be codified into law. One example: companies voluntarily disclosed non-financial information, such as their carbon emissions or water use; the practice became widespread, and recently, the EU moved to require disclosure from big companies. Without the early, voluntary action, “this would have met with more resistance, and it never would have been passed” Hansen said.
Aron Cramer, the president and CEO of Business for Social Responsibility (BSR), said there’s little point debating whether government or business will lead, because both are needed.
Cramer told me: “We need government to do what it does uniquely and best – set rules, and enforce them. And we need business to capture the opportunity to deliver value in ways that improve people’s lives. To suggest that it’s one or the other, and reject one or the other, is like fighting a battle with one hand behind your back.”
One thing all agreed upon: companies need to align their public policy work with their sustainability goals. If companies are serious about sustainability, Bakan said, they should “get together, set up a lobby in Washington, DC, and lobby the government for strict sustainability rules – with the same fierce vigor that they lobby against regulations today”.
This series on the 2014 United Nations Global Compact Lead Symposium is funded by the UNGC. All content is editorially independent except for pieces labelled “brought to you by”. Find out more here.