The Barclays Debate, chaired by Matthew Tayor, Chief Executive of the RSA, pitched John Elkington, Founding Partner and Executive Chairman of Volans, originator of the “Triple Bottom Line” against Mark Kramer, CEO of nonprofit consulting firm FSG, and co-author of “Creating Shared Value” with Michael Porter to discuss, “Is CSR dead?”.
A virtual poll of the audience revealed the split was fairly even at the start of the evening. I was for #TeamMark, surely corporate social responsibility of old has quietly passed on to more productive pastures? CSR teams as an outpost of corporate affairs, staffed with communications professionals, set CSR firmly outside of core business operations. As such, many totemic activities were scythed in cost-cutting exercises during the economic downturn.
Mark Kramer framed the debate as the choice between the responsibility of “doing less harm” and the strategic opportunity of “generating economic value in a way that also produces value for society by addressing its challenges”. Kramer honed in on the role, and definition of profit, “I think John believes we need to reinvent the model to take into account things that have no monetary value – the use of natural resources, the welfare of people – so that we can present them to companies as a bottom line that frankly is fictitious.” Externalities are out of the equation. Companies respond to reality, the real incentives of the bottom line, government policy and the regulatory framework context.
The “Triple Bottom Line” accounting framework with three parts: social, environmental (or ecological) and financial, or people, planet, profit, was coined by Elkington in 1994. Acknowledging the complexities of valuation, the framework has been a powerful tool to reveal the full cost benefit analysis of doing business. However, the framework separates people and planet from profit, perhaps reinforcing the sense that CSR sits apart from core operations. With his opening comments, Elkington expanded this narrow frame of reference, and influence, from within to without an organisation: “CSR is a deep rooted, ongoing conversation across sectors about the role of business in society. It is about transparency, accountability and sustainability.” Shared value, Elkington counters, may provide limited win-wins, but will not deliver the breakthrough capitalism we need, described in his latest of 19 books, “The Breakthrough Challenge: 10 Ways to Connect Today’s Profits with Tomorrow’s Bottom Line”, co-authored with Jochen Zeitz, and central to the B Corps movement that launched in the UK last month.
Elkington did question whether CSR is fit for this greater goal of systemic change. As the mutual dependency of people, planet, profit is increasingly recognised by the mainstream, so CSR is facing serious problems. Resource scarcity has risen up the business risk agenda, so activities that may have been within the CSR remit, are now considered part of core business, but the question of intention remains. Citing that day’s news of John West’s woeful performance on sustainable fishing, Elkington said, “John West promised to get to 100% pole and line caught tuna by 2017 – it’s currently at 2%. Does that completely wipe out CSR? Absolutely not. It means John West are semi-criminal”. John West and the VW emissions scandal are examples of an absence of integrity and values.
Janet Voute, Global Head of Public Affairs, Nestle, in her opening remarks as #TeamMark seconder, quoted Nestle’s CEO as saying the corporate sector has had a values crisis. At Nestle there is no ‘Shared Value’ department, rather Voute asserts the values of Nestle are aligned across the organisation with the Ten Principles of the UN Global Compact, looking to create shared value, and value for shareholders, over the long-term. The time horizon is a vital disclaimer, echoing Kramer’s caution that companies short-term incentives may conflict with shared value. The externalities of environmental, social and governance factors getting squeezed out by short-term profit and pay incentives.
A quick show of hands revealed most of the audience agreed that capitalism itself needs a serious health-check. Patrick Thomas, Chairman of Board of Management of Covestro, joining the debate as #TeamJohn seconder, was fresh from meetings with fund managers: were they won over by Covestro’s products or their commitment to the triple bottom framework? Hermes Investment Managers latest paper on Responsible Capitalism and our Society finds that while awareness of environmental, social and governance (ESG) issues amongst institutional investors is growing, it is not being reflected in decision-making. Saker Nusseibeh, Chief Executive of Hermes Investment Management, said “Today’s siloed and short-term investment approach is the antithesis of responsible capitalism. Change is necessary, if we are to ensure today’s savers and their children will be able to enjoy a fruitful world in the future”.
Finally, as a coalition of 19 investors with over £625 billion in assets under management has written to 11 major automobile companies calling for improved reporting of their public policy interventions on emissions standards, we need greater transparency of the relationships between business, regulators and policymakers. The air quality in our cities is testament to the current system failure.
#TeamJohn won the vote, but the consensus in the room was that rather than either CSR or CSV, we need both. A revitalised CSR agenda to build momentum for systemic change, and shared value to reconnects businesses and all their stakeholders. A panellist at a Harvard Kennedy School Leadership dialogue in 2007, said “CSR is dead! Long live CSR.” In eight years hence, I hope we have met the breakthrough challenge.