The Sustainability Challenge for Big Business

The Cantor Business Lecture was introduced on 29 January by Prof Bob Doherty, professor of marketing at the Management School of the University of York. The lecture was delivered by Sir Stuart Rose on the subject of  “The Sustainability Challenge For Big Business.” 

I thought you might be interested in my notes on the presentation.

Stuart Rose was the Chief Executive who introduced Plan A to Marks & Spencer. He started his speech by reminding us that the world will soon be a very different place with a population of over 9 billion by 2030. By then we will need

• ·      50% more food,
• ·      50% more water and
• ·      30% more energy.

Prof John Beddington, former Chief Scientific Advisor to the government, has described this as "a perfect storm." At the moment there is not enough to go round. 

While Marks and Spencer adopted Plan A because there is no Plan B, there is no plan at all for the world at large. Whether capitalism can survive is an open question. David Attenborough has made the point that we cannot grow indefinitely and Tim Jackson, in his book “Prosperity Without Growth”, states that growth will inevitably come to a halt.

Today each of the top 12,000 families in the US owns more than the poorest 10 million inhabitants of the world. Those families control sufficient resources to wipe out global poverty within five years. Warren Buffett and Bill Gates are showing the way, but much more could be done.

Of the 100 largest institutions in the world, 63 are corporations, not governments. Trust is the key. Many businesses are better trusted than many governments.

A child born today in the West can expect to live for 100 years. It’s worth recognising this while remembering that the Bruntland Commission defined sustainable development in 1987 as “development that meets the needs of the present without compromising the ability of future generations to meet their own needs.”

Plan A was introduced at Marks & Spencer following an abortive takeover. Stuart Rose read Al Gore’s book “An Inconvenient Truth” and then watched the film. He then showed the film to the top 100 executives at Marks & Spencer. The next day around 70 of them emailed him saying something should be done. Al Gore’s thesis is that sustainable business is more profitable business. Initially Marks & Spencer’s competitors wrote off Plan A as mere greenwash. The company has 2,500 suppliers encompassing 25 million people, all needing to be convinced. The investment community was sceptical. Stuart Rose personally led the internal team and brought staff and customers on board.

After three years, 72 of 100 pledges had been achieved and profitability had improved. Then Walmart and O2 and Unilever and Nike and HSBC all came along asking how they could do the same. Sir Stuart quoted the Chief Executive of Patagonia, an outdoor clothing supplier, who said, “every time we do the right thing we make money”.

At Marks & Spencer Plan A had four effects.

• ·      First it drove cultural change and encouraged people to look everywhere for savings and also to be hungry for more change.
• ·      Secondly, remuneration was tied to the success of Plan A and as it succeeded people were paid more.
• ·      Thirdly, innovation accelerated and
• ·      finally there were far-reaching changes in the  supply chain.

For example, in Bangladesh workers’ incomes, workers’ rights, industrial relations and improved productivity were all targeted. As a result wages were increased on average by 25% but increased productivity meant that Marks & Spencer could continue to use these suppliers and remain competitive.

The company’s current aim is to be the most sustainable organisation in the world by 2015.

In concluding, Stuart Rose said that he believes that in future everyone will have to have fingers on every pulse. Organisations will need to network more. Businesses that create partnerships will succeed, not only through partnerships with competitors, but they will need to work with NGOs to accelerate innovation and to deal with the challenges that face us all.

The question is not whether organisations should do these things but whether they can possibly afford not to try. The imperative is to change radically and change now because we cannot continue as we are. We need to plan and we need to set goals. All this must go on at a time of rapid change in global economic activity and a shift of economic power from one part of the globe to others. People in the third world and in developing countries have expectations equivalent to our own and have the same rights to them, but how we’re going to be able to satisfy them is still not clear. If we are to have any hope of solving the problem we need to start now.

There is a storm starting now for our children, for our grandchildren as well as for us.

It’s time for action.

Here are some of the points from the question session which followed.

Stuart Rose agrees that the government must get involved if we are to succeed, but at the moment they’re not doing anything if it’s going to lose votes. He believes they will eventually be forced to face up to reality.

Incentives are a good way to change behaviour. He once sent a crate of champagne to someone who managed to save one penny’s worth of cardboard from the packaging of every pair of socks. When you’re selling millions of pairs of socks that’s a lot of money.

In other cases firm guidance is important. For that reason he personally chaired the sustainability committee at M&S.

Is continuous economic growth possible? No.

Is sustainability compatible with consumerism? No - unless perhaps the products are truly recyclable so people can renew their wardrobes and their gadgets and everything else, but return the ones that they no longer use.

Sir Stuart believes that George Osborne was too late in implementing many of his cuts. He believes the cuts are necessary and recognises that they are unpalatable, but the alternative of spend, spend, spend, is a reckless road to ruin.

The business of business is no longer just business!

Economics for a Crowded Planet

For Christmas I was given Commonwealth: Economics For A Crowded Planet by Jeffrey Sachs.

This book covers a range of challenges facing the world and is optimistic in suggesting solutions.

Commonwealth  contains a number of startling insights. First, the human domination of major components of our world. Humanity controls 45% of the land, around 60% of the water cycle and nearly 80% of marine fisheries. Agriculture is the principal user of water and uses as much as all the rest of the demand put together. As a result the Ganges, the Yellow River and the Rio Grande no longer reach the sea because the water is abstracted along the way. We are using groundwater, otherwise known as “fossil water” because it’s been trapped underground for millions of years, in the mistaken belief that it’s an infinite resource.

Sachs shows how we can address these problems and in particular the problem of population growth. He shows how government intervention is essential and demonstrates that the free-market economies will not address these problems. He also shows that social welfare economies outspend both free markets and mixed economies on R&D, they contribute more in aid and have the lowest proportion of their domestic population in poverty.

Sachs is an American, but that does not stop him from criticizing his country. He complains that poverty in the US is more widespread than in even the average free-market economy. The US struggles to meet its 0.7% GDP target for foreign aid, yet spent $572bn on the military in 2007. This is nearly as much as the whole of the military spending by all the other countries in the world. Spend on humanitarian and development aid by the US was just £14bn. In Sachs’ opinion, few of the world’s current problems can be solved by military means.

This book was written and published in 2008. It closed on an optimistic note. Sadly the actions which Sachs expected to be taken have not been taken. In many ways the world has gone backwards. He echoes the Stern Report (2006) in saying that immediate action will be much cheaper than if we delay. And yet, instead of a strengthened Kyoto agreement which Sachs looked forward to in 2012, the actual result concluded last December was even weaker than the original agreement, with many decisions postponed for yet more years. Meanwhile, the US shows no signs of moving away from its policy of using military solutions almost regardless of the nature of the problem, the people of Haiti squat in disease-ridden refugee camps still waiting for the aid funds promised more than a year ago and exceptional weather brings fires and flood to Australia, with hurricanes and blizzards attacking parts of the US with ferocity that they’ve never seen before.

I very much hope that Jeffrey Sachs will write a sequel, but we can’t sit around waiting for it. Spread the word. Take action now. At the risk of sounding histrionic, the future of humanity depends on what we do this week, this month, this year. Leave it much longer and it’ll be too late!