DAVOS: BUSINESS LEADERS FOCUS ON 5 SUSTAINABILITY THEMES

COMMENTARY ARCHIVES, 29 Jan 2010

Peter Lacy

As I write from the World Economic Forum, having attended an event with some of the UN leadership and CEOs from various sectors, I’m further reminded of the growing prominence of sustainability issues in both core business strategy and mainstream geo-politics. This was was barely thinkable even five years ago.

As I reflect on this, five themes emerged for me from my Davos conversations that are consistent with what I’m hearing from clients. They also seem to fit well with Davos’s own core theme as business leaders consider their own contribution to “Improve the State of the World: Rethink, Redesign, Rebuild”. These five themes take us from ensuring the global stability and legitimacy of capitalism through to the imperative of execution.

The event today was organized by the United Nations Global Compact, a vehicle set up by Kofi Annan to work with the private sector on the UN’s sustainable-development goals, launched here at Davos in 2000. As the Compact celebrates its 10th Anniversary both the UN leadership and business leaders were reflecting on progress to date, the challenges and opportunities ahead, and in particular the leadership that will be required to live up to what Secretary General Ban-Ki Moon has called the "Compact 2.0" in the next decade.

The debate was a fascinating and wide-ranging one. It was also a debate that went way beyond climate change to encompass a broad set of environmental, social, and governance issues. On the one hand the tone was a somber and challenging one. Jeffrey Sachs of the Earth Institute at Columbia University called upon business leaders to go beyond pure self-interest and act as “global statesmen” as they look to reshape the world in the wake of the global financial crisis. “We need to be honest about the fact we nearly blew up the global economy," he said. "Now it isn’t about only regulation or self-regulation. We need business leaders that can go beyond their own interests and act as `global statesmen’ in building a sound global system.”

But on the other hand business leaders generally felt that significant progress had been made and their commitment remains firm to responsible and sustainable business. Although they clearly felt the downturn has had a significant impact on their activities and ability to invest due to a need to just survive, the economic context has forced them to align sustainability with core business objectives where they can have the largest impact.

There was also a sense that business needs to really focus on what it does when it is at its best: deliver wealth creation and economic returns for shareholders and stakeholders, sustainably and responsibly.

This was a timely discussion at Davos because this year Accenture (my employer) is leading the UN Global Compact CEO study to help understand business leader attitudes on sustainability. I jointly led the interviews back in 2007 for McKinsey so I’m looking forward to seeing how opinion has evolved. The results of our study will be presented in June at the UN Leaders Summit in New York. But for now, based on what I have gleaned from my own client discussions and from Davos I see five key themes emerging amongs CEOs across industries and geographies:

1. Stability: Business leaders across sectors and geographies are concerned that the global economic situation is putting capitalism and a commitment to free markets themselves at question. They fear a resurgence of populist measures and protectionism that could act as a brake to global recovery and growth. They feel the urgent need for business leaders and the UN to restate the positive role that companies can play in generating wealth and to redouble the efforts to do that in a way that contributes to sustainable development outcomes, verifiably.

So it isn’t good enough just to make the "business case" for sustainability but also at a much more fundamental level, "making the case for business."

2. Regulation: The business leaders I have spoken to fear that we are going to see a wave of regulatory activism and interventionism. They fear that the pendulum could swing too far. Generally they are not against regulation per se–in fact many see the need for a re-calibration in financial markets in particular–just not knee-jerk reactions. More commonly they want to seriously explore collaborative solutions such as self-regulation and multistakeholder engagement. I see more interest in creative and innovative solutions here that are truly about demonstrating verifiable outcomes and building trust.

3. Limits: The downturn has forced business leaders to stick to what one CEO called the "hierarchy of needs" just to survive. But the ramifications of instability go further. CEOs feel the need to restate the core purpose and benefit of business as an engine of economic growth. They also believe there are genuine limits to responsible business if it doesn’t align with core business objectives, as well as recognizing the need to work with other players who may be better placed to deliver impact around education, health, climate change, etc., such as development agencies and NGOs.

There is also a hint of "backlash" against pressure groups, who some feel are quick to chastise but slow to publicly recognize progress, particularly given scarce financial and management resources (e.g. sometimes even taking a leadership position on sustainability ends up with being damned if you do, damned if you don’t).

4. Markets: There is a strong sense from CEOs that they see sustainability issues becoming increasingly relevant to market forces, particularly as consumer and customer demand grows not just for sustainable performance (where there are still doubts about whether consumers and customers are prepared to pay a premium) but also products and services whose core proposition is about tackling sustainability challenges in areas like energy, water and waste.

Nowhere is this more evident than in the wide range of discussions that have been going on at Davos around Intelligent Cities and SMART technologies in everything from energy grid technologies to SMART transport and logistics.

5. Execution: Business leaders seem again and again to recognize that "Execution, Execution, Execution" is the name of the game. They increasingly understand sustainability trends and how they are likely to impact their industry. In many cases they have a good strategic vision for where they want to get to, both in terms of the way they run their business and in terms of embedding sustainability in their product and service mix.

However, where they are struggling is executing across the organisation. This is in areas ranging from supply chain to performance management, from new business development to building the organisational and individual capabilities to align sustainability with revenue growth, cost reduction, risk management or brand and reputation. So delivery and implementation are already a big theme and don’t appear to be going anywhere.

So as both political and business leaders at Davos “Rethink, Redesign, Rebuild” their way to improving the world, it is clear that sustainability is here to stay as a top table agenda item and is becoming an increasingly embedded part of geo-politics and what it means to be a high performance business.

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Peter Lacy, based in London, is Managing Director of Accenture Sustainability Services in Europe, Africa and Latin America. He is blogging from the World Economic Forum in Davos this week.

Submitted by TRANSCEND Member Fred Dubee

This article originally appeared on Transcend Media Service (TMS) on 29 Jan 2010.

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