Corporations not Government lead to a sustainable future
The last time an Australian Prime Minister served a full-term without being ousted, the iphone had not been invented. Whilst this might not be the case in every country, what stands true is that governments change regularly. Every time they do, incoming leaders undo policy often as a matter of party principle. So progress made on important issues by one government — like creating a sustainable future — can be quickly undone by another.
When it comes to a global issue like sustainability, change needs to come with momentum, scale and power. If it occurs within the borders of a single country, it doesn’t necessarily impact on the outcome — one country can undo the good work of another. Just look at emissions targets. The reality is sovereign governments cannot make the change on their own, so rely on global consensus which is disrupted by a carousel of leadership and their changing agendas.
We need to look to another source. The Corporation.
Not subject to ever changing leadership (the average CEO tenure of the Fortune 500 is now nearly 10 years), party politics, or the burden of a myriad of domestic issues under a government’s remit, the Corporation is better placed to work across international borders and force change. They also have the size and power to do so.
If you consider that 51% of words largest economies are corporations and that Walmart alone is bigger than 161 county’s combined economies, you can see my point. The combined sales of the top 200 corporations is bigger than that of 182 countries, which makes you realise that on a global scale it is the corporates who really have the power of influence. Imagine the potential impact of a company like GE; which employs over 300,00 people in more that 100 countries.
On a more individual level, consider the power of Lars Rebien Sorensen who has been the CEO of the global pharmaceutical firm Novo Nordisk for over 15 years (and this years top global CEO as ranked by Harvard Business Review). Novo employ 40,000 and operates in more than 70 countries world wide. Overall Sorensen has been at Novo for 33 years and his tenure has enabled him to embed a deep respect and engagement with social and environmental issues. So much so that they now even factor in to Novo’s financial calculations. “Corporate social responsibility is nothing but maximizing the value of your company over a long period,” says Sørensen, “In the long term, social and environmental issues become financial issues.” (HBR 2015)
But we can’t sit around waiting for every CEO to have the same epiphany. Just like we can’t sit back and wait for our governments to legislate for a sustainable future. So how do we do something as ‘average joes’?
Kofi Annan recently highlighted the power of the consumers to help influence a more sustainable future — through purchasing power. On the 20th of January this year he said, “Every time you buy a product or service, you are supporting a company. Before you decide which sneakers to buy or financial services to use, consider its business practices. There is a wealth of information out there on how businesses behave. Through our collective buying power, we can set the agenda and drive up standards”.
But equally, as investors we can force all global corporates to engage positively in social and environmental issues by rewarding the right companies to do the right things through investment. Importantly, we can also punish those who do not, by not investing in them.
The upshot, beyond a brighter future, is that there is increasing evidence that companies guided by a purpose beyond making money, return more to shareholders than explicitly profit-driven rivals. It’s a win, win…win.