Last Friday in Quito, the Chair of our board Herman Mulder gave a visionary speech at the Cumbre Mondial de Responsabilidad Social. From pain to gain, this is the moment, and the only way forward is considered collective action. Be inspired by the full speech below:
Cumbre Mondial de Responsabilidad Social (Global Social Responsibility Summit)
Quito, 26 July 2013
Speech by Herman Mulder, Chairman of the Boards of GRI and True Price, Member of the Boards of NCP-NL/OECD, UTZ Certified
The “Rana Plaza moment”
Extreme pain had, again, to serve as a wake-up call for us that we are living unsustainably, with some having too much and many others too little: “Rana Plaza” with 1200 people left dead earlier this year under a collapsed garment factory in Dhaka, Bangla Desh. The “prize” (reward) of innovation and globalization appears largely be attributed to the affluent few, leaving too many “underprivileged” in our societies (and often working at the beginning of our own supply-chains) excluded from our “common goods”, their rights and benefits, and being directly affected by our lack of environmental and social stewardship and even seriously at risk.
This serious accident in Bangla Desh should not be seen as an incident, but rather as an example for more fundamental flaws in our societies. It is yet another “canary in the coalmine” for a broader issue we all need to address: “how on earth are we all, with 9 billion people, living together sustainably, in peace and in prosperity”. How do we realize “the world we need” (rather than just the Rio+20 “want”): wellbeing for all, within planetary boundaries, with social justice. Which actors need to be mobilised, which obstacles and drivers need to be addressed, sooner rather than later.
From Pain to Gain?!
The “Rana Plaza” accident may well become an example how “accidental pain” should, an hopefully will result in “systemic gain”: in the aftermath of this event, an unprecedented cooperative, tripartite effort is being made by the government of Bangla Desh and international organisations with unions and business to take steps to prevent this to happen again in in Bangla Desh and beyond, and also, even more importantly, to address at a more fundamental level how to create sustainable, fair, transparent business value-chains. This accident is, hopefully, an inflection point to much more broadly recognize the importance and urgency of the sustainability agenda, and provide further impetus to the Post-2015 Agenda by the UN.
We all have to play a role in this: governments with the right regulations and effective enforcement; business to realize and put into practice, out of long term self-interest, the imperative it has to raise its ethical, operational and transparency standards; consumers and financial institutions to similarly, proactively step up to the plate; civil society organisations (including NGO’s and unions) to challenge but, importantly, also to cooperate with governments and business on the journey for a better world.
This is the new moment
In the early years of this millennium (stimulated by Earth Summit/Rio+10 in 2002 in Johannesburg) many voluntary business initiatives were taken, directly or supported by advanced businesses, such the UN Global Compact Principles, Equator Principles (project finance by banks), Principles for Responsible Investment (PRI, by asset-owners and -managers), World Business Council for Sustainable Development (WBCSD: leading global business platform), Global Reporting Initiative (GRI: non-financial/ESG disclosure standards), The Economics of Ecosystems and Biodiversity (TEEB), ISO26000, many others. An increasing number of corporations (small, medium and large) are embedding since then sustainability into their core strategies and applying this in their valuechains, increasingly successfully.
The beginning of the current decade, enhanced by Rio+20 last year, is showing a next stage of addressing our common sustainability challenge: leading businesses and civil society organisations have learned to work together, and are exercising pressure on governments and international organisations to co-create smart baseline regulations, nationally and internationally, for their practices to become mainstream in their sectors and across countries.
Examples hereof are the 2011 Update of the OECD Guidelines for multinational enterprises(co-created by OECD with BIAC, TUAC, OECD Watch; adhered to by 45 countries, including Peru and Colombia, but not Ecuador), the UN Guiding Principles for Business and Human Rights, national laws and regulations on disclosure (eg EU Directive on non-financial reporting, India Ministry for Corporate Affairs), the Natural Capital Declaration at Rio+20, the Post-2015 Agenda, etc.
Drivers for change
Unintentional blindness has obscured our vision on values and value. This is changing. We are increasingly able, prepared and even required to identify and value non-traditional assets, liabilities, returns and costs (ref. payment for ecosystem services, as also in water-catchment for Quito) . Measuring is an essential part of managing change for better.
In this context, new advanced initiatives are being taken: creation of IIRC (integrated reporting; co-founded by GRI), G4 Guidelines from GRI (with particular focus on due diligence and materiality), initiatives to develop methodologies to measure/monetize environmental and social externalities (including True Price). Zero impact coalitions (on i.a. climate, water, biodiversity, etc.) are spreading. Impact investing is attracting increasing interest from large investors.
Risk management and policy development may only be done adequately if the relevant data are known and the medium/long term broader context is considered. Due diligence is of the essence, also focusing on material issues, possible impacts beyond the direct control of an organization, taking preventive remedial actions and/or setting conditions for engagement.
“Making markets work “ for a sustainable economy and society is a challenge: markets are not perfect (failing regulation, asymmetric information, short term focus); prices are not right (holistic valuations, incorporating natural, human, social capital are hardly considered); the lenses of many investors and most consumers are mostly focused short term profits, respectively lowest costs, not considering the real intrinsic value or the “harm” done to others (ref the working conditions and subsistence wages in Rana Plaza).
Key drivers for change are (GRI-style) structured disclosure of non-financial issues in company reports and product information; government baseline regulations on industry- and disclosure- standards; social media; disciplined application by large corporations in their full value-chains of their high standards (even beyond local requirements; directly affecting SME’s in their operations); procurement and contracting practices by governments; active sharing and learning of good practices.
Only way: considered, collective action
Ecuador faces a number of challenges: its dependency on oil; the dominant role of government in the economy as regulator, market party; poverty; infrastructure (including: logistics, health, education, housing); limited access to international capital markets; its dollarized economy (sovereignty; inherent currency risk); symptoms of “Dutch disease’; weak international “brand” (compared to i.a. Colombia, Peru).
However, it also has some important assets: its ambition to address its challenges and transform into a truly “value added” society and economy; its nature; and, most importantly, its unrealized potential. The question is thus how to realize its full potential.
Some steps the government might take are, as seen from an outsider point of view: enter into preferential trade-agreements with strategic partners; join the OECD Guidelines for multinational companies in order to be part of the emerging international business level-play field; adopt a business disclosure law requiring businesses with more than eg 250 employees to publicly report on environmental, social & governance (ESG) and impact matters on the basis of “report or explain why not” (using GRI-G4 guidelines); address corruption; ensure that Civil Code and capital controls are conducive for equity capital investment (including foreign); create a dynamic private sector enabled by a pro-entrepreneurial and -innovation regulatory and economic environment; spur technological innovation and support their business application; transform from a raw material and commodity-producing-only to a more value-added processing-oriented economy; be very restrictive in affecting its Natural capital (ref oil-production, mining).
But rather than me as an outsider to tell you what to do, it should be a joint effort by government (incl. cities), business (incl SME’s), unions, civil society organisations (incl NGO’s, unions) to jointly define a roadmap on the basis of a shared overall interest, with complementary objectives and differentiated responsibilities. For this a multistakeholder platform (institute?) would be an avenue also followed successfully in other countries, including my own, the Netherlands. The role of the government is foremost to convene, listen and learn, and converge into shared solutions: such an inclusive approach would set the stage for not only good intentions, but also, subsequently and more importantly, good practice.