These days, when Prime Minister Rutte’s press conferences attract more viewers than a World Cup Final, our need for a toehold in this global crisis has become patently clear. We’re all trying to find the exit; a way out of a situation we’re unfamiliar with and whose impact is impossible to predict. Of course we all want to know when we can go to the hairdresser’s, visit the pub and enjoy corona-proof travel by plane or public transport. The ‘one-and-a-half metre economy’ seems now to be commonplace.
Yet a much more fundamental question is at stake here. How do we construct an intelligent pathway out of this lockdown towards a sustainable future? We believe this pathway rests on three supports.
We’ve lived, travelled, produced and consumed freely, and have pretty much lost sight of each other and the world. In an economy where the majority of shareholders and investors prefer unlimited growth and short-term profit, there’s still insufficient space for long-term collective responsibility. The climate crisis is not new – it’s just been waiting for a lockdown. Now we’re in the midst of one, it appears that there are opportunities for reassessing what we consider normal. We’ve been brought to a grinding halt and face just one real task: things must change.
There is hope. Yuval Harari published a compelling article in the Financial Times of 20 March in which he argues that it’s not the virus which poses the greatest threat, but the choices we make now: choices between authoritarian supervision or citizen empowerment; between national isolation and global solidarity. In 2015 Mark Carney, Governor of the Bank of England, sounded the alarm in his speech ‘The Tragedy of the Horizon’, pointing to the traditionally shorter horizons of the financial world and how ‘the catastrophic impacts of climate change will be felt beyond the traditional horizons of actors’. After his term as CEO of Unilever, Paul Polman founded IMAGINE, convinced that a growing number of CEOs firmly believe they need to be part of the solution rather than the cause of the problem.
So, where do we go from here? Praising individual moral and ethical compasses isn’t enough. We must create companies with a sustainable raison d’etre, implement appropriate system changes, and embrace courageous leaders with the vision and drive to see it through. A company with a sustainable purpose has a far-reaching mission. That mission is long-term, meaningful, rational, all-embracing, inspiring and unifying.
The central tenet of successful entrepreneurship is long-term value creation, where the economic success of an individual company goes hand-in-hand with social impact. We must not view the health of the planet, social stability and the economy as disconnected topics. In the time of COVID-19, we have seen how people’s health is joined to the economy.
Including chain responsibility in your industry or linking your mission to one or more SDGs, and clearly and consistently translating these values into the strategy and objectives that determine how you evaluate and reward your people, should be the norm.
Paul Polman called Unilever ‘the world’s biggest NGO’ and made it his personal mission to develop the publicly listed company as a sustainable and socially aware business. Sustainability is perfectly compatible with commercial success. Pretty obvious, right? As one of the architects of the Sustainable Development Goals, he won the battle to have these crucial social themes included on the global agenda, only to lose it at the hands of both long-term and activist shareholders. Ultimately both battles played out under the same financial (valuation) system, although Polman’s loss was partly attributable to his failure to invest in a strong relationship with his own leadership team at Unilever. Lesson learnt: ‘If you want to go fast, go alone. If you want to go far, go together’.
A new financial system is needed. Systems are unruly, particularly those of publicly listed companies, who also happen to be the movers and shakers in our economic and ecological world order. As long as the shareholder-oriented model, with its emphasis on growth and short-term financial profit, remains the norm, it will be difficult for publicly listed companies to do things differently and Mark Carney’s ‘The Tragedy of the Horizon’ will continue to ring true.
Many parties rely solely on their moral and ethical compass to achieve greater sustainability. Under the current model, if you don’t watch out, you may even become susceptible to a hostile takeover by value-hungry predators, as was the case when Warren Buffet and Kraft Heinz attempted to acquire Unilever in 2017. And therein lies the key: the manner in which companies are valued must change. A new level playing field is required.
We must create a shift from shareholder primacy towards stakeholder primacy, which requires businesses to account for the interests of all relevant stakeholders. What if European legislation quickly made it compulsory for businesses to produce an (initially shadow) profit and loss account to reflect the actual value of doing business? This would undoubtedly lead to a discussion of just how and what to value. If legislation fails to materialise, another group of players, namely the Big 4 accounting firms, could play a leading role here. In consultation with pension funds, economists and scientists and the like, they could develop a new global valuation system. This would give a meaningful purpose to a group of companies that has been known to struggle with its own social profile. A case of two birds with one stone!
A transition period from the old to the new system is needed. Yet, as the WHO has said of the approach to the COVID-19 crisis, ‘perfection is the enemy of progress’ and we need to start somewhere. The transition period will carry us into the new normal where good returns are once again available to shareholders, entrepreneurs and investors.
To achieve this, we need more entrepreneurs, CEOs and political leaders who take a prime position in developing a new leadership mindset; who shape the conditions for this new way of doing business and turn it into a personal mission; with less ego, more vision, with courage and decisiveness.
As far as we’re concerned, that’s the new normal.
Translated into English by
Penny Putman Cramer
3711 AA, Austerlitz
+31 343 449300