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Blog

Purpose: summer of promises, autumn of...?

I’m back from the summer after a rash of amazing, intriguing or disruptive, but certainly important, events. Activist Greta Thunberg sailed the Atlantic to deliver a poignant speech (Yes Greta! Boo to the haters!).

The Amazon burnt (and is still burning) while Jair fiddled with his tasteless tweets. 29 fashion companies led by François-Henri Pinault, PDG de Kering,  unveiled a Fashion Pact[1] that seeks to kickstart action in one of the world’s most polluting sectors. And, in the USA, 181 CEOs[2] from some of the planet’s biggest firms declared that the “purpose of a corporation” is not just to serve its shareholders but to create value for all stakeholders.

The handbrake turn needed to avoid planetary catastrophe seems to be getting through. Even MEDEF's “committed” show at its summer university (#REF) smacked of a good start. But decades of tired formulas about the general interest do not inspire confidence.

Instant reaction

Take the statement by the 181 US CEOs and the French Fashion Pact initiative. True, these processes look groundbreaking, seeming (finally) to break with the paradigm - or dogma - formulated last century by Milton Friedman: “The social responsibility of companies is to increase their profits.” But we also know how far and how hard lobbies are pressing to maintain business as usual, up to and including undermining and discrediting scientific warnings about the climate emergency. Many signatories to the two documents mentioned above continue to bitterly oppose any and all climate-friendly initiatives. This, despite eloquent statements on sustainable development and social responsibility.

ExxonMobil is perhaps the most glaring example of such hypocrisy, having spent years casting doubt on climate change and blocking any changes to US law. But we shouldn’t forget Inditex and HM either, whose mass-volume business model seems inherently incompatible with any kind of sustainable development model.

Burning issues

So, are the summer's commitments to a “better world” just the latest PR stunt or do they mark a real step forward? Are they sincere or taken by corporate chiefs under growing pressure? The good news in the second - and worst - case would be that CEOs are feeling the heat, to the extent that they are rethinking or at least looking again at their and their companies’ role in society. Can Inditex really decide on its own to stop bringing out new collections every two weeks? How long will Danish energy firm Orsted - signatory to the famous statement of US business leaders - continue digging fossil fuels out of the Arctic and Greenland? Without citizen pressure, when will all these companies be able - i.e. have the legitimacy, the right, the duty - to throw off the short-termist tyranny of quarterly results and dividends over the year?

With time running short and doubts mounting such pressure can only build. For one thing is now undeniable. Resetting the bar will demand systemic effort, cooperation and, ultimately, a challenging of the business models themselves.

Protective measures

Now is the time, as we return from our holidays in 2019, for cool heads and maturity. The key question is what these companies are going to do now. If we are merely seeing a ratcheting up of utopian statements unaccompanied by any binding commitments, we will know soon enough - we’ve seen it before. What we expect now are actions, concrete measures and significant demonstrative results. What then must they do? A good starting point for significant actions was proposed early in September by the Harvard Business Review[3], which advocates “decisive leadership” in at least one of the following fields of action:

 

  • Pay and incentives: reducing the multiple of CEOs’ pay to that of their average employees (from 200 to 1) would be a good start.
  • Ownership and governance: more ESOPs (employee share ownership plans) and more representation for different stakeholders on governance bodies.
  • Taxes and lobbying: rather than paying lobbyists to delay essential social and economic changes, leaders could undertake, for instance, to abandon legal but barely ethical tax manoeuvres.
  • Procurement: buy as locally as possible.
  • Investment: prioritise reducing companies’ own carbon footprint over share buybacks.
  • Products and prices: real proof of leadership and commitment would mean renouncing problematic products and services whose impact on the planet and people are deeply negative. Likewise, when it comes to genuinely game-changing products it would be good to avoid inflating prices or leveraging patents to create monopolies (hello pharmas) that stretch out way beyond the time it takes to amortize their R&D investment.

Sniffing the wind

The challenge for companies remains, then, to move beyond warm words and take effective action. If this brave new world is really here to stay, it means we need to look - and look hard - at all our businesses (branding, communications, advertising, etc.) and ask what purpose our support is really meant to serve. Too often, we consent to act as an “adjustment variable” in the face of inaction (in the worst case as a smokescreen).  This is probably a topic for a future article. In the meantime, a good first step would be to encourage our clients to make corporate purpose a real part of their company project and to involve their communication and marketing departments in every stage of discussions.

 

[1] Turning over €1,500 billion in revenue each year, fashion is one of the most important, dynamic and influential industries in the world...but it also has the world's second-highest environmental impact. The fashion industry alone is responsible for 20% of the world's waste water, 10% of carbon emissions (more than international flights and sea freight combined), 35% of micro-plastics in the ocean and uses 22% of global pesticides.

 

[2] The 181 CEOs signed their statement as part of the Business Roundtable (BRT), a conservative lobby group of big US corporations set up in 1972 by John Harper to put pressure on the public policies of the US federal government. Members include: American Express and Mastercard, Caterpillar and ExxonMobil, Walmart, General Electric, Accenture and Apple.

[3] HBR – 6 Ways CEOs Can Prove They Care About More Than Shareholder Value – September 2, 2019