January 11, 2011
Over the past couple of years, relentless focus on the basic vitality of the world’s economy has distracted attention from important underlying trends. As we go into 2011, the market meltdowns of 2008 are receding from view. This means that structural changes in the world are—thankfully—again capturing the world’s attention. These longer-term developments are again shaping the business environment—and pointing to an even greater focus on sustainability as one of the defining characteristics of business success. Here are five key trends that will shape our world in 2011.
Sustainability Goals—the Bigger the Better
2010 ushered in the era of big global commitments by big global companies, and this will only expand in 2011. In the final quarter of 2010 alone, stalwarts like Unilever, Procter & Gamble, Google, and Walmart all set audacious goals tied to massive resource efficiency, local sourcing, and innovation. What’s striking about this is how it represents a fundamental shift from just a few years ago, when companies were exceptionally timid about making public commitments. Too often in the past, companies embodied the Japanese proverb that says that the nail that sticks out gets hammered down, and shied away from setting public performance targets. Those days are gone. Two key changes have occurred. First, sustainability has become a topic on the Board’s agenda. Second, it is now more widely understood that sustainability can spark innovation that delivers a competitive advantage—it is not simply a risk mitigation exercise. Both these changes have led the world’s most prominent CEOs—such as Unilever’s Paul Polman, Walmart’s Mike Duke, and Procter & Gamble’s Bob McDonald—to link their companies’ reputations, and their own, to their sustainability performance. I can think of few better ways to demonstrate that sustainability is now in the mainstream of business.
Rio+20 Starts Now
Looking ahead at 2011, it’s important to remember that events are stubbornly resistant to following calendars. Most historians, for example, believe that what we think of as “the Sixties,” did not run neatly from the start of 1960 to the end of 1969. With that in mind, one way to think about 2011 is as an 18 month run-up to the Rio+20 summit in June 2012. The disappointment in Copenhagen at the end of 2009 reminds us not to expect a grand global agreement on sustainable development to come from Rio; global summits seldom deliver the goods in that way. Despite this, however, this next Earth Summit will be very significant. Companies, civil society, and governments will assess what’s been accomplished since the first Earth Summit nearly 20 years ago, and look for ways to accelerate progress.
It is very clear from my conversations with many companies that they are looking at the next Rio Summit as an opportunity to demonstrate business leadership, develop new collaborations, and to innovate in ways that achieve sustainable prosperity for all. And because the event is taking place in Brazil, this will be as much about economic development across the globe as about decarbonizing the economy. Companies—and the business sector as a whole—should seize the mantle to show that they are delivering the kind of progress that can make the vision of the first Earth Summit a reality.
Getting Ready for Ruggie
John Ruggie, the UN’s Special Representative on Business and Human Rights, is due to present his final recommendations to the Human Rights Council in June. This won’t close the book on his work, but rather usher in a shift away from John Ruggie’s office at Harvard, where he and his team have toiled the past four years, to the field, where implementation happens. From now forward, we’ll see Ruggie and Co.’s framework and guiding principles put into action in countless government agencies, companies, supply chains, communities, and partnerships. In fact, an increasing number of companies have already begun to implement elements of the framework, from conducting human rights impact assessments to setting up grievance procedures. Even though the principles being developed by Ruggie and his team will not have the formal force of law, they will immediately be considered the de facto standards against which company actions are gauged by stakeholders. To implement the standards fully that will emerge, most companies will need to broaden and deepen their approach to human rights. They will be expected to demonstrate and ensure respect for human rights through policies and ongoing and transparent due diligence. In 2011, to meet this growing area of activity, BSR’s Faris Natour will be assuming expanded responsibilities to lead our human rights efforts, working with companies to develop human rights strategies, policies, and implementation plans.
Stakeholders Strike Back?
For some time, the stakeholder world has been in a state of flux. The last several years have brought unprecedented collaboration, with local and global NGOs becoming valued partners for the world’s most significant companies. This has resulted from—and generated—a serious upgrading of many NGOs’ technical capacity. There are, however, three reasons to think that this era of generally constructive relations may be about to grow more turbulent. First is the existential question of what civil society’s purpose is. A growing number of NGOs who are alarmed at the increasing coziness between some of their civil society brethren and the world’s biggest businesses are questioning whether they are devoting too much time and attention to collaboration. Second, many NGOs question whether the era of cooperation is delivering the goods, and whether a more confrontational approach is needed to achieve their goals. The third factor is the rise of social media, which is undermining the monopoly NGOs have held in reflecting public opinion on global business. YouTube, Twitter, and Facebook present as large a challenge to the monopoly of big institutional NGOs as they present to newspapers and other “old media.” This environment suggests that some organizations—or online coalitions—will test the status quo by challenging big name companies in ways we’ve not yet seen. While collaboration most certainly won’t end, companies can also expect 2011 to bring renewed challenges from established NGOs, unexpected challenges from emerging organizations, and opposition and possibly “hacktivism” from loose networks that form on the web with little or no institutional backing.
Expect the Unexpected
As always, humility is in order when making predictions. Former BP CEO Tony Hayward had a very different vision of 2010 than the one he experienced. There is little doubt that surprises will erupt. By definition, they cannot be predicted, but some candidates are more likely than others to emerge. It is a good bet that the kinds of challenges faced by governments from WikiLeaks in 2010 will also affect business in 2011. Privacy will continue to rise on the corporate responsibility agenda as the “internet of things” grows in significance. Wild weather will remind all but the most steadfast skeptics that climate disruption has already arrived on the world’s agenda. And an economy that’s returning to health also means that commodity prices will return to the upward climb that was temporarily halted by the recession, again making efficiency an imperative for consumers and business.
In sum, 2011 will likely deliver “surprises” that are in fact the immediate manifestations of long-term trends. And all of these trends show just how central sustainability is to the business agenda. Indeed, too much can be made of daily events, especially in our 24/7 hothouse media culture. As my colleagues and I have been saying with increased frequency—and urgency—it is essential that long-term trends be our north star. Companies that focus now on the way that long-term developments are changing our world will wake up on January 1, 2012, having had a successful year—and look to the future with confidence.
Let’s talk about how BSR can help you to transform your business and achieve your sustainability goals.