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Blog | Monday February 25, 2019

A New Transparency Challenge for Business and Human Rights

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What’s the harm in sharing company data with the government? Three recent news stories demonstrate the significant human rights risks that arise when companies share data with law enforcement agencies: Motel 6 was fined over US$7 million for sharing guest lists with U.S. immigration authorities. Bloomberg News reported that 7-Eleven Inc. had shared information with U.S. immigration that led to raids in over 100 of the company’s franchises. And in China, the Associated Press revealed that more than 200 automotive manufacturers, including Tesla, Volkswagen, BMW, Daimler, Ford, General Motors, Nissan, and Mitsubishi, are sharing location information and other important data to government-backed monitoring centers.

There are many good reasons why companies share data with law enforcement agencies. This can include transport and logistics companies addressing human trafficking and smuggling, travel and tourism companies seeking to prevent child sexual abuse, and financial services companies tackling money laundering and the illegal funding of terrorist organizations. There are also many ways in which companies are called upon to assist with criminal investigations or with matters of public safety and national security.

However, these scenarios come with two common challenges: The first is providing appropriate assistance to law enforcement efforts that have the protection of human rights as a core purpose, while at the same time protecting the privacy rights of customers and users. Second, companies must work out how to constrain assistance to law enforcement efforts that may not have the protection of human rights as a core purpose, as can be the case in governments that don’t respect the rule of law, or that regularly violate the human rights of their citizens.

This leads me to my central theme: the public currently lacks sufficient insight into how companies are navigating these two challenges, the strategies companies and governments can deploy to enhance human rights protections, and the transparency necessary to scrutinize whether these human rights protections are being implemented.

The public currently lacks sufficient insight into ... the strategies companies and governments can deploy to enhance human rights protections and the transparency necessary to scrutinize whether these human rights protections are being implemented.

Encouragingly, the technology industry has developed practices that indicate a path forward. In 2010, Google published the world’s first law enforcement relationship report (which the company called a “transparency report”) listing the number of requests the company received from governments to restrict content or hand over user data. The report explained how relevant legal processes worked and described when and how Google chose to challenge these requests to protect their users’ rights to freedom of expression and privacy. Since then, more than 70 internet and telecommunications companies have started publishing regular law enforcement relationship reports.

While much remains to be done to ensure that data are managed appropriately, this transparency has brought three essential benefits:

• Awareness: The reports have substantially raised awareness about the complex data sharing relationships between governments and companies, resulting in higher quality public policy proposals on key human rights issues.
• Advocacy: The reports have enabled civil society organizations and human rights defenders to advocate for improved privacy protections. More strikingly, companies have used the reports to expose privacy violations committed by governments and advocate for greater human rights protections on behalf of their users.
• Accountability: The reports have provided a place for companies to explain the processes and procedures in place to respect and protect the human rights of their users, allowing them to be held accountable for their approach by civil society organizations and users. The reports have also enabled civil society organizations around the world to better understand the nature and volume of data requests made by their home governments, advocate for improved rule of law and data protections, and hold governments to account.

However, as the three cases of Motel 6, 7-Eleven Inc., and automakers in China illustrate, technology companies are not the only ones receiving requests for data and assistance from law enforcement agencies. These requests extend to companies in the transport and logistics, travel and tourism, retail, healthcare, financial services, and other sectors as well.

Indeed, with the emergence of the internet of things, facial recognition, and artificial intelligence, the amount of data collected, processed, and shared by non-technology companies is exploding. And there is no doubt that law enforcement agencies will increasingly demand access to this information. In a world of increasingly ubiquitous data, it is essential that all companies incorporate data sharing considerations into their human rights due diligence and strategies.

There is an urgent need to enhance disclosure practices across all industries that receive requests for data and assistance from law enforcement agencies.

For this reason, I believe there is an urgent need to enhance disclosure practices across all industries that receive requests for data and assistance from law enforcement agencies. By establishing the norm that all companies, regardless of sector, issue thorough, transparent, and informative law enforcement relationship reports, we increase the likelihood that personal data will be better managed by the private sector and that civil society, business, and governments are more able to hold each other accountable.

Blog | Tuesday February 19, 2019

The Future of Sustainability Reporting

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Sustainability reporting and environment, social, and governance (ESG) disclosures are on the rise around the globe—we’ve seen increased regulation in Asia, it has become expected practice in Europe, and investors in the U.S. are increasingly using this information to inform their decision-making.

2018 saw some of the first communications in line with the Task Force on Climate-related Financial Disclosures (TCFD) recommendations, the codification of the Sustainability Accounting Standards Board (SASB) Standards, and a new draft standard from the Global Reporting Initiative (GRI) on tax and payments to governments. The field—and what is expected of companies—is evolving at an accelerating pace.

The most essential development that we need to see in the coming years, however, will be the alignment and harmonization of reporting standards to enable more efficient reporting processes that result in more user-friendly, comparable reports on the most important sustainability topics. For this reason, we strongly support the continued work of the Corporate Reporting Dialogue.

As one interviewee for our recent report, Redefining Sustainable Business: Management for a Rapidly Changing World, told us, “It is like the wild west out there in terms of what is reported. We would really like to see the reporting standards organizations get together and streamline.”

Over the past year, BSR has been working with over 20 companies to explore and influence this field through our Future of Reporting collaborative initiative. This group of companies seeks to shape the future of reporting by sharing reporting best practices, exploring ways to improve the decision-usefulness of reports, and informing the work of various reporting organizations. (While this post is informed by that work, the opinions expressed here are those of BSR.)

These are the five innovations that we would like to see improve reporting and disclosure in 2019.

1. Reporting practitioners play an essential role in shaping the future of reporting, including through the work of the Corporate Reporting Dialogue. We heard loud and clear in our conversations with companies that they want to play a role in shaping the future of reporting; practitioners are, after all, the ones who hold the pen when reports are written. Because they are most closely involved in the use of reports to improve performance, they have fundamental insights into how harmonized reporting standards can improve company performance. Standardization across various frameworks should be a central aspect of this work, as this will both help companies disclose the most decision-useful information for their stakeholders and increase efficiency.
2. We look forward to continued effort from companies and investors to meaningfully quantify and report on impact, including related to the SDGs. This applies to both the impact of the company on sustainability and the impact of sustainability on the performance and direction of the company. Companies should move from mentioning the SDGs and mapping their existing programs to them to prioritizing those SDGs most relevant to their business and measuring their contributions and impacts. Ideally, this measurement should also inform company strategy—it creates an opportunity to link disclosure with performance. Investors are increasingly using this information both in individual decisions and the creation of new funds.
3. We hope to see increasing efforts to apply the TCFD recommendations, including to undertake and report on scenario analysis. Implementing the recommendations may be challenging for many companies, but companies looking do so don’t necessarily need to implement them all immediately—they can start with those that are most closely aligned with their existing reporting. Those elements that pertain to organizational change are likely to be the most difficult for companies to implement, but this creates an opportunity for them to make progress over time. Companies can also use their sustainability reports and CDP disclosures as a testing ground for information that may ultimately reside in mainstream financial disclosures.
4. More involvement and oversight of ESG disclosures at the board level will help raise the profile of sustainability efforts as a contributor to long-term value for companies and society. Increasingly, forward-looking companies are appointing directors with specific sustainability-related expertise, and boards and board committees are including aspects of sustainability into their charters to govern ESG issues at the highest levels. Board oversight of sustainability strategy and performance overall is increasingly common; a recent study of the S&P 500, State of Integrated and Sustainability Reporting 2018, found that 212 companies (42 percent) have a formal board committee overseeing sustainability.
5. We hope to see more sustainability information included in mainstream financial disclosures (including the Form 10-K), yet we also hope to see more detailed issue-specific sustainability reporting targeted at specific audiences. The Future of Reporting group had energetic discussions across these aspects. Companies should not try to include all disclosures in one report, but issue different reports focused on the differentiated needs of different target audiences.

If you’d like to be a part of the conversation about the next generation of sustainability reporting, please contact us to learn more about how you can participate in the Future of Reporting group in 2019. 

Reports | Tuesday February 19, 2019

Five Reporting Trends for 2019: Insights on the Future of Reporting

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Over the past year, BSR has been working with over 20 companies to explore and influence this field through our Future of Reporting collaborative initiative. This group of companies seeks to shape the future of reporting by sharing reporting best practices, exploring ways to improve the decision-usefulness of reports, and informing the work of various reporting organizations.

Here are the five innovations that we would like to see improve reporting and disclosure in 2019.

Please note that the opinions expressed here are those of BSR. While informed by the Future of Reporting group’s work and other engagement with our member companies, this document does not necessarily represent the opinion of BSR’s members.

Blog | Tuesday February 12, 2019

Getting to a Price on Carbon: Opportunities for a New Generation of Collaboration

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As discourse on climate change continues to grow in the political, public, and business spheres, the outstanding question remains: What is the best solution? While advocates have long touted its promise, there is no consensus on the most effective form of a carbon pricing scheme or how to achieve it. This is the question we, along with business leaders and NGO partners, will explore at our CoLab event at GreenBiz 19.

The private sector and other key “non-state actors” in the U.S. have stepped up in a big way on climate action. More than 100 U.S. companies have committed to science-based targets, and over 3,600 companies, cities, universities, and other organizations have sent a clear message that We Are Still In with respect to the Paris Agreement, regardless of the position of the current administration.

As discourse on climate change continues to grow in the political, public, and business spheres, the outstanding question remains: What is the best solution? 

And yet, we know that this is not nearly enough to secure the prosperous low-carbon future we want while avoiding the worst impacts of climate change. Recent IPCC and other reports indicate that we are running out of time to take the bold, large-scale action needed and, despite the leadership shown by many organizations, we simply won’t get there without leveraging corporate and citizen ambition to drive changes in public policy that will enable faster and larger scale change.

Smart public policy will be critical to accelerate action and increase ambition on the part of thousands more companies, cities, and other players, while unleashing the massive capital needed to drive innovation. The Green New Deal introduced last week was met with both enthusiastic praise and harsh criticism—which raises the question: What exactly are these “smart” policies, and what can we do to achieve them?

Progressive policy advocacy is a tricky undertaking for business at the best of times, and in our current highly polarized political environment, it seems even more so. Earlier failed attempts (remember cap-and-trade?) cast a long shadow. And yet, there is reason to believe the time is right for an attempt that builds on lessons learned and takes advantage of bigger and more diverse constituencies for change.

There is broad agreement across the ideological spectrum that policies that put an effective price on carbon, while not a silver bullet, will be a key ingredient in enabling and accelerating our transition to a low-carbon economy. There is no shortage of specific policy ideas to consider, from fee-and-dividend, to tax shifting, to new and improved cap-and-trade schemes. What is far less clear is how we can best mobilize people and organizations around one or a small number of potential solutions in a way that enables durable political change on a national level.

As members of the We Mean Business coalition, BSR and CERES—together with many partners in the U.S. and internationally—have been working to catalyze the kind of business leadership we believe can drive policy ambition and accelerate the energy transition. While much of the recent activity in the U.S. has necessarily been “defensive” in nature (maintaining commitment to the Paris Agreement, preserving key government programs and policies, etc.), we are also working to develop a longer-term positive strategy for change. Ambitious new forms of collaboration between private-sector and other key players will be critical to any successful strategy, and we launched the BSR CoLab last year with exactly this kind of challenge/opportunity in mind.

Ambitious new forms of collaboration between private-sector and other key players will be critical to any successful strategy.

CoLab is BSR's incubator and accelerator of private-sector collaboration, mobilizing the collective power of business to solve some of the world’s biggest sustainability challenges. Driven by the collective ingenuity of business and stakeholders, CoLab ideates, designs, and scales collaborations that have transformational impacts.

On February 25, BSR and CERES will co-host a half-day workshop at GreenBiz 19 in Phoenix, Arizona, in which we will put our new CoLab methodology to work, exploring the prospects for powerful new collaboration(s) in pursuit of an effective public policy advocacy strategy to support climate ambition in the U.S., with a focus on, but not limited to, a price on carbon.

We are inviting selected companies and expert stakeholders to join us as we consider key questions such as:

• Do we agree on the problem we’re trying to solve? What are best objectives for getting effective price on carbon in the U.S.?
• What can we learn from past efforts to build political will for climate action in the U.S. (cap and trade in 2007-8) and how should that impact our next run?
• For companies, how can we elevate and align climate policy with other priorities for government relations? How do we create and communicate a compelling business case for corporate action?
• For social and political leaders and advocates, how can we build truly bipartisan popular support that will in turn enable bipartisan action?
• What is the best pathway to build unstoppable political force at the national level, and what are roles for local and state action as well as direct national-level and “mass-market” advocacy?

If you are interested in joining us in Phoenix, and/or for any efforts which may follow, please reach out to us at web@bsr.org.

Blog | Thursday February 7, 2019

Large Companies Have a Key Role in Strengthening Small Supplier Integrity

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Last year, I was proud to participate as an adviser in a project commissioned by the U.K. Government’s Business Integrity Hub, which has been established to provide practical support for companies to help prevent bribery and corruption when doing business overseas. The project, run by Business Fights Poverty, has sought to find out how to encourage small and medium-sized enterprises (SMEs) to take business integrity issues more seriously and adopt meaningful anticorruption compliance.   

As part of the project, we conducted an extensive literature review and complemented it with an online survey, 24 interviews, and two business roundtables in which we gathered perspectives from both multinationals and smaller enterprises. This gives us deep insights into how corporate anticorruption efforts need to evolve—and enables us to make a strong case for fresh thinking from large multinationals.

SMEs and Issues of Business Integrity

The schizophrenic state of play in anticorruption efforts is highlighted in the research results: While 90 percent of the small and medium-sized companies with which we spoke consider doing business with integrity important for commercial success, fully 30 percent found that having a strong approach to integrity presents a disadvantage in winning business.

The barriers to a more robust implementation of integrity are considerable. Smaller companies feel that an overall lack of understanding of bribery and corruption issues persists, and that systemic corruption challenges in many markets may offer ‘no choice’. Finally, they cite a lack of direct control over their own agents, distributors, and suppliers. All these challenges, combined with familiar sales and commercial pressures, also confront large multinational corporations. But they are exacerbated in smaller companies by two factors: a lack of dedicated compliance resources, and—compared with large multinationals—a lack of leverage to drive behavioral change in third parties.

Smaller companies feel that an overall lack of understanding of bribery and corruption issues persists, and that systemic corruption challenges in many markets may offer ‘no choice’.

Despite the challenges, there is plenty of room for optimism. Strikingly, smaller companies do not view regulatory pressure as the strongest argument for anticorruption programs, having (rightly) assessed that regulatory resources are far more likely to be aimed at large multinationals. And SMEs understand the argument that integrity helps in winning and retaining customers, accessing finance, and building trust and reputation. Small companies fully understand that if they want to do business with large customers or credible financial institutions, having a basic anticorruption program in place is non-negotiable. Smaller companies also see that integrity risks are shared by businesses in the same value chain, and they are calling loudly for a more collective, collaborative approach to address them.       

The Role of Multinational Companies

The single, overwhelming message from this research? Multinational companies need to take a more active role in influencing supplier integrity via procurement processes enforced across their value chains. This is particularly important because only large companies have the financial resources to hire compliance consultants and the market clout to access regulators as needed. Smaller companies need concrete help from their biggest customers.

Large multinationals could start by applying the thinking they have used to drive sustainability into their supply chains. As we at BSR work with first-tier suppliers to multinationals such as Apple Inc., GlaxoSmithKline Plc, and Walmart Inc., we find that increasingly stringent environmental and social mandates from customers are driving transformative change along the value chain. These large companies have adopted an engaged perspective that gives their suppliers the necessary time and guidance to bring programs up to scratch, while also making it clear that adoption of sustainability standards is a condition for retaining their business over the long term. 

While these supply chain sustainability programs can be very effective, companies generally do not extend them to cover bribery and corruption issues. This is because legal liability is involved. This results in siloed and misaligned approaches to business-partner risk in many companies. When environmental and social ‘red flags’ are identified, a large company is usually prepared to collaborate with a small supplier to drive improvement; the standards in question are voluntary, and regulatory risk is deemed to be manageable. In contrast, a company compliance team conducting due diligence regarding suppliers and distributors under the U.K. Bribery Act will simply terminate relationships in which it identifies ‘red flags’ concerning integrity.

This is a logical response to the legal and reputational pressures facing large companies. It is essential in mounting an ‘adequate procedures’ defence and helps to shield large companies from regulatory risk. However, if the end game is to reduce corruption in modern society (as opposed to helping corporations deflect legal liability), this approach makes little sense. Companies that don’t treat workers properly and violate environmental standards are also highly likely to be paying bribes; these practices characterize a risk-taking, short-term culture. Indeed, such companies may be paying bribes to evade social or environmental regulations.

Multinational companies need to take a more active role in influencing supplier integrity via procurement processes enforced across their value chains.

What’s Next

New laws such as the Modern Slavery Act, combined with investor pressure, are encouraging a more integrated approach to environmental, social, and governance issues. Moreover, the anticorruption field could make far better use of the collaborative tools and approaches to systemic change that have been so effective in tackling such issues as human rights and climate change. The highly successful Maritime Anti-Corruption Network is a model that could be used to good effect in other industries.

Our research shows that U.K. suppliers to large multinationals hunger for more support from their customers, and that customer demand can best incentivize stronger integrity programs. If large companies were to begin advising their suppliers on how to address integrity challenges and navigate regulatory risk, this could help transform the anticorruption environment. Through collective action, we might also start to address some of the entrenched integrity challenges in high-risk markets: repeated facilitation-payment demands accompanied by extortion, for one. This would constitute a more effective, empathetic, and constructive approach than the protective, self-interested mindset that now dominates corporate anticorruption programs. The U.K. government is ready to work with companies to explore and encourage this new thinking.

Blog | Tuesday February 5, 2019

Improve Sustainability with New Air Freight Alliance

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To protect people from the catastrophic effects of global warming beyond 1.5°C, business must continue to take action to limit climate change. As such, BSR is pleased to announce the launch of the Sustainable Air Freight Alliance (SAFA), a forum for buyers and suppliers alike to collaborate on air freight emissions reduction. The alliance is now open for membership, and we invite all interested parties to join an introductory webinar (U.S. time zone/Asia time zone).

While countries continue to make progress on their individual national commitments under the Paris Climate Agreement, industries have the power to mobilize large-scale emissions reductions. As an example, the International Maritime Organization (IMO) announced in April 2018 that the shipping sector would aim to halve its emissions by 2050 against 2008 levels.   

While countries continue to make progress on their individual national commitments under the Paris Climate Agreement, industries have the power to mobilize large-scale emissions reductions.

Currently, air transport represents around two percent of global carbon dioxide emissions. However, the air freight sector is projected to grow at five percent per year until 2050—faster than any other mode—and with potential to increase emissions significantly. In recent years, the industry has undertaken collective engagement through the Air Carbon Initiative and the development of a reporting protocol agreed via the Global Logistics Emissions Council in coordination with the International Air Transport Association (IATA). The aviation industry has also achieved performance improvements and commitments thanks to the leadership of the International Civil Aviation Organization (ICAO), IATA, and individual airlines.

However, there remains no consistent forum for direct business-to-business exchange between the various stakeholders, which is key to driving collaborative solutions. There is also a general lack of transparency around the application and use of the environmental performance information requested from airlines by shippers for their reporting and decision-making needs.

To address this gap, leading airlines, shippers, and freight forwarders have united to develop the Sustainable Air Freight Alliance—a unique buyer-supplier collaboration to track and reduce carbon dioxide emissions from air freight and promote responsible freight transport.

Following an incubation with active contribution from over 15 companies, SAFA is now open for membership. Participants include DB Schenker, DHL, Finnair, GEODIS, H&M, Maersk, Nike, and United Airlines.

The leading forum for air transport sustainability, SAFA provides a platform for collaboration allowing companies to:

• Build dialogue with business partners to understand needs and strengthen long-term business relationships
• Demonstrate company and industry leadership on sustainability
• Reduce exposure to risks (such as regulations) to the air freight industry by leveraging collective knowledge and action
• Credibly measure and report their emissions performance
• Help shape international standards, in line with ICAO, IATA’s work, and sectorial initiatives
• Access a collaborative forum for sharing sustainability information, best practices for reducing GHG emissions, and innovation opportunities to help achieve company goals

To find out more about the Sustainable Air Freight Alliance, please register for an introductory webinar (U.S. time zone/Asia time zone) and reach out to our team.

Blog | Thursday January 24, 2019

What Larry Fink’s 2019 Letter Means for the Future of Business

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Last year, Larry Fink’s annual letter to CEOs forged its way into public and corporate consciousness. In it, Fink, chief executive officer of BlackRock Inc., the world’s largest investment firm, made the bold declaration that “to prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society.” A direct riposte to Milton Friedman’s 1970 argument that “the social responsibility of business is to increase its profits,” Fink’s statement rapidly appeared in thousands of articles and PowerPoint slides. Suddenly, every business meeting I attended featured a conversation about the implications of the “Larry Fink letter.” The mainstream business press is still debating the questions Fink raised.

This year’s highly anticipated letter from Fink appeared on January 17, reiterating and expanding upon many of his 2018 points. Its advice to business reflects sustainability best practice and is fantastic news for anyone with concerns about today’s social disruption and environmental destruction. Here are our four main takeaways:

It’s such a big deal that it spawned a hoax—which people fell for

An activist group called the Yes Men released a spoof letter the day prior to the publication of the official document, saying that BlackRock would begin treating companies that do not adhere to the Paris Climate Agreement as “sin stocks”—like purveyors of tobacco and weapons. It is hard to overstate how significant such a move would be for companies and for the environment; as Fink subsequently showed, BlackRock is not ready to put its money where its mouth is to such an extent. Nonetheless, publications including the Financial Times were fooled by an idea that they would have deemed utterly implausible coming from BlackRock just five years ago. So the reaction to the hoax letter proves two things: Responsible investment possibilities are expanding at an accelerating rate, and the debate over the future of corporate responsibility is now sufficiently mainstream to spawn its own fake news.

“Purpose” is happening, whether we like it or not

As a corporate responsibility practitioner, I tend to roll my eyes when I hear the term “purpose.” A 2017 survey indicated that although businesses are highly enthusiastic about it, there is no consensus as to what “purpose” actually means. Fink uses the term 21 times in his 2019 letter and defines it as “a company’s reason for being,” a statement unlikely to clarify matters. He equates purpose with long-term value creation and hails it as an “animating force” for achieving profits via a stronger strategy and culture, not as a detriment to growth.

Fink also quotes a survey wherein by a 63 percent margin, millennials agree that the primary purpose of business should be to improve society, rather than generate profits—and then skates past tough questions as to whether and when these goals might conflict. It is the time horizon of corporate planning that he takes aim at, arguing that stakeholder trust and social responsibility offer the only path to profitability over the long term. This might leave companies wondering how they should address his calls to provide workers job and retirement security in the context of aging and automation, not to mention the very future of our economic models in an era of global warming and resource scarcity. This debate will inevitably continue.

Questions about implementation are growing louder

The chorus of questions about how BlackRock translates its position into meaningful action lost no volume in 2018. The 2017 proxy season saw both Vanguard Group and BlackRock support two climate-related shareholder proposals; this was a big step, but there were a total of 90 on corporate tables. BlackRock has also struggled to navigate the gun control debate; it divested from gun manufacturers but went on to exclude from ESG funds even retailers that had acted to make it harder to purchase guns in the aftermath of the Parkland, Florida, shootings.

BlackRock aims to effect change through engagement and discussion with companies, not hostile shareholder resolutions—and it has cause to argue that this is working. The 2018 proxy season saw far fewer shareholder proposals on climate, precisely because the energy and extractives sector is shifting its approach in an attempt to anticipate and respond to pressure.

So are questions about the interaction between business and politics

Fink explicitly calls on business to solve societal challenges that have been left unaddressed by governments. As the credibility and functionality of political systems across the world faces ever-more-extreme pressures, it is tempting and comforting to view corporate scale as the answer to many pressing challenges we face. Nonetheless, Fink’s efforts raise important questions about the rapidly escalating power of corporate boards, not to mention the future of democracy in an environment where we look to corporations instead of governments to solve our problems. There are strong counter-arguments that business should focus its attention on the murky worlds of lobbying and tax avoidance, pushing for regulatory capacity and action rather than expanding into territory being vacated by today’s governments.

This year’s BlackRock letter marks a further step forward in an increasingly high-stakes debate about the future of the corporation and its nascent shift from shareholder value to stakeholder trust, from risk to impact, and from growth to sustainability. As ever greater numbers of influential people seek answers to the questions Fink raises, the pace of change is accelerating. I’m already looking forward to next year’s letter.

Blog | Tuesday January 22, 2019

How Futures Thinking Can Help Us Shape Globalization 4.0

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The agenda for the World Economic Forum’s Annual Meeting 2019 presents an audacious challenge: developing a model for Globalization 4.0.

This challenge comes at a hinge point in history. Over the past 30 years, the global economy has delivered immense human progress: For the first time, more than half of humanity is considered middle-class. But it seems the existing model is running out of road. Income inequality is rising, sparking populist challenges to the market economy. Climate change and natural resource depletion are already creating human and economic dislocation that are, in turn, creating social and political instability. And the pace of technological change requires new thinking about how to build legal and ethical frameworks so that the use of these amazing new tools is based on shared values.

Just as these changes have created a radically different set of issues to understand and address, we also need radically new ways of thinking to help us understand and shape the path forward. Futures thinking is an invaluable tool in informing and testing strategies for the next era of globalization.

At times like ours, with rapid, interconnected change, scenarios offer a powerful way to explore multiple distinct possibilities. Rather than predicting what the world will be, they provide stories of alternate futures that combine research into drivers of change with informed speculation about how key uncertainties could play out. Scenarios help deliver insight into the social and political context in which businesses make decisions and the rules under which societies apply their values. They are designed to complement more traditional analytical approaches, which too often offer precision at the cost of failing to anticipate truly disruptive change.

Already, we can see many of the tectonic shifts likely to define the coming decades. A changing climate will reshape our natural world and our economy. The shifting nature of work and the rise of new technologies will present both immense opportunity and profound dilemmas. The specific nature and timing of these changes cannot, however, be foreseen. We know that increasing drought will threaten food supplies and that increasingly violent storms will disrupt global supply chains—but we don’t know where or how. We know that automation will both create and destroy jobs, but the pace of destruction and the likeliest new opportunities are hard to predict. We know that advances in technologies create profound questions, as we are seeing today with the sharp debate over gene-edited babies, with different principles applying in different locations.

In outlining its vision for Davos this year, the World Economic Forum has challenged us to redefine globalization for our era through “wider engagement and heightened imagination.” Looking at potential scenarios for our shared future is an invaluable way to apply these principles. As an example, the scenarios outlined in our Doing Business in 2030 report explore whether and how our information and decision-making will reflect global consensus or deep fragmentation.

This is one of the fault lines along which our future is being shaped, with signals of both consolidation and fragmentation visible. There are forces of consolidation in our world: technologies bring greater transparency, and urbanization means that people's’ experiences are increasingly similar. Equally we see forces of fragmentation: different values applied to privacy rules and medical ethics, and nation states ceding power to cities and regions while simultaneously asserting nationalist views.

There is also a very good chance that the future will reflect both the reality of divergent models and the need for global consensus. Indeed, Globalization 4.0 will almost certainly be defined through countless experiments reflecting different cultural norms and expectations, with different economic objectives and conditions, and under diverging political systems. Eras of great change often evolve in diverse ways before converging (if they ever do). And at the same time, there is a crying need for collective global answers to the climate crisis, increased migration, and the uses of technology that are reshaping the very question of what it means to be human.

Decision-makers in business, government and civil society will therefore have to be “multi-lingual,” and prepared to steer their organizations through a range of possible futures. Not only that, the dividing lines between different types of institutions can be a barrier to progress. As we wrote in our Doing Business in 2030 scenarios: “If humans are to flourish on a thriving planet amid rapid technological change, we need to reorient the relationships between civil society, government, and business.”

Globalization 4.0 won’t be defined for all-time in one week at Davos. But to ensure we make a good start, futures thinking and the ability to conceptualize multiple futures are essential.

Ultimately, the future scenario we want, and the one the world needs, is yet to be written. While future scenarios depict how external forces could evolve in the coming years, it is up to us, working together, to write a new and better story. That is the great prize, and there is no time to lose.

This article originally appeared on the World Economic Forum website.

Blog | Thursday January 17, 2019

Global Tech Companies, Partners Identify Tools to Fight Human Trafficking

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In June 2018, a coalition of global tech companies, civil society organizations, and international institutions jointly launched Tech Against Trafficking, a collaborative effort to support the eradication of human trafficking.

By tapping into their technical expertise, capacity for innovation, and global reach, the company members of Tech Against Trafficking believe that technology can and must play a major role in preventing and disrupting human trafficking and empowering survivors. The group will work with anti-trafficking experts to identify and investigate opportunities to develop and scale promising technologies.

“We all want to leverage our resources and skills to help further the impact of the tools already out there,” says Eric Anderson, head of the Modern Slavery Programme at BT. “But to do that effectively, we first need to know how technology is currently being used, what’s working and what’s not, and where the gaps are.”

The group has embarked on an ambitious project to understand and map the landscape of existing tech tools being used in the anti-trafficking sector. Over 200 anti-trafficking tools were identified, with the majority (approximately 69 percent) working to identify existing victims of human trafficking and address and manage the risk of child and forced labor in corporate supply chains.

“We were surprised at how few of the tools are intended to directly benefit or engage with victims or vulnerable populations. Of those tools with publicly available information, only 11 percent are geared toward worker engagement, 9 percent are educational, and 2 percent focus on victim case management,” says Livia Wagner of the Global Initiative, co-founding organization of the RESPECT initiative*, which led the research. “Of the identified tools, we also noted a strong concentration of tech tools developed and operating in the Global North, despite higher prevalence rates of human trafficking in the Global South. This is most likely due to our lack of insight into the use of technology in these regions, and we’ll need help from organizations on the ground to better understand how tech is, or is not, being used.”  

Following this initial identification process, Tech Against Trafficking is evaluating each of the more than 200 tools to better understand how they work, how effective they have been, and the barriers they face to scaling their impact. The evaluations are based on publicly available information and are ongoing as the group conducts outreach to organizations developing technology applications.  

Tony D’Arcy, head of corporate responsibility reporting, communications and customer relations at Nokia, stated, “We know this is just the start, but we are looking forward to sharing the results of our landscape mapping to understand how technology is being used to combat human trafficking across geographies and sectors. The initiative will be publishing an interactive map of these tools, with the goal of increasing collaboration and encouraging the use of innovative technology to support a multi-pronged approach to eradicating trafficking.”

Tech Against Trafficking intends to make this map as comprehensive as possible and invites all organizations using technology to combat human trafficking, in every language and every region around the globe, to review and recommend additions to the list of identified tech tools, found here. We encourage interested organizations to reach out to the BSR team with any additions.

We invite all interested technology companies to contact us to find out how to get involved.  

*The RESPECT initiative was founded by the Global Initiative, Babson College’s Initiative on Human Trafficking and Modern Slavery, and the International Organization for Migration.

Blog | Friday January 11, 2019

Procurement in 2019: Shared Objectives, Shared Challenges

Preview

In 2019 procurement executives can help advance their objectives by aligning with their colleagues in trade finance and the sustainability department. At the end of 2018, BSR and Bank of America Merrill Lynch held an event in London to discuss what our future supply chains will look like and how procurement, trade finance, and sustainability can work together.

The objectives and challenges of these three seemingly disparate groups are more aligned than you might think. As such, there is value in working together to achieve a shared vision for supply chain management.

Aligned Objectives

The 2018 Deloitte CPO survey showed that, once again, the top priority for procurement chiefs was cost savings, and their top strategy was consolidating spend.

Managing the corporate social responsibility (CSR) strategy rose to sixth position, which suggests that procurement and sustainability agendas are increasingly aligning. In some of our own research, we have found trade finance professionals want to integrate sustainability more firmly into their offerings, which implies there is room to work together.

Sustainability professionals also welcome efforts to consolidate spend among a smaller pool of suppliers, as long as CSR issues are considered in the equation. Indeed, working with a smaller number of first-tier suppliers can help focus sustainability efforts and improve performance in this area.

At the same time, when considering suppliers that are further upstream, all actors agree having improved visibility and a more connected supply chain is better. For sustainability, it enables them to have an impact where challenges exist; for procurement, it helps to better manage risk and ensure security of supply; and for trade finance, it opens up opportunities to provide financing to a broader array of companies with a wider set of service offerings.

Finally, everyone needs to digitalize. Digitalized supply chain finance is overtaking traditional trade finance mechanisms. Procurement chiefs are looking to digitalise their processes, while sustainability professionals are increasingly using digital tools, such as satellite imagery, to help in their efforts to drive performance.

Shared Challenges

There are shared challenges as well. The first is how they measure sustainability performance of suppliers at all tiers of the supply chain. As certifications, audits, and other traditional measurements of sustainability performance are being called into question, and as the number of databases and tools measuring sustainability performance increases, complexity grows.

Trade finance professionals need to consider this in their know-your-customer efforts, and buying organizations need to consider what they are going to ask for and potentially reward. The attendees to our event agreed there is a tremendous opportunity to learn from each other and harmonize efforts and datasets.

Another challenge these three face is in trying to break down silos. Sustainability professionals need to be in the room with finance and procurement, but they often don’t speak the same language. Procurement and finance can see some correlation between sustainable suppliers and high-performing suppliers, but they need a better articulation of this fact.

Finally, engaging and accessing upstream suppliers is a critical issue for everyone. Procurement knows some of the greatest supply chain risks lurk there, and this aligns nicely with sustainability’s perspective on where their biggest challenges lie. Trade finance can see opportunities to finance further up the chain, but they also need better access to be able to derisk the opportunities such that they become financially interesting.

In short, we can see a path forward from three siloed approaches—where procurement optimization, maximizing financial returns from trade finance, and achieving sustainability objectives in the supply chain could become truly integrated. Perhaps this is what supply chain transformation should really be about.