Shanghai Scribbles

August 01, 2008

Shanghai Scribbles

Thought-leader Simon Zadek on emerging sustainable development challenges.

Scribbling 10,000 metres up en route to Beijing from Shanghai, an always-late shuttle service now almost as familiar to me as the dreaded New York-Washington run. This is just one sign of the stepwise shift in our collective realities over the last decade. On the down side, our northern icecap is all but gone, oil prices are more than 10 times their levels of a decade ago, whilst soaring food prices driven by an ugly cocktail of eco-unfriendly bio-fuels and investor speculation is re-advancing global poverty and widespread civil unrest. On the up side, sustainable development, and climate change in particular, has evolved from its Cinderella status into mainstreamed policy debate and business strategy. The UN Special Representative on Business and Human Rights has presented his report to the UN Human Rights Council barely a decade since the first publicly-listed companies adopted human rights policies, whilst China’s embracing of ‘CSR’ exemplifies the distance we have come since the Body Shop produced the world’s first externally audited sustainability report in the early spring of 1996.

Celebrating the 100th issue of the Corporate Citizenship Briefing is an opportune moment to reflect on where we have arrived and what comes next. Most broadly, an era of globalisation, international development and multilateralism as practiced for over half a century is over, for both better and worse. As we bid it a fond farewell, there are four emergent challenges we face in reinventing our global community to effectively address sustainable development.

* Fractured Multilateralism: a fracturing, perhaps fatally, of an inherited 20th century multilateralism and associated institutional arrangements.
* Globalization Losers: increasing income inequalities within developed as well as developing countries stemming from our global economic integration.
* Development’s Last Round: driven by an international community dominated by the West’s ‘universalist’, liberal project.
* Environmental Resurgence: the re-emergence of ‘environment’ as a critical development issue.

Taken together, we can surmise that the ways in which the world is run is up for grabs, and that tomorrow’s dominant leaders, values and institutions are unlikely to resemble what has gone before.

We are, in short, witnessing no less than a revolution in accountability. Every aspect of modern accountability is in flux, challenged by a bloody mix of social, economic and political innovations and regressions that will transform everything from the role of business in society to the haloed temple of democracy itself. As AccountAbility’s Honorary President, Anwar Ibrahim, has pointed out:

There is no obvious island of integrity from which to point the finger. Governments, businesses and civil society in every part of the globe face profound challenges in meeting their obligations.

Our collective efforts in advancing the responsibility of business are a key element of this broader transformation. As a community of practice, we point to a new generation of tools, codes and standards that exemplify and amplify good practice by leadership companies. But there are signs of more profound change. The march of black economic empowerment in a post-Apartheid South Africa, the challenge to the scope and structure of fund manager bonuses in the aftermath of the sub-prime meltdown, the failure of the multilateral process underpinning the Doha Development Round, and the re-emerging importance of the public ownership of business from Beijing to Caracas are illustrative indicators of the breadth of this fracturing of historical practice and assumptions regarding our political economy.

Moving ‘corporate responsibility’ beyond the experimental zone has proved to be both easier than many of us expected, and disappointingly limited to date in its effects on people’s lives and the environment. Codes, compliance and disclosure, the core first-generation toolbox, have proved inadequate to the task of delivering major upgrades in business practice. We have come to understand that compliance alone will not transform business practices, and that driving strategic innovation is a key to transforming business practice. Business-level innovations, however, will not in isolation do the job. Competition between nations and communities is a driving force of business behaviour, as AccountAbility’s ‘responsible competitiveness’ work has amply demonstrated, conceptually, illustratively and quantitatively.

In this context, a new generation of sustainability standards represent some of the most important assets created over the last decade. Covering everything from palm oil to labour standards and internet privacy, these standards have been developed and governed collaboratively, involving business, civil society and public institutions in diverse ways. Such ‘collaborative standards initiatives’ have provided a critical bridge between business-level compliance and innovation and the macro-level of international markets, where inter-governmental trade and investment rules have failed to keep pace with sustainability needs. As Pascal Lamy, Director General of the World Trade Organization has highlights:

Responsible competitiveness…blends forward-looking corporate strategies, innovative public policies, and a vibrant, engaged civil society… creating a new generation of profitable products and business processes underpinned by rules that support societies’ broader social, environmental and economic aims.

Scaling up the effectiveness of these standards is, however, challenged by a variant of the ‘founder syndrome’. Western companies, NGOs and governments must be congratulated for leading the way in creating these standards. However, their pervasive dominance over their design and on-going governance is now constraining the engagement of emerging global players from China and elsewhere. Opening these standards initiatives to such engagement, involving fundamental shifts in their governance, is the key to their continued relevance.

Our understanding and practice of accountability are in flux. Our first generation of responses under various names, including corporate citizenship, has been a success on its own terms – validation, demonstration and adoption. The next generation, however, must succeed against more demanding criteria commensurate with our situation. This means avoiding moving from experimentation to incrementalism – always the danger of ‘normalisation’. What is needed is a shift towards a more radical stepwise development.

Embracing this is the first step in achieving this. Second, however, is seeing the conservative, dangerous influence of many of yesterday’s innovators. The innovation needed is more likely to come from nations emerging onto the global stage than its incumbent actors. It is an uncomfortable fact that many of us are employed by organisations – whether businesses, NGOs or public institutions – that could become, or already are, part of the problem, exhausted, confused and resistant to deep change. John Maynard Keynes was right in arguing that our greatest constraint to change is not a lack of ideas, but a tendency to hold onto the past. Nothing less will do than the reinvention of the basis on which tomorrow’s powerful institutions, public and private, commercial and public-interest focused, are held to account.

Simon Zadek is AccountAbility’s Chief Executive, a Senior Fellow at the CSR Initiative of Harvard University’s J F Kennedy School for Government, and an Honorary Professor at the Centre for Corporate Citizenship of the University of South Africa.