On the 8th October two heavyweights of an agenda which, as evidenced by the night’s proceedings, is incredibly hard to define, met at The British Library to debate the demise of the agenda’s most recognised manifestation, Corporate Social Responsibility (CSR).
The two opponents were Mark Kramer and John Elkington. Mark, who co-developed the Creating Shared Value (CSV) approach alongside Harvard Business School’s Professor Michael Porter, was there to support the motion “CSR Is Dead” – And to argue that it had been overtaken by CSV.
John who originated the “Triple Bottom Line” concept was, at least notionally, against the motion. (When first asked to do the debate, he and Mark had agreed that neither of them liked the motion, nor found it easy to wholeheartedly argue their corners.)
In any event, and unusually for a debate, the evening started with an agreement. Both Mark and John admitted that they had disliked the framing of the debate, but after seeing the buzz it created on social media realized it had resonated with the audience.
To support their pitches they had both been asked to bring a leader from industry. In Mark’s corner was Janet Voûte, Nestlé’s Global Head of Public Affairs, and Chairperson of the company’s Creating Shared Value Council. In John’s corner was Patrick Thomas, CEO of the high-tech polymer supplier Covestro (formerly Bayer MaterialScience).
The agenda according to Mark
Mark opened with his arguments as to why CSR was dead, and highlighted where he thought he and John fundamentally disagreed. According to him, CSR is not sufficient in meeting society’s needs, and he equated it to “doing less harm.”
But it was hard to hide the areas of agreement. Like John, Mark claims that if we do find solutions to the social and environmental needs of the 21st century most of them will be devised and propagated by business. And a recurrent theme in Mark’s CSV pitch is the need to work with the ‘reality’ of business, and appeal to existing market incentives. “Profit,” he said, “is magic. If you can find a business model that solves a social problem whilst generating profit, you can scale it”.
It is around these concepts of reality and profit that the two men begin to disagree, according to Mark. “I think John believes we need to reinvent accounting to take into account things that have no monetary value – the use of natural resources, the welfare of people – so that we can present them to companies as a bottom line that frankly is fictitious.” The CSV view of the Triple Bottom Line is that it is asking companies to value things that are not yet valued by the market, and in doing so is failing to incentivise business to act. “We don’t have to wait for the revolution. We can work within the current system.”
And with that it was John’s turn to respond.
The agenda according to John
John started with a disclaimer. He explained that he consciously distanced himself from the CSR movement several years ago, but is happy to support it in as much as CSR represents a deep-rooted, ongoing conversation across sectors about the role of business in society. Its three main tenets, he noted, are sustainability, transparency and accountability.
Yes, it’s easy to find examples of where there have been failures to meet these three principles. As if on cue from the debate organisers, Volkswagen had been lauded as a sector leader by the Dow Jones Sustainability Index just days before their disastrous emissions scandal became public. For another recent example of failure John pointed to the seafood company John West, which promised to use 100% pole caught tuna by 2017, but were recently revealed to be at only 2%. That said, this is probably better described as fraud than failure – or as John put it, “semi-criminal”.
Putting aside the dead or alive issue, this spotlighted the question whether CSR is fit for purpose. The issue, according to John, is that CSR has been mainstreamed and, in the process, become diluted. “Values, however much they are embraced by companies, drift.”
(Which may support Mark’s claim that with CSR you are trying to persuade people to understand something that is very important, but which their salaries and in many cases the vast amount of wealth they have built up, depend on them not understanding. Whereas if you stress the opportunity for competitive advantage in Creating Shared Value you are incentivizing them to act in a way that CSR in practice has often failed to do.)
John was quick to point out that Shared Value can be very helpful in creating win-win outcomes. But achieving sustainability is about more than win-win outcomes; it’s about system change, it’s about disruptive change. As John put it, “we don’t just need better capitalism, we need breakthrough capitalism”
So how does fit-for-purpose CSR get us to breakthrough capitalism? John gave an interesting example: “The anti-slavery movement in the 1800s cost an estimated £17bn over 60 years; that’s about 2% of GDP over a very long time. And yet that’s a small challenge compared to climate change.”
This is an example of something (the liberty of human beings) that was valued by society, but had not yet been valued by the market. It showed how if companies become accountable for their creation or destruction of this value it can have a profound affect on the market. If it goes against the market incentives to be accountable and transparent about these different forms of value, then we need visionary leaders who will proactively develop the creation of this value and in doing so will redefine success in their market.
(Interestingly, a week after the debate Novo Nordisk CEO Lars Rebien Sørensen was ranked the best performing CEO in the world by the Harvard Business Review and spoke of his Triple Bottom Line philosophy, “Our philosophy is that corporate social responsibility is nothing but maximizing the value of your company over a long period of time, because in the long term, social and environmental issues become financial issues.”)
In conclusion, John borrowed the motto of the B Corporation movement in suggesting what CSR should aspire to as it rolls forward: “Don’t just compete to be the best in the world, but the best for the world.”
The audience participates
The debate was then opened to the audience for their input. The first comment came from Geoff Kendall, co-founder of the Future-Fit Foundation, who said that he was disturbed by two things Mark had said; 1, that we don’t have to wait for the revolution, and 2, that we can do it in the current system of incentives.
He pointed to Nestlé as an example: They are continuing to do what they have done for 150 years, but now they can label it Shared Value. “But we don’t need Shared Value, we need System Value.” The win-wins of Shared Value may be a vital tool in the salvation of humanity, but unless companies embrace the accountability and transparency integral to CSR they will never truly understand their impact on society and on the environment. Without knowing their impact, how can they possibly know where the value must be shared?
By following the current incentives, he argued, you will only look to create shared value where the (magic) profit tells you to. In the process, the risk is that you continue to create initiatives that will allow you to sustain and perpetuate your current strategies, regardless of their impact on the wider system.
The issue of urgency was brought up by Professor Steve Martin from the University of Cardiff. “Planet Earth is in the emergency room,” he said. “What are we going to do about it? CSR [in its current form] is awful. It’s a silo. It’s not led at board level.”
The next comment came from Rob Cameron, Executive Director of SustainAbility: “I know Nestlé’s CSV work very well, and at its best it makes a huge impact. What it does well is think about process.” He then borrowed Stephen’s analogy and asked how is CSV going to deal with Planet Earth being in the emergency room. “It’s not CSR that has to change, it’s business”. He continued, “CSV could not have stopped what happened at VW, but a serious discussion on the purpose of business could have. We have to acknowledge that people died because of this misplaced purpose.”
After a flurry of other questions and comments from the audience, the debate was handed back to the panel where Covestro CEO Patrick Thomas agreed that the planet needs emergency support. In his view CSV is in the same camp as Six Sigma, in the sense that it is about continuous improvement. He explained that at Covestro the Triple Bottom Line (in its People, Planet & Profit version) is integrated right from the Research and Development phase. When developing new products, candidates need to show progress across all three dimensions of value creation and performance. At worst, one dimension out of three can show neutral. “All corporates have continuous improvement. We need to invite in a different mindset.”
At Covestro they dare to dream. Patrick noted that they celebrate failures. “If you’re not failing regularly, you’re not trying hard enough.” So, for example, this willingness to dream – and fail – has led Covestro to develop a technology that can repurpose the carbon in Carbon Dioxide into Polyols which will soon be used to produce every mattress at IKEA, Patrick told the audience with some pride.
Mark and Janet, clearly impressed, interjected that this initiative is a wonderful example of Creating Shared Value. Which it is. A company’s carbon impact is hugely valuable, even if the market does not yet value it; so to have a net positive impact on carbon emissions is an enormous competitive advantage.
As Peter Diamandis puts it, the easiest way to become a billionaire is to solve a billion-person problem. But the only way to do this is to look beyond what is material to your current market incentives, and towards what is material to tomorrow’s incentives. By being sustainable, accountable and transparent, the opportunity will be to create System Value, as Geoff Kendall put it.
The award for the audience contribution of the day went to a South African, who commented that it was ludicrous to ask whether CSR was dead, when it hadn’t even been born yet!
When it came to the final vote, Team John won the debate 75:25. Which is not a surprise really. How could CSR be dead if it is still struggling to be born?
By Richard Johnson