Interview with John Elkington Interviewer: Toby Thompson JE Well I've been involved in the corporate social responsibility space for over 30 years. The labels have changed a great deal, and the areas where companies are expected to be responsible and accountable or sustainable have also morphed and mutated, but for me it's still governments tell business and many jurisdictions what to do; the corporate responsibility piece is partly making sure you do what the governments tell you to do, that you're in compliance, but the bulk of the agenda that most of us are interested in now are the bits that go beyond compliance, the bits that are about not just citizenship but how you actually create markets of the future. TT So what role do you feel business schools and institutions of education such as this have? What role do they play in putting out a new community of business leaders? JE I think business schools and universities and institutions like that have an absolutely central role to play, potentially at least. I think the problem is very often that when these waves of enthusiasm come up around issues like environment or access to medicines or human rights, or whatever it is, the initial reaction from business schools and universities as well is to do what boards and businesses more generally do, which is to say "actually this is rather uncomfortable, we don't quite know where this fits into the agenda as we have it currently constructed; just go away" and we heard a little bit about that this morning, about the NGOs just being seen to be a damn nuisance and CEOs and other business leaders really not wanting to be bothered with a bunch of this stuff. But then over a period of time I think several things happen: I think you get younger faculty in the business schools who switch on. One of the most powerful drivers, and I've been doing business school work now for over 20 years, has been the students themselves; the people who pay the bills to get the MBA or whatever it is. Periodically they get enthused about all of this and then they don't want to get sheep dip where they are given the half‐hour ethics course once a year or whatever: they want to dig into this, they want to see cases, they want to develop cases. The other piece is that businesses over a period of time start to ask questions as well. They too want the people they bring in, their talent, to not just be concerned about these issues, interested in them, but they want them to have the skill sets to be able to understand what's being asked of business, manage the responses, and increasingly also be a bit entrepreneurial; to try and do stuff that the customers and others – the stakeholders – haven't yet worked out that they need or want. John Elkington
TT So what is our responsibility as business school to allow that, to enable that? JE I think that the responsibility, not just of Cranfield, which I think is beginning to do this quite well, but of the educational ecosystem more generally is to act as the permeable membrane between those people who are doing a bunch of stuff – you know the propaganda is always easy to do, you know everything is working perfectly, but generally it isn't and if you're doing things that are really at the innovative edge, we all know the failure rate goes off the scale. So it would be really nice if people could come in and not just do psychotherapy sessions with academics, but actually share some of the stuff they are trying, some of the stuff that works, but particularly interestingly some of the stuff that hasn't worked to date and why: and getting that learning pooled, challenged, communicated not only to the current generation of students, but back into alumni networks and out through some of the corporate executive conferences that institutions like Cranfield are very active in now. TT I have heard you talk before about waves of energy and enthusiasm dying and coming back again; and the post‐Seattle, post WTO protest and so on, being now directed more towards venture capitalists and entrepreneurs. Is that something business schools can help with – instilling that appetite, that hunger for change? JE Just a bit of context. I think there have been 3 big waves since 1960 and the first one focused largely on governments and then cascaded out to business through regulation enforcement to some degree, and so on. Business was on the defensive, on the back foot, didn't like it: was in compliance mode. The second wave which was 1988‐91, the peak period, was much more about competitive strategy for a short period of time around are you CFC free, mercury free, chlorine free if you're in paper, or whatever it happened to be. You have taken one component out and therefore you're green. It was a fairly immature debate, and it didn't last that long: it lasted about 3 or 4 years. We pitched a book out called the Green Consumer Guide in 1988 – it sold a million copies in 18 months. That was one of the moments where the consumers did switch on; they did want to make powerful choices. The problem was that there was almost no feedback from the companies that they were provoking, Procter & Gamble among them. The third wave was very much more about global issues, the sort of anti‐
globalisation movement, global governance and corporate governance. There were a raft of scandals, WorldCom, Enron, Anderson all of these sorts of names stick in the brain. Parmalat was another one. But behind all of that something else was beginning to happen. We were beginning to reach the limitations of what companies can do in an unregulated way, Page 2
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if their competitors aren't compelled to do likewise. And I think what we're seeing now is a fourth wave. The third one was truncated by 9/11; security got radically redefined, it was suddenly about iris scans and things like this, not about climate so much. Climate's coming back. But the question now is, who's best suited to coming up with the solutions? Is it governments, as in the first wave and afterwards? Is it major multinational corporations, as in the second and third waves? Or is it something rather different? And my sense is it's something rather different. I think the big companies will play their role ‐ they have to. The governments have to play a crucial role in shaping markets, pricing signals and so on. But increasingly it's a bunch of people most of us have never heard of. It's people like John Dorr and John Dunneson at Kleiner Perkins Caufield & Byers, the venture capital people. And I sit on advisory boards for 3 venture funds. One in London and two in California. And there are a bunch of people coming into this space. Some of them are talking about clean tech; the key thing is that they're no longer talking about responsibility and accountability; that's almost taken as read. What they're talking about is the markets of the future, the opportunity spaces of the future and they're really interested to see where the hotspots of innovation, of the creative, almost reconstruction activity that is going to be needed in our global economy will come from. Is it going to be California? Is it going to be Silicon Fen in a new guise? Or is it going to be China? Because China is in this crucible now with these intense resource, population and environment pressures pushing in. Tom Friedman has recently said if you were placing your bets as to where the really fundamental innovation might well come from, it could well be China. TT And BRIC generally. In terms of de‐saturated CSR and in terms of the new recession, the economic recession, is CSR now an option? Are people going to stop buying organic or stop thinking about green because it’s now difficult because times are hard? What is ahead? JE For 2 years I have been saying to colleagues I think we're headed into something that is not a spiky recession like the ones we've got used to. It's not one governments can manage in the way they have done, at least with a couple of previous recessionary periods. It's going to be deeper and much more protracted than we – even now, I think – might imagine. And when I said that – between 2 years and 18 months ago – I was then making a conclusion which was I think corporate citizenship is quite vulnerable in that sort of environment. We ought to already be preparing ourselves for that set of shock waves when they come through. You have already started to see consumers throttling back on organic purchases, you have started to see early signs that even some quite major companies are cutting back on the size of their CSR departments. That's not necessarily a bad thing because to Page 3
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some degree either they can outsource it, or much more fundamentally and much more importantly, what can happen is that companies remove some of their defences, they take out some of the people who in the past have almost been like an immune system against the external challenges; but the external challenges don't go away. They may mutate and the priorities may shift, but they intensify and what that means is that the societal agenda – it might be climate change, it might be poverty, it might be human rights, it might be transparency, bribery and corruption, who knows – but it very likely will drive even deeper into the business, and that's what's beginning to happen. You have seen it come up to the board level; boards don’t always know what to do with this stuff, but increasingly they're being challenged. I thought that Sir Michael Rake of BT’s comment today that every board now understands how this stuff was cloud cuckoo land in some ways. I think the fundamental problem that we have, there are many, but one of the fundamental ones in boards, is it is the wrong people going through the wrong processes to deal with a lot of this stuff. And it has often been said that the best allies of fundamental change are death and retirement. I think even if we killed off the entire generation of current board members it wouldn't solve the problem because the processes are still there. There are many people in the corporate governance world who see governance as a very particular set of activities and responsibilities and accountabilities and really do not see how in 20 years the sorts of issues that we currently label responsibility or sustainability or whatever, are going to be shot through everything that companies and therefore everything that boards do. So I think we're in an uncomfortable period. I think the uncomfortable period will go on for quite some time. I think one of the implications for corporate citizenship is it will be intensely squeezed. I think that's a good thing because there's too much stuff that is if not blather, not fundamental to the business; it's not really getting down into the DNA, as I think it was Peter White from Procter & Gamble talked about. How do you get it into the genetic code? And a lot of CSR is not getting into the genetic code. If you write it into your charter, as P&G have done, that's a first step. But actually the final point, I just think that increasingly that the incumbent companies are not well prepared to do what is now expected of business in general, and so the likelihood is you will start seeing new formations – entrepreneurs, venture capitalists, private equity investors, a bunch of other people – coming into this space and starting to put together very different organisations and business models and so on. A question for the incumbents is do we ignore that? Do we fight against it as some of the big incumbent companies are already doing? Do we buy them up? But that's difficult because if you buy them up its very easy to suffocate the entrepreneurial spirit. Or do we somehow align with these new people, either in strategic partnerships or by taking a stake and Page 4
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developing a window on what they're doing and seeing how we can help them scale? I think those sorts of issues are going to be very much on the board agenda and much sooner than people currently realise. Page 5