Interview with Jane Nelson Interviewer: Toby Thompson JN When we think of CSR, I think we need to think first and foremost about how a company operates its core business and its value chain. I think in the past there has been a tendency to think about CSR either as purely philanthropy or as compliance with laws and norms and regulations. But to me it is first and foremost how a company runs its core business operations with the goal of a minimum to do no harm, so internalising human rights standards, environmental, health and safety standards, good labour standards, anti corruption standards. But also looking as creatively as possible how to harness the core competencies of business, corporate value chains, core products and processes to make a positive contribution to society. So I think there is both a responsibility element of minimising negative impacts, but also an opportunity element, an innovation element, through the company’s core business of how that can be harnessed for the good of society. So I think the first component to me is fundamentally about the company’s core business and its value chain. Secondly, I think philanthropy and innovative social investment and community engagement is an important part of corporate responsibility. Not as important as the core business, but it can still be, I think, a very important contribution that business makes to society; particularly if it is what I would call competence led social investment and philanthropy. So a water company engaging in water projects in developing countries or in low income communities in the UK, for example. Or an energy company looking at energy access or an information communications technology company looking at access to ICT and digital divide issues; or a professional services firm using the core competence of their people and their consulting skills to work with one governmental organisation to improve their community practices. So I think the second area is what I would call competence led philanthropy and social investment. And then, to me, the third area of corporate responsibility which often doesn’t get included in definitions of corporate responsibility is how companies engage in public discourse and public policy dialogue, government lobbying, engagement with governments on framing and setting regulations. The private sector has, I believe, an incredibly influential impact on governments around the world; both global governments at the UN level, but also national and local government. And the government relations component, the public policy component, of what companies do is often separate from the corporate responsibility department and I think in many companies you see a disconnect between what they are doing in their corporate responsibility and what they are Jane Nelson
doing in their government relations and lobbying. So I believe that public policy engagement and an advocacy is lobbying is another component of corporate responsibility. So to summarise, I see it first and foremost as core business operations and value chain, supply chain management. Secondly as competence led philanthropy and social investment; and thirdly the public policy engagement and dialogue that companies have. And in all three areas at an absolute minimum aiming to do no harm. We all have negative impacts – even individuals – on society, but I think companies need to think what are their risks, what are their negative impacts and how do they manage them? And then secondly, how do you harness the incredible capabilities and networks of business in the most creative way possible through the core business, through the philanthropy and through policy dialogue. And I think if each company of each industry sector thinks what are the main both risks and negative impacts they might have and what are the main contributions they could make, and really focus on those I think again there is a tendency to think that you have got to cover the entire waterfront. But if each company can think well what are our material risks and what are our major contributions and focus their energies on that; that to me is excellence in corporate responsibility. TT In terms of top teams and boards of directors, why should they care about CSR and what can they do to embed CSR in their practices? JN That is a good question. I think for many years corporate responsibility has been the domain of the philanthropy department, or the health and safety department and not addressed at the board level as much as it should be. I think what we have seen over certainly the last five years, probably the last ten years, is a number of social and environmental issues becoming strategically important either to the company’s risk profile and to the fiduciary responsibilities of the board, or to the company’s long term business opportunities and social licence to operate. So for example, climate change, I think would be a classic example. Ten years ago most people had barely heard of climate change, today for most industry sectors it has become a strategic risk and opportunity in some cases, which is relevant at the level of the board of directors. Diversity has become an issue that if you are working and operating in an increasingly diverse not just global economy, but also national economies; it has become a strategic employment issue, but also consumer issue for a growing number of companies as their consumer base becomes more diverse. So I think the first point on the boards of directors is that issues that weren’t strategic before have become strategic, and so any board that is really fulfilling its fiduciary responsibilities cannot afford not to look at emerging social and environmental issues. And I think that it needs to be the obligation of every single corporate board at least once a year to do an analysis of what are the strategic risks and opportunities which are Page 2
Jane Nelson
the social and environmental domain for their business and for their industry. I think secondly, we are obviously used to hearing about remuneration committees and audit committees, I personally believe that there needs to be either through the audit committee or otherwise some separate committee, a dedicated focus in boards of directors on the environmental, social, governance issues that companies are now facing. And I think we are seeing a trend with more and more boards setting up specialised committees, whether they call it the sustainability committee or corporate responsibility committee – committees of non executive directors who are focused on the boarder social environmental challenges that the company and the industry is facing. I believe that good governance is at the heart of business excellence generally and that boards of directors need to take on board not just the competitiveness strategy and the overall risk management issues of the company, but increasingly these broader social and environmental challenges. So whether it is a dedicated committee or a dedicated non executive director or a slot allocated at every board meeting to just addressing and updating on these issues, I think boards of directors need to take it a lot more seriously than they have done up until now and I think in terms of director education, bringing corporate responsibility issues more into board director education is an opportunity and indeed I believe a responsibility increasingly for business schools. TT So where does that leave the UN? Aren’t the ambitious millennium development goals irrelevant to business? Businesses are doing it already. JN I don’t think enough businesses are doing it already. I think we are going into a period, one of the most challenging periods probably in human history if you think about climate change just for a start – we are going to go through fundamental environmental and eco system change. We are going through some very fundamental demographic shifts – ageing populations in Europe, a youth bulge in Africa and the Middle East, increasing diversity in our populations. We are going through a fundamental economic shift in the world in terms of the shift of economic power to China and India and the Middle East. We are going through fundamental technological transformation. We have got, I believe, a growing challenge both in Europe, let alone the developing countries of growing inequality and income gaps. Large numbers of the world’s population are still living in absolute poverty; parts of populations in Europe and America – I have been doing work in New Orleans recently where there is enormous poverty, and I think that the United Nations, as well as national governments are realising the ability of government in the public sector to address some of these big global and national challenges we face – whether its climate change or growing inequality and poverty – Page 3
Jane Nelson
governments can’t do it on their own and they are increasingly looking to business and the markets to play a role. And I think there is a big question: what role should business play relative to government? I am certainly not suggesting that business should be taking over the role of government and there is a danger, I think, that governments are putting too much onus on the private sector to take responsibility for things like climate change and job creation and inequality; and yet at the same time business can’t ignore these issues and I think traditionally it has been possible for business to shrug its shoulders and say well that’s the role of government. Whereas I think in the era we are going into there is going to have to be a constant negotiation between business and government, between the state and markets, who is responsible for what. I think there are going to be more demands both from governments – not only through taxes, but through all sorts of other government interventions – as well as from society more generally from non‐governmental organisations, from activists, from the media for the private sector to be seen to be playing more of a role. I think at the UN level, the Millennium Development Goals are a framework that the UN has developed of eight goals to be met by the year 2015 which they probably won’t be met by that stage – but eight very clear goals on the environment, on gender equality, on hunger and poverty alleviation, on technology transfer. In pretty much each of the eight goals the private sector can play a role and we are seeing more and more companies stepping up and saying we will partner with the UN, with governments, with non‐governmental organisations to tackle some of these environmental challenges like climate change or social challenges like hunger and poverty. And I think it varies from industry sector to industry sector what companies can realistically do, but I think we are going to see more and more companies agreeing to play some type of role. To me the most interesting question is going to be how many companies will do that without governments demanding it off them, or having regulations that they do it. So how much of it will be done voluntarily by business in a way that makes business sense. And secondly, what is the impact going to be of the emergence of Chinese multinationals and Indian multinationals and South African multinationals and Middle Eastern multinationals and who are coming from very different cultural traditions, very different starting points to the American and European multinationals. I think many of the emerging market multinationals are already playing a role in these issues – they might not call it corporate responsibility, but I think we are going to see from very interesting lessons coming from the emerging markets themselves in how to address some of these global challenges. But it is to me a very uncertain period ahead because I think we have got these massive emerging challenges that are unprecedented in the history of human kind, so no one knows how to deal with them. We have never Page 4
Jane Nelson
had to think about climate change in quite the same way as we are going to have to think about it in the next few years. Transformation to a low carbon economy – we are not sure what that is going to involve or mean and yet I think one thing is absolutely clear to me that governments alone aren’t going to have the solutions. And while business and markets certainly aren’t a panacea there is going to be more and more expectation I think that they will be part of the discourse and be part of the solution. So there is going to be, I think, a much broader and more challenging leadership challenge for corporate CEOs and for companies. Going back to the role of business schools, I think we are going to have to think very creatively about how we develop future leaders because it’s not only going to be about understanding marketing and budgeting and competitiveness, but also these broader societal issues and what role business can realistically play in addressing them. Page 5