Changing corporate culture

Posted: 18 July 2001

Author: John Elkington

Companies today have to face up to a 'triple bottom line'. They have to meet not only economic goals, but environmental and social ones. To suceed in the 21st century they will have to face up to seven business revolutions, says John Elkington.

The sustainability agenda, long understood as an attempt to harmonise the traditional financial bottom line with emerging thinking about the environmental bottom line, is turning out to be much more complicated than some early business enthusiasts imagined.

Increasingly, we think in terms of a 'triple bottom line', focusing on economic prosperity, environmental quality and ­ the element which business had tended to overlook ­ social justice. To refuse the challenge implied by the triple bottom line is to risk extinction.

Nor are these simply issues for major transnational corporations: increasingly, they will be forced to pass the pressure on down their supply chains, to smaller suppliers and contractors. These changes flow from a profound reshaping of society's expectations and, as a result, of the local and global markets business serves.

With its dependence on seven closely linked revolutions illustrated here, the sustainable capitalism transition will be one of the most complex our species has ever had to negotiate. As we move into the third millennium, we are embarking on a global cultural revolution. Business, much more than governments or non-governmental organisations, will be in the driving seat. Paradoxically, this will not make the transition any easier for business people. For many, it will prove gruelling, if not impossible.

Markets

Revolution 1 will be driven by competition, largely through markets. For the foreseeable future, business will operate in markets which are more open to competition, both domestic and international, than at any other time in living memory. The resulting economic earthquakes will transform our world.

When an earthquake hits a city built on sandy or wet soils, the ground can become 'thixotropic': in effect, it turns to jelly. Entire buildings can disappear into the resulting quicksands. In the emerging world order, entire markets will also go thixotropic, swallowing entire companies, even industries. Learning to spot the market conditions and factors which can trigger this process will be a key to future business survival, let alone success.

In the same way that the motor car undermined a whole economy based on grooms, saddlers and farriers, the new industries of the 21st century will consign less sustainable companies ­ and even entire industry sectors ­ to the "dustbin of history."

In this extraordinary environment, growing numbers of companies are already finding themselves challenged by customers and the financial markets about aspects of their triple bottom line commitments and performance. And, although we will undoubtedly see continuing cycles based on wider economic, social and political trends, this pressure can only grow over the long term. As a result, business will shift to a new approach, using triple bottom line thinking and accounting to build the business case for action and investment.

Values

Revolution 2 is being driven by the worldwide shift in human and societal values. Most business people, indeed most people, take values as a given, if they think about them at all. Yet our values are the products of the most powerful programming that each of us has ever been exposed to. When they change, as they seem to do with every succeeding generation, entire societies can go thixotropic. Companies that have felt themselves standing on solid ground for decades suddenly find that the world as they knew it is being turned upside down, inside out.

Remember Mrs Aquino's peaceful revolution in the Philippines? Or the extraordinary changes in Eastern Europe in 1989? Recall the experiences of Shell during the Brent Spar and Nigerian controversies, with the giant oil company later announcing that it would in future consult non-governmental organisations on such issues as environment and human rights before deciding on development options? Think, too, of Texaco. The US oil company paid $176 million in an out-of-court settlement, in the hope that it would bury the controversy about its poor record in integrating ethnic minorities.

Protests in Nigeria changed Shell's social policy© Jim Hodson/Environmental Images

Transparency

Revolution 3 is already under way. It is being fuelled by growing international transparency and will accelerate. As a result, business will find its thinking, priorities, commitments and activities under increasingly intense scrutiny worldwide. Some forms of disclosure will be voluntary, but others will evolve with little direct involvement from most companies. In many respects, the transparency revolution is now 'out of control'.

In the wake of the Brent Spar controversy, for example, Shell talked in terms of an emerging "CNN World" in which companies would be held to account in totally new ways.

This process is itself being driven by the coming together of new value-systems and radically different information technologies, from satellite television to the Internet. The collapse of many forms of traditional authority also means that a wide range of different stakeholders increasingly demand information on what business is going and planning to do. Increasingly, too, they are using that information to compare, benchmark and rank the performance of competing companies.

Life-cycle technology

Revolution 4 is being driven by and ­ in turn ­ is driving the transparency revolution. Companies are being challenged about the triple bottom line implications either of industrial or agricultural activities far back down the supply chain or of their products in transit, in use and ­ increasingly ­ after their useful life has ended. Here we are seeing a shift from companies focusing on the acceptability of their products at the point of sale to a new emphasis on their performance from cradle to cradle ­ from the extraction of raw materials right through to recycling or disposal. Managing the life-cycles of technologies and products as different as batteries, jumbo jets and offshore oil-rigs will be a key emerging focus of 21st century business.

Think of Nike, suddenly having to deal with issues linked with the social conditions of labour ­ particularly child labour ­ in parts of the world which were previously not on society's "radar screen".

Partners

Revolution 5 will dramatically accelerate the rate at which new forms of partnership spring up between companies, and between companies and other organisations ­ including some leading campaigning groups.

Organisations which once saw themselves as sworn enemies will increasingly flirt with and propose new forms of relationship to opponents seen to hold some of the keys to success in the new order. As even groups like Greenpeace gear up for this new approach, we will see a further acceleration of the trends driving the third and fourth sustainability revolutions.

None of this means that we will see an end to friction or even outright conflict. Instead, campaigning groups will need to work out ways of simultaneously challenging and working with the same industry ­ or even the same company.

Time

Time is short, we are told. Time is money. But, driven by the sustainability agenda, Revolution 6 will promote a profound shift in the way we understand and manage time.

As the latest news erupts through CNN and other channels within seconds of the relevant events happening on the other side of the world, and as more than a trillion dollars sluices around the world every working day, so business finds that current time is becoming ever 'wider'. This involves the opening out of the time dimension, with more and more happening every minute of every day.

By contrast, the sustainability agenda is pushing us in the other direction ­ towards 'long' time. Given that most politicians and business leaders find it hard to think even two or three years ahead, the scale of the challenge is indicated by the fact that the emerging agenda requires thinking across decades, generations and, in some instances, centuries. The use of scenarios, or alternative visions of the future, is one way in which we can expand our time horizons and spur our creativity.

Among the industries that already think long term are chemicals, oil and forestry, but this challenge will confront growing numbers of sectors in the new century.

Corporate governance

Ultimately, whatever the drivers, the triple bottom line agenda is the responsibility of the corporate board. Revolution 7 is being driven by each of the other revolutions and is also resulting in a totally new spin being put on the already energetic corporate governance debate.

Now, instead of just focusing on issues like the pay packets of 'fat cat' directors, new questions are being asked. For example: What is business for? Who should have a say in how companies are run? What is the appropriate balance between shareholders and other stakeholders? And what balance should be struck at the level of the triple bottom line?

The better the system of corporate governance, the greater the chance that we can build towards genuinely sustainable capitalism. To date, however, most triple bottom line campaigners have not focused their activities at boards ­ nor, in most cases, do they have a detailed understanding of how boards and corporate governance systems work. This, nonetheless, constitutes the jousting-ground of tomorrow.

John Elkington is Chairman of SustainAbility Ltd and a member of the European Union Consultative Forum on Environment and Sustainable Development. He is author of Cannibals with Forks: The Triple Bottom Line of 21st Century Business, Capstone Publishing, Oxford, England, £18.99, also available in the USA from New Society Publishers.