Business Leaders and Public Policy - notes from the CPL Think Tank

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1 Centre For Progressive Leadership A White Paper Business Leaders and Public Policy - notes from the CPL Think Tank Matt Gitsham January 2014 The Centre for Progressive Leadership's White Paper series aim is to stimulate wide-ranging debate. The Centre hosts this debate, but does not own it. The views expressed in this white paper therefore represent the personal views of the author(s) and not the adopted views of the Centre for Progressive Leadership

2 Business Leaders and Public Policy - CEOs and the UNs Post 2015 Development Goals Matthew Gitsham is a Fellow of Ashridge Business School s Leadership Centre and director of Ashridge s Centre for Business and Sustainability. He is currently leading research on the role business leaders are playing in shaping the Post 2015 UN Sustainable Development Goals. 1

3 Business Leaders and Public Policy - CEOs and the UNs Post 2015 Development Goals The role of business leaders in contributing to sustainability has never been greater or more urgent. In 2013 the United Nations published Ban Ki-moon s High Level Panel report on the Post-2015 Development Agenda and, although the high level panel s report only contains recommendations, and the final decisions will be made by governments, it is certainly of more than passing interest that a UN High Level Panel co-chaired by Liberian President Sirleaf, Indonesian President Yudhoyono and UK PM Cameron counts among its number civil society leaders, academics and the likes of Paul Polman, CEO of Unilever, and Betty Maina, CEO of the Kenyan Association of Manufacturers. And a much wider group of business leaders have been closely involved in the process Paul Polman asked leaders like Nestlé s Peter Brabeck, PepsiCo s Indra Nooji, DSM s Feika Sijbesma and GSK s Andrew Witty to give him detailed perspectives on what they thought the panel's report should say on water, energy, health, food security and nutrition. And I ve had chance to be a fly on the wall in CEO roundtables convened by the UN at the World Economic Forum in Davos and numerous other countries around the world, where CEOs from some of the world s most influential companies have had long, in-depth conversations on what the Post 2015 goals should be, and what the architecture to achieve them should look like. When did it become normal for individuals who don t hold government roles, and business leaders in particular, to play such a central role in shaping such influential policy decisions? This isn t something that s changed overnight I think we re seeing something that s part of a much longer term trend. Think back to the 1970s. The prevailing view was that government leaders dealt with society s challenges. Business leaders priority was to keep their eyes squarely on their industry and focus on making money. Broader societal issues were seen as none of their business, and to get involved would only add cost. 2

4 Fast forward to the 2010s and much has changed. Not only have civil society organisations become much more influential, but so has a much more globallyintegrated private sector. In 1970, the world s biggest economic entities were all countries, but now a sizeable number of them are private companies. Now there is a widespread view that most big challenges are pretty hard for governments to address on their own, and that a much wider group of actors need to be at the table. The scale of the challenge is therefore one of the underlying reasons that it has become necessary for business leaders to become involved: 9bn people expected on the planet by % of people will live in cities by bn people go to bed hungry every night today 200m people unemployed today 2m children die every year from pneumonia and diarrhea Climate change is accelerating towards a temperature rise of more than 2 o C Two-thirds of the world could be living in water stressed conditions by in 10 of the adult population is obese Many of the big issues have combined with equally wholescale trends such as globalisation, along with geopolitical shifts and changes such as the rolling back of the state in many Western countries, which mean that governments have had little choice but to seek the input of a much wider set of stakeholders in civil society and influence of the world s largest businesses: Changing role of governments rollback of the Welfare State More influential Civil Society Organisations More globally integrated and influential business Much greater connectivity and global communication 3

5 A more challenging question concerns the motivation of the leaders of big businesses to become involved. Clearly, one set of motivations stems from instrumental shortterm self-interest it simply makes good business sense, for example in projecting a positive image of those organisations. But there are also much deeper shifts in the business mind-set that appear to be emerging. CEOs' thinking about fundamental business models has been changing too. The 1980s saw business adopt the model of maximising shareholder value, as a way of fixing some of the problems of poor profitability in the 1970s. But as business leaders have seen first hand the weaknesses of this model in the past few years, many have begun experimenting with alternatives, like Michael Porter s (e.g. Porter and Kramer, 2011) creating shared value approach developing strategies that focus primarily on creating value for wider stakeholders to ensure they generate return for shareholders in the medium and long term as well as the next quarter. As Porter and Kramer (2006, p. 89) argue, engagement with such wider societal matters... unlocks shared value by investing in social aspects of context that strengthen company competitiveness. A symbiotic relationship develops: the success of the company and the success of the community become mutually reinforcing. These changing ideas about fundamental business models, combined with the changes in context outlined above have had some pretty fundamental implications for the kind of leadership role leaders are now finding themselves having to play. For one thing, the much greater economic clout and influence of globally-integrated business has thrust business leaders, whether they like it or not, into a far more overtly political kind of role in global geopolitics you might say as much statesman as businessman (leaving aside the unfortunately gendered nature of these terms). Ten years ago, when these forces first started pushing business leaders in this kind of direction, many rejected this new role, and it got them and their companies into trouble think big pharma and the mess it got into on access to medicines at the end 4

6 of the 90s. Now, more and more business leaders seem to be embracing this new role, and finding themselves, like Polman, playing a significant leadership role at the heart of global decision-making. We ve been leading a programme of research around this at Ashridge Business School for several years now. We partnered with the International Business Leaders Forum to talk with some of the CEOs who ve been at the forefront of this trend in recent years we asked them what their experience said about how the role of a business leader is different now from what it was in the past (see Gitsham et al, 2012). What came through very clearly from their experiences was that it is essential that business leaders today have a nuanced understanding of the major societal forces shaping our world, and a genuine personal passion for running a profitable business out of serving the interests of wider society; that helping address societal challenges through their core business is the primary means by which they create value, not a source of cost, and at the heart of their job description. A quite different view on the role of a business leader compared with the norm of a generation ago. The New Business Mindset Equating societal issues with creating value, not cost Believing that these issues need to be tackled by a coalition of political, civil society and business leaders, not governments on their own Being passionate about how to run a successful organisation out of serving the interests of wider society, not viewing every decision solely through the lens of impact on short-term financial performance 5

7 And they were also clear that doing this well means getting involved in activities that require a different skill set. For one thing, leading change within the organisation has taken on particular nuances: Leading change in the organisation Setting goals that encourage and make it safe for others to innovate, Understanding and using the symbolism of a chief exec role in leading change, Using stories to empower, champion and celebrate change agents in the organisation, Adopting new measures of success and rewarding those who excel at them. Having courage to take on resistance Not only are CEOs and senior leaders now playing some very specific roles in leading innovation and change within their own organisations however; they re also now playing a much more significant leadership role in wider society too. As a result they are finding it much more important to be able to engage meaningfully with multiple constituencies and relate well with all kinds of different actors in society, and to be able to engage in public and political debate with a point of view. And effective skills in partnering have also come to the fore, whether that be with policymakers, public sector leaders, mutli-laterals and civil society, or all at once. The role of government, public sector and civil society leaders has been changing at the same time too, with the same new emphasis on skills for cross-sector partnering and collaborative approaches, and a mindset that is open to the potential of what the private sector can contribute to the wider good. 6

8 Leading change beyond the organisation s boundaries Engaging in public debate, Being connected with the communities you serve Partnering with NGOs and other unusual bedfellows Leading change in consumer behaviour through a different approach to marketing Leading change through supply chains Collaborating with industry peers to lead change across market sectors Lobbying to lead change in government policy and regulation to shift market rules and incentives. The research that we ve been conducting on the role business leaders are playing in the Post 2015 process provides a range of unique insights into how senior business leaders see their role and the kinds of challenges they face. What I ve seen from the meetings I ve been in and the interviews I ve been doing with CEOs participating in the process is that: Business leaders see clear value in investing large chunks of their own time and energy into participating in these policy processes, where in the past they might have been happy to send someone from the government affairs or CSR team While there s a spectrum of starting points, many business leaders have really quite informed and sophisticated points of view on the issues at stake in the Post 2015 agenda 7

9 Almost all are coming from a position of wanting to push policymakers to come to a more ambitious agreement, and want to help shape a policy framework that makes it easier for them to contribute Many often feel out of their depth in participating in policy processes, but are learning on the go and learning fast What implications does all this have? Some might feel some unease at business leaders playing this kind of role in the way decisions get made. But given that so many of today s challenges cannot be addressed without the private sector, at least the way the global landscape looks today, it must be a better thing that business leaders are engaged than not. But at the same time, it is still only a fraction of the world s business leaders that are playing this new kind of leadership role, a much larger proportion are still operating with an outmoded blueprint of what today's leader s role needs to be witness how many leaders have recently been finding themselves in an indefensible position on their approach to paying tax, and some quarters of the business community are still putting a great deal of money into lobbying to stop stronger carbon legislation. So there is also a need to understand how best to support and educate today s and tomorrow s leaders in this new world, so that more understand how to play the kind of leadership role required today more effectively another area where Ashridge has been leading research in partnership with the UN Principles for Responsible Management Education initiative. It s an open question how much influence the High Level Panel will have on the actual intergovernmental negotiations which will decide the final set of Sustainable Development Goals, and in what ways business leaders and leaders from other parts of society will end up influencing that over the next year or so. Certainly the research which we conduct at Ashridge Business School will continue to follow the role 8

10 business leaders play in the process over the next couple of years or so. In broader terms, such insights need to be located within a wider understanding of progressive leadership principles that is being developed at the Centre for Progressive Leadership. We attempted to consider exactly how this may be achieved by considering a few pertinent questions. Firstly, are the kinds of things discussed above an anomaly or do we recognise this new pattern of behaviour? In considering this question, we noted that while there was certainly an abundance of examples evidencing the persistence of more conventional business mindsets, there was also a recognition that the new attitudes and approaches outlined above were emerging. We then went on to consider what different interpretations could there be which could account for the phenomenon and what are their respective strengths and weaknesses? As pointed out above, there are certainly some self-serving interpretations of business involvement in the sustainability agenda including positive PR, as mentioned above, but also a desire to ensure a level playing field between those organisations and nations that are prepared to go green and those that have not yet signed up. However, it was also felt amongst discussants that there were certainly other elements to the business case, including the arguments put forward by writers such as Porter regarding changing business models and their focus on long-term sustainability. In addition, aside from a straight-forward business case, it was also suggested that there is something that individual business leaders (and their values) bring to bear a personal commitment to sustainability and broader societal issues which engenders a positive view of such affairs within the organisations which they lead. We concluded the think tank by considering whether this new kind of role for business leaders is a good thing and what could be done to encourage more business leaders to play this kind of role. While the advantages (or even the necessity) of businesses to become involved in leading the sustainability charge was generally viewed very positively, there was also a note of caution in that we ought to be aware of the 9

11 possibility of such businesses playing too big a role, particularly the danger of them becoming too powerful in some sense, in relation for example to the geopolitical exclusion of some other players such as China. In terms of how to encourage business leaders to become involved in such initiatives, it was felt that the various elements of the business case could provide some incentive, however perhaps a stronger motivation could be elicited through exposing the senior leaders of business organisations to some of the sustainability issues as well as broader societal issues within the communities in which they operate could be beneficial, for example through corporate CSR inititatives. In conclusion, while the role of business leaders in contributing to sustainability has, as pointed out at the beginning, never been greater or more urgent it is our practical understanding of exactly how such leadership plays out in organisations that will ultimately determine how we can maximise the fruitfulness of such engagement through sustainable development globally. 10

12 References. Gitsham, M., Wackrill, J,. Baxter, G. & Pegg, M. (2012) Leadership in a Rapidly Changing World: How business leaders are reframing success, Ashridge and International Business Leaders Forum for the UN PRME Porter, M.E. and Kramer, M.R. (2006), Strategy and society: the link between competitive advantage and corporate social responsibility, Harvard Business Review, Vol. 84 No. 12, pp Porter, M. E., & Kramer, M. R. (2011) Creating Shared Value. Harvard Business Review, 89(1/2),

13 Matthew Gitsham is a Fellow of Ashridge Business School s Leadership Centre and director of Ashridge s Centre for Business and Sustainability. He is currently leading research on the role business leaders are playing in shaping the Post 2015 UN Sustainable Development Goals. 12