On its 50th anniversary, the World Economic Forum has launched a new Davos Manifesto and its founder and executive chairman, Klaus Schwab, makes the case for a better kind of capitalism that engages all stakeholders in “shared and sustained value creation.”
This is a welcome development, but we should treat it with some caution.
Last year’s U.S. Business Roundtable commitment to stakeholder capitalism, which Schwab cites as evidence of change, has been criticized as the biggest business con of 2019. And Paul Polman, chair of the Saïd Business School, recently asked, “even though we know how to solve poverty and climate change, do we care enough to do so?”
To deliver a cohesive and sustainable world in which business and enterprise flourish, we must reshape the global economy so that it delivers long-term inclusive prosperity, rather than maximizing short-term growth and accelerating inequality.—
5 years on
If we take progress on implementing the Sustainable Development Goals — agreed by the U.N. General Assembly in 2015 — as a measure of our collective concern, the answer is no.
A recent survey ranks governments, investors, and the private sector as the bottom three performers on SDGs, and some parameters are worsening, including inequality between countries, malnutrition, greenhouse gas emissions, soil erosion, biodiversity loss, and overfishing.
Business and development:
And yet the SDGs remain the most comprehensive global blueprint available for a sustainable future. If the challenge facing world leaders in Davos this week is bringing together “stakeholders for a cohesive and sustainable world”, then collective delivery on the SDGs is the solution.
An opportunity begging
The SDGs are “universal” — relying on governments, businesses, and civil society alike for delivery — and “indivisible” — the achievement of one depends on that of all the others. They challenge business to innovate and develop business models that address climate change, nature loss, and inequality, while also responding to changing consumer and employee expectations. Indeed, the “Better Business, Better World” report in 2017 found pursuing SDG delivery could generate market opportunities worth at least $12 trillion by 2030 if business partners with government and civil society.
Yet despite business interest in the SDGs, there is a gap between intent and action. According to PwC’s “SDG Challenge 2019,” 72% of businesses surveyed mention the SDGs in reporting, but only 25% include them in published business strategies, with just 14% mentioning specific SDG targets.
Exceptions and impetus
There are exceptions. Clothing brand H&M, for example, used the World Wide Fund for Nature’s Water Risk Filter to assess all water-related aspects of its value chain and engage suppliers, communities, and policymakers to deliver water stewardship beyond factory gates — the kind of collaboration on which SDG delivery relies.
In the textiles sector, which uses significant quantities of water, often in countries like Bangladesh, China, and India which suffer from water scarcity, a license to operate depends on being a good neighbor and helping deliver SDG 6 — water and sanitation for all.
Other companies are working closely with communities. Danone, for example, supports social businesses currently improving the lives of over 1 million people around the world. And the new Dutch Fund for Climate and Development is investing in nature-based solutions that help low-income countries build climate-resilient economies, including by supporting vulnerable groups such as women and youth.
Nevertheless, while many companies reference SDGs in reporting, there is a need to accelerate implementation. Around the world, protests about inequality and environmental breakdown are growing, and impetus may come from millennials and generation Z who want to work for companies that look beyond shareholder interest.
Meanwhile, within the private sector, there is a growing conversation around corporate “purpose” with the World Benchmarking Alliance ranking the performance of 2,000 keystone companies across seven systems, from food to finance, vital to SDG delivery.
A way forward
Last September, Greta Thunberg reminded us that our current economic system — upon which the economic promise set out in “Better Business, Better World” largely relies — is a betrayal of future generations. The solution is system change, and the SDGs offer a framework that can help companies and stakeholders deliver it together.
Creating a sustainable food system, for example, demands that many SDGs are met, including by balancing ecological processes with food production, ending habitat conversion, supporting small producers, and encouraging more sustainable diets.
Given the control just a few companies have over the food system, business can play a leading role in its transformation. And as the Champions 12.3 group on food waste shows, SDGs both inspire and require collective action.
Show you mean it
To deliver a cohesive and sustainable world in which business and enterprise flourish, we must reshape the global economy so that it delivers long-term inclusive prosperity, rather than maximizing short-term growth and accelerating inequality.
We must scale business models that build shared value for society and improve corporate governance so that enterprise benefits all stakeholders. We must also redesign finance and markets so they recognize the value of nature, adopting measures of progress beyond gross domestic product, and promoting circular and regenerative economies that realize the promise of the SDGs.
With governments due this year to make key decisions on the environment, climate, and sustainable development that will set the agenda for the next decade, there is a unique opportunity to make a start. And no better place to do so than this week at Davos.
The question is, does business care enough to deliver and demand change?