Purpose before profit: Some progress, gaps remain

CANBERRA — Meeting expectations of sustainability and rights-based business practices continues to remain a challenge for the private sector. The Global Compact Network Australia conference to be held on April 30 will bring together 250 leaders from business, civil society, academia, and government to focus on the issue of trust in Australian corporates.

The bar set by the global community on expectations of private industry is higher than what businesses have come to grips with, managing director at Konica Minolta Australia David Cooke explained to Devex.

“For business, it is a matter of being aligned to community standards — and sometimes there is a lag there,” he said. “Communities look up to highly paid senior executives running corporations and they want to see real leadership. But unfortunately, we find examples through probes of poor practices. And it is deeply wounding to organizations and their reputations when these things come out.”

The past year has seen the private sector face increasing challenges in public perceptions and demand for greater action putting human rights, environment and sustainable practices first – including a growing divide between rich and poor and stagnating wage growth in countries such as the United States and Australia.

“There is greater frequency of financial crises and companies not paying their fair share of taxes which hollows out public capacity,” John Ruggie, the Berthold Beitz professor in human rights and international affairs at the Kennedy School of Government and former United Nations special representative for business and human rights, told Devex. “And the United States — still the world’s wealthiest country — life expectancy is in decline. So there is a systemic issue here of concern.”

The conference will also highlight the need for urgent action — with guidance and support for transitioning to a rights-based approach to business. The lessons will extend beyond Australia, with global corporations urged to take up the call for action as public and environmental demands cannot wait.

Opening conversations

According to Cooke, human rights is a challenge for the private sector and an area it is not comfortable with. Engaging a subject matter expert is an important first step, but not a solution.

“Will that individual have maximum impact on the hearts and minds of all those C-suite executives?” he asked. “Will they have maximum impact on the hearts and minds of the chair and the board to set strategy for the organization?”

The U.N.’s Guiding Principles on Business and Human Rights, Cooke said, has helped advance the cause enormously — and it will be an important point of conversation at the conference.

“The principles are a great asset to business because they bring a degree of certainty and a framework to operate in — half the work is done already and business reach out for things like this.”

In his role as U.N. special representative for business and human rights, Ruggie’s mandate was to propose measures to strengthen the human rights performance of the business sector around the world. This saw the development of the Guiding Principles on Business and Human Rights, endorsed in 2011.

“It has opened the door to new conversations,” Ruggie said. “There are a lot of conversations we could not have had 10 years ago. We didn’t even have the vocabulary to have the conversation.”

Among the key changes, Ruggie explained, is that businesses have become far more aware of their responsibilities in the areas of human rights.

“Traditionally that was a category that was for states,” he said. “But both business and government have become far more aware of the immense importance of companies in creating shared value.”

But it has also helped companies Ruggie considers the “frontline” of human rights — including apparel and electronics industries — to understand they had a responsibility to support human rights even if governments in the countries of operation were not.

“Before the guidelines, these companies didn’t know how or where the boundaries were,” Ruggie said. “The guiding principles, I have been told by many people in business, helped them to understand what it is that they can and should do.”

Barriers for progress

Despite the door being open to new conversations with the private sector, there are still barriers in helping the U.N. guiding principles achieve maximum impact — including administrative, political, and cultural barriers.

“Some companies are flying below the radar and are hard to reach,” Ruggie explained. “It’s still tough for small- and medium-sized enterprises to absorb all of this — not conceptually but administratively.”

But the biggest barrier, he said, is getting businesses to think of the bigger picture.

“Short-termism has been a constant challenge,” Ruggie said. “If a CEO has to focus on the quarterly shareholder reports, it’s tough to do important things that don’t impact the bottom line ... This is one of the reasons that Paul Polman, when he became CEO of Unilever, stopped issuing quarterly earnings estimates. He said he had a long-term agenda and if the short-termers didn’t like it, they could invest elsewhere.”

Leading by example: Konica Minolta

An important part of breaking down barriers to a rights-based business approach is sharing the stories and examples of businesses leading the charge. And Konica Minolta aims to be a leader in this space.

Cooke took up the role of managing director in 2013 after completing a doctoral thesis on the business case for profit-making corporations to contribute to the community.

“In the end, the business case for it was glaringly obvious by the time I had finished the study,” Cooke explained. “When I became the managing director and chair it was a no-brainer to apply those principles.”

Among its recognized and awarded actions has been leadership on modern slavery, including the implementation of an ethical sourcing roadmap that prioritizes contracts with ethical suppliers. Within the operations of the company, Konica Minolta has also implemented a family violence leave policy.

Cooke believed it would help deliver stronger economic results in the face of Konica Minolta’s challenge of becoming a sunset industry as a printing company.

“And that has absolutely proven to be the case,” he said. “We compete against companies that are two or three times bigger than us, but often our sales per month are at their level or in excess of their level … By aligning profit and purpose, you can create a workplace that is powerful and sustainable in the sense of being around in the long term.”

Rebuilding trust in corporates

Events such as the GCNA conference enables like-minded organizations to gather and progress rights-based business agenda and achieve sustainable development outcomes. But they also help support new businesses seeking to change their practices — with the aim of helping to rebuild trust in corporates from all stakeholders.

Kylie Porter, executive director at GCNA, said the outcomes from this conference will focus on the need for businesses to change and respond to the demand for ethical leadership.

“I want people who are attending the conference to go back to their organizations with practical examples of the ways they can reconnect with customers, employees, shareholders, and the broader public,” she told Devex. “But I also want them to leave with practical examples of how businesses are putting purpose over profit.”

And while it was important to note that the cultural change that will need to happen within businesses will take time and determination, with no silver bullet available, Porter said businesses will not leave thinking time is on their side.

“There are also planetary boundaries we need to work with that won’t necessarily wait,” she said.

Devex is a media partner for the 2019 Global Compact Network Australia conference. Follow Lisa Cornish and Devex for insights from the conference.