Why is business not only obliged, but also compelled to be socially responsible? To what extent a situation of the COVID-19 pandemic is unordinary? Did the category «capitalism» compromise itself and how competition relates to the requirement of entering into cooperation? About all of that we talked with a leader of the academic track «Business in Society» at the international conference «Emerging Markets-2020», Director of PricewaterhouseCoopers Center for Corporate Social Responsibility of the Graduate School of Management of St. Petersburg State University (GSOM SPbU) Yury Blagov.
— Yury, could you highlight some of the most interesting presentations?
— This year, the track «Business in Society» opened the main program of international conference «Emerging Markets-2020», which is being held for the seventh time. For us, this is a very important event that allows us to demonstrate to academic and business societies what we do at GSOM SPbU, to compare the level of our research with national and international ones. Besides, it is important in terms of development of our partnerships — for several years we conduct our track jointly with one of the leading international associations — The Academy of Business in Society (ABIS). This, as a rule, guarantees us a high level of reports and a wide variety of membership. During the track, 17 reports were presented, which were prepared by 14 business schools and universities of nine countries. Geography impresses: participation was among scholars from Poland, China, Austria, Tunisia, Chile, Spain, Mexico, India and Russia. Thanks to that, we were able to focus specifically on analysis of emerging markets. After all, people from the countries that are of direct relevance to this group, let's say, «feel through their skin» its specificity. As for common themes and some breakthrough presentations, there is good news. It is that there weren’t any breakthrough presentations. Those changes and crises, which now many associate particularly with the COVID-19 pandemic, specialists of our profile, which are concerned with issues of corporate sustainability, have explored long enough. In this sense, the pandemic is indeed tragic, but, unfortunately, only a special case of deterioration of global problems, to which companies are compelled to adjust for many years already. And a key word here — compelled. Whether companies want that or do not want, did they grow a conscience or did not — adjusting for a rapidly changing environment and markets is becoming a question of survival for them.
— What changes have happened?
— Global Academic Community (even not only scientific, but also managerial) today is in general consensus that such global problems, as climate change and loss of biodiversity are much more large and serious, and much more devastating than expected. Meanwhile, as Rafael Sarda (who actually represents this «new unity» as an environmental scientist, representing High Council of Scientific Research of Spain, and professor of the business school ESADE) stressed during our discussion, interrelationship of business, society and nature has reached to a qualitatively new level. Business is an element of society, and society is an element of nature, and this is not a banality, since environmental pillars, environmental problems and expectations now permeate all civilizational systems.
Only a few years ago, the issue that was at the forefront is to what extent these changes can be defined as a man-made phenomenon, whether humans are to blame for that or not to blame. That was especially urgent for Russian economy, to a large extent connected to production of energy sources. Today, this emphasis makes less sense. Because in many respects the situation can’t be taken back, and the majority of changes is irreversible. In this regard, discussions about that «thanks to» the pandemic, planes started to fly less frequently and emissions into the atmosphere declined, seem to be speculation. Again, in most aspects, especially regarding climate, changes are irreversible, furthermore, reasons for it do not come down only to human influence.
— So then it is late to find the guilty ones — it is needed to understand how to to turn the situation around?
— Polish colleague Boleslaw Rok from Kozminski University in his presentation talked about the relevance of the BuildBack Better (BBB) approach. The essence of the approach is that now humans observe new reality that frightens them, and they want to come back to the point that they got used to, that they liked. Now, everything terrifies — how to wake up yesterday? But we say that it is not enough to return the situation to its initial point, it is needed not only to restore all systems, but to make them more adjusted to «new normality», caused by deeping of global problems. The current crisis contains opportunities for transformation of economy and society.
— You are speculating on strategic issues, but business has tasks for short term perspectives.
— And now it is about rapid changes. Traditional statements of sustainable development — let’s think about a future generation (generations) — do not work anymore. Since we talk about not 100-year time horizons, but 10-year, 30-year, 50-year time horizons. That is to say, about the currently living generation. So, a company does not have a choice nowadays — whether to be responsible or not to be, whether it likes that. If it does not become like that — it dies. All in an imperative mood. Another thing is that the content of corporate social responsibility is changing, which today has no point outside the context of sustainable development and corporate sustainability, whereby — in the modern understanding. The pandemic really helped, if I may say so, with all the evidence to be sure that interrelated global problems indeed take place. It has also become clear which instruments of corporate sustainability proved themselves well due to COVID-19 — they are needed to be developed further. And others — «improve» or transform on the basis of the pandemic experience. This is a crash-test for the instruments that were created and are being introduced by leading companies.
— Within the track, there was a presentation of Russian edition of the book Moral Capitalism: Reconciling Private Interest with the Public Good.
— This is a very important point. Usually, at our track, there are also several events for business, for social entrepreneurs are being held. But since online squeezed our lives, this time, we made only a presentation of this iconic book. It was written a long time ago, as early as in 2003 by Stephen Young, Executive Director of the Caux Round Table (international association of business leaders, which analyzes best practices of responsible business practices and develops relevant toolkits). We took over to translate and publish this book with support from Unilever. Its original title is «Moral capitalism», but in Russian edition it will be (that will be in 2021 by a publishing house of SPbU) entitled «Ethical capitalism», which, you must admit, has a certain linguistic nuance. Seemingly many years have passed, however we come back to some «archaic». But it turns out that ideas and models, which were formulated back then not only have withstood the test of time, but also have become more in demand than before. Ethical business implies not just mutually beneficial relationships between all interested parties — consumers, employees, owners, local community, environment — but also that interactions should be based on values, including values of sustainable development.
— It is easy to assume that talk about morality and ethics могут идти вразрез с сугубо рациональноймотивацией, isn’t it?
— Actually, it is impossible to separate a moral dimension from a rational one. For a question whether business exists without ethics, there is an unequivocal answer — does not exist. In this regard — about the «thesis of separation» — there was a multi-annual intense debate, containing many aspects, including interdisciplinary ones. To a large extent, what is ethical is something that provides sustainable development of a system. Accordingly, modern corporate social responsibility is not only separated, but also actually implemented in practice by many companies, retains and develops for each of them such systems that they can count on business success.
— Finally it should be beneficial. But where in the hierarchy of business values is the person (consumers, employees), and can we talk about national characteristics in this regard?
— As a rule, this issue is addressed in a simplistic way: there is an environment of doing business, where consumers, employees, the local community live, which are becoming surrounded (for example, simultaneously) by western and home businesses. And they act allegedly differently. It is not so. Because their environments vary. Business, however, reflects expectations of interested parties. A consumer is the same and abstract only in the most basic textbooks. Consumers of even the same products in Russia, Japan and USA differ and have different expectations. The same applies to owners, employees and other interested parties.
The business's responsibility is not to meet some abstract "higher requirement." Businesses rationally respond to specific expectations, realizing that they are actually creating a very contradictory system. Therefore, it turns out that responsibility cannot be the same in every country and, in any case, differs across country groups. We are also talking about the specifics of emerging markets.
The worsening of global problems makes the expectations system a new powerful dimension. Common for all countries. In particular, the history of the pandemic makes responsible companies (including, in our country) realize more clearly the importance of interaction with employees. Because it's one thing to routinely think about what to do with employees, in order to raise their interest in results of work, and another thing is when there is COVID-19 and there is an urgent need to make the decision on starting distant work or even worse — on staff reduction.
— We are experiencing a severe difficult period.
— But it, like I said, takes place for several years. Well, we talk about sustainable development goals of the UN (SDG) and indeed, it is an absolutely alarmist agenda. And it was signed by members of the United Nations in 2015 at the state level.
For example, what is meant by a company participating in achieving sustainable development goals of the UN? It is not a slogan nor compulsion of company to activity that has no practical sense. This means that it is trying to adjust to the environment that changes around the company. We say: «A company is coping with climate change!» In particular it means that it reduces greenhouse gas emissions into the atmosphere. But a company does it not to get a certificate of merit from the UN. It is needed for a company to persist on the market. Illustrative example is that an aircraft giant Airbus introduced three concepts of the planes of the future that are hydrogen-powered. In 20-30 years a whole fleet of passenger aircrafts will change. And whoever will manage to fit in this new market will survive, others will go bankrupt.
Clearly, that business under the slogan «Let us address environmental problems» cannot stop being itself and self-destruct. No, because it has its red line, passing which it will be impossible to make a profit.
— You have mentioned the red line. Indeed, a common argument for rejection of cleaner production is that it is costly. It is needed, for example, to replace all equipment or abandon plastic packaging. Is it possible to convince all companies all around the world?
— It's not that bad. In particular, during our track a report by GSOM researcher and currently, Deputy Prime Minister of the Komi RepublicIrina Bahtina, dedicated to such endeavour as «Green Brands League», recently established in Russia on the initiative of Unilever. This league can really contribute to raising environmental standards, both collective and voluntary. Of course, an illusion arises that it is possible to sit tight or, alternatively, make money from the fact that everyone will try to be more responsible, but a company «Х» won’t. But it is exactly the illusion — still have to. Another example. Still the same company Unilever a couple of years ago was one of initiators of initiative project LOOP, in realization of which the world's largest food and household chemistry producers were involved, including P&G, Nestle, PepsiCo, Mars, Coca-Cola, Danon. Unfortunately, it is a little bit gone quiet due to coronavirus. The purpose of integration is in significant decline in the use of disposable plastic packaging. Problem of circulation of plastics and microplastics is appalling, almost everyone has heard about it. If a specific company will just abandon plastic packaging, it will incur substantial losses. And if to jointly create a platform on using non-disposable packaging and non-disposable product delivery to a consumer in the format of «old milkman»? And this — outpacing COVID-19 time, when practice of delivery of anything «to the door» by a specially trained person became more or less widespread. Well, the future is exactly with such an approach. With partnerships of all levels: intra-industry, cross-industry, cross-sectoral. Because that very proverbial «red line» can be moved only by joint effort. Sounds quite banal — «Let us join hands, friends!» But now it is the most important. SDG №17 — «Partnership in the interest of sustainable development» is not a final objective of a set, but an essential, system building part of the system.
— So we thus question the integrity of competition as a basic principle of capitalism development?
— I’ve been waiting for this question! A wonderful Stephen Young's book is about capitalism. When this word sounds today in Russian Federation, it, as a rule, triggers negative emotions. Like the one: «Again these elderly showed up, which know nothing except Marxism-Leninism dogmas!» But the term «capitalism» is used worldwide. It is a standard category for describing a system in which we live, whereby a more rich category than neutral «market economy». It is indicative that Paul Polman, a world business legend, whom I have asked to write an introduction to Russian edition of «Ethical capitalism», started it from a quote by Karl Marx: «Capitalism tends to destroy its two sources of wealth: nature and human beings».
Idea of the book, to which we always come back, is not that capitalism is not good or bad, but that it is a system that has much contradiction, but which possesses a huge potential. It can and needs to be realized, not «hovering around» long-forgotten manifestations and instruments. What does this mean? When you ask me a question about change in attitude towards employees — yes, of course, it changes. But it is still real capitalism, and not an ideal society from a fairy tale.
And when we do not choose between competition or cooperation because both are being developed. There has never existed the competition without cooperation.
— Can at least the conditional «ideal standard» of socially responsible business be formulated? What criteria to use?
— Today or rather, yesterday, the last pre-COVID-19 day on leading world platforms consensus has emerged: Ideal companies in terms of responsible business practices not only do not exist, but also there cannot be any theoretically. For the simple reason that all interested parties have complicated and multidirectional expectations. Whatever you decide, there always will be someone who loses. Or, at least, does not win.
In Russia, about 15 years ago, when a topic of social responsibility actively started to be disseminated in the media and business community, interest in the topic was strong. And then, it started to fall. But this falling interest meant that large companies, particularly «Russian MNCs», which have already gone a long way into the issue, managed to adapt quickly to an international toolkit and standards, including non-financial reporting standards to their own realities. There are relatively few of such companies, but they are real leaders of Russian economy. Moreover, these 20-25 companies are at a very good level of corporate social responsibility.
However, when we talk about the bulk of the companies, medium and small business, there is not a slightest reason to consider such business to be irresponsible for the very reason that it is alive. Clearly, that for many companies, a complicated modern toolkit is not always adequate in addressing problems. Besides, for us, a law on mandatory non-financial reporting hasn’t been yet adopted. However, based on their capacities companies try to build mutually beneficial relations with interested parties. Even intuitively companies are perfectly aware of the importance of responsible business practices.
Illustrative point is that 5-7 years ago, during business events, often enough it came down to a simple question: you explain everything so attractively, but show us the figures that confirm what are the benefits from being responsible. Over time, this question was withdrawn. It has become evident to everyone, it is not so much about acquiring competitive advantages through «responsible» or, on the contrary, «irresponsible» differentiation, as it is about business transformation as a whole. And this transformation in the interest of sustainable development is beneficial for both companies and society. Even traditional corporate philanthropy is becoming more strategic. Indeed, a period that we are experiencing is a period of new opportunities for moral capitalism,
Трек «Business in Society» was held on November 11, 2020, as a joint event by GSOM SPbU and The Academy of Business in Society (ABIS). During the track, 17 reports were heard, prepared by researchers from 14 universities and business schools, representing nine countries. In presenting Russian edition of the book «Moral capitalism: how to reconcile a private interest with a public good», also participated: author — Stephen Young (the Global Executive Director of the Caux Round Table), Paul Polman (former CEO of Unilever, founder of the Imagine Foundation), Herman Mulder (Chairman of SDG Netherlands, the head of the fund True price/Impact Economy), Regina Kuzmina (President of Unilever in Russia, Ukraine and Republic of Belarus), representatives of member companies of the Advisory Board of GSOM SPbU.