As I read leading commentators on business responsibility and sustainability sharing their insights on trends for 2012, I saw a new boldness. People are recognising the need for ambitious goals that address root causes, including economic governance failures. At Lifeworth we have been seeking to contribute to a sustainable economic transformation and published a variety of works on that theme over the past ten years. In that time I’ve seen the more critical analyses initially ignored by leaders in favour of less challenging narratives. Yet this year I think we will see more opportunity for ‘radical’ suggestions for change to be discussed and trialled. In that sense, despite the fears, it’s the year we have been waiting for. But rather than adding to the many predictions, I’ll summarise Lifeworth’s efforts that could be of relevance if you seek to team up to strive for far greater positive change than you might have before.

The first area for transformative action in which we are engaged is policy innovations for scaling responsible enterprise and finance. Rightly or wrongly, government budgets cuts are happening in many countries. The implications for them to regulate businesses for social and environmental objectives are beginning to be felt. How then can we promote and reward better business practice, without increasing the costs to government? Leveraging private standards of social or environmental performance is one option. In work for the UN Conference on Trade and Development (UNCTAD), we looked at public policy innovations to scale the number of firms adhering to voluntary standards like the Forest Stewardship Council. This appeared in the World Investment Report, with the full academic study published elsewhere. The idea that these forms of ‘collaborative economic governance’ are a pragmatic response to the twin challenges of sustainable development and government efficiencies, was fed into the policy discussions leading to Rio+20, happening this June. The need now is to create systems for collecting innovative public policies for scaling responsible business, analysing which work well in what contents, and disseminating this to government officials worldwide. If you can help on this project, do get in touch.

Yet we must go further than coping mechanisms in a world of irresponsible enterprise and governance failures. The second area for transformative action, therefore, is redesigning financial systems for more fair and sustainable outcomes. Although commitments to responsible investment have existed for some years, the translation into investment practice and the realities of corporate leaders has far to go. The limitations of current environmental, social and governance (ESG) practice in empowering investors to act is one of the stumbling blocks which we analysed in 2011, sparking lively debate. Our interest in ESG is because of the potential for progressive investor influence, which is a historically novel situation. In 2012 I hope we see the emergence of a progressive voice from investors on matters of public concern. Aside from investor-business relations, the public voice of the progressive investor has been slow to emerge. The Carbon Disclosure Project has shown that on climate change investors can sound a new tune on public policy. In 2012 and beyond, we could see other forums, particularly the UN-backed Principles for Responsible Investment (UNPRI), providing opportunities for progressive investors to promote policy debates that better include social and environmental priorities. Whether they will be able to counter-balance the more regressive investor resistance to financial re-regulation will be interesting to watch.

In 2012 I’ll continue to participate in fora that discuss the need for transformation of economic systems for sustainable development, including The Finance Innovation Lab in the UK, the World Economic Forum in Davos, Switzerland, and the Griffith University conference on transition, in Australia. As I explained in an interview for Griffith, the key stumbling block to progress on tough issues is our limiting assumptions and oversights about the real causes of our crises. During the next months I’ll be asking world leaders what they think are the key activities to drive massive positive change that weren’t possible before now, and who they need to work with to make that happen. Identifying such pressure points for massive positive change will inform our philanthropy advisory during 2012, and beyond.

One area where I think there is currently a woefully lack of attention, funding and action is in “sustainable currencies”. Current monetary systems are incompatible with the goal of a fair and sustainable economy, and thus we need greater efforts at reform, as well as at developing secure, scalable and community-owned alternative currencies and barter systems. It is, no doubt, a difficult area for many to grasp; as I experienced myself. Yet in 2011 there were strides towards greater understanding by sustainable development professionals, through the work of New Economics foundation (nef), among others. My TEDx talk on the topic reached over 12,000 views in a couple of months. As austerity bites and unemployment persists, new ways of getting people working for each other without putting governments further into debt will inevitably rise up political agendas. In 2012 we will help through collaboration with Community Forge and The Finance Innovation Lab, amongst others, and promote the uptake of ’sustainable currencies’ as an innovative social development mechanism, through fora such as the Geneva Forum on Social Change.

What does this renewed emphasis on systemic change mean for specific industry sectors? I think the main implication is to be more ambitious in attempting to mainstream change for sustainable development. That is a third area for seeking transformative action. That has been our approach in the work we do in the luxury and mining sectors. With the organisation Fair Jewelry Action we researched and published “Uplifting the Earth: the ethical performance of high jewellery brands.” In this report we mapped out a transformative agenda for responsible jewellery, where the industry can contribute to sustainable development. From this basis, we aided De Beers’ stakeholder consultations, and worked with the UN Institute for Training and Research (UNITAR) on their training for the jewellery industry, which will be rolled out from Antwerp this year. The Spanish version of the report was launched at the world’s first Sustainable Luxury Awards, in Buenos Aires, co-organised with CSSL and the Authentic Luxury Network. The aim of these awards is to encourage sustainable innovation in the luxury sector; this year’s awards are scheduled for November. The insights from our work on transformative corporate responsibility in the luxury sector were refined for the launch of the world’s first MBA module on ‘Sustainable Luxury and Design’, which I teach at IE Business School, in Madrid. Students learn how sustainability is the smartest and most elegant paradigm within which to design anything. At the other end of the value chain, in 2012 we are working with Channel Research and the German development agency Gesellschaft für Internationale Zusammenarbeit (GIZ) to encourage disclosure on the social, environmental and economic impacts and contributions of mining companies in the Congo. There are few more challenging locations for mining to align better with the goals of peace, human rights and development.

A fourth area for transformative action in 2012 is enhancing the way UN agencies and civil society organisations engage companies. There are now many cross-sectoral partnerships, and the relationships they established hold the potential for greater changes. Largescale change goals need to be connected back to practical steps that can deliver benefits in the near term for various partner organisations. That’s the thinking behind a spate of new resources on more transformative partnering that were released in 2011, including reports from the UN Global Compact, and my own book, “Evolving Partnerships: engaging business for greater social change.” During 2011 we applied our approach to developing transformative alliances in our support for the International Labour Organisation’s fight against forced labour. In 2012 we aim to help the development of their Global Business Alliance against Forced Labour.

Despite the shocking persistence of slavery today, and the general dystopian tone we hear from thoughtful people in international fora, or indeed, because of such darkness, we need a bright vision for life on Earth. That is why we are helping the Future Perfect Festival in Sweden in August. It will celebrate the brilliance and fun of sustainable lifestyles, sustainable businesses and sustainable communities. It will shine rays of light on a better way of life, beyond the dark mountains of outmoded and destructive ways of thinking, working and living. Our ability to understand values, and articulate them in professional contexts, is important when working towards a positive vision. My colleague Ian Doyle has therefore been teaching ‘voicing your values’ class at Grenoble Graduate School of Business, and we will be integrating this into various lines of work in 2012. In our forthcoming book, Healing Capitalism, Ian and I will seek to integrate both the personal and systemic levels of analysis, to aid transformative action.

In summary, we hope our 2012 will involve the following arenas of transformative action:
1) Policy innovations for scaling responsible enterprise and finance;
2) Redesigning financial and monetary systems for more fair and sustainable outcomes;
3) Mainstreaming contributions to sustainable development within specific industry sectors (including luxury, mining etc);
4) More ambitious collaborations between UN agencies, civil society organisations and companies;
5) Visions of sustainable ways of living, pathways to achieve them, and values competence to walk that path.

To better develop our work, this year we become a Swiss non-profit association. We will remain a network of independent associates, and will continue to deliver in partnership with other service providers, for a limited number of clients who seek to create meaningful change. If you can help us have an impact in these areas, I’d love to hear from you.

Professor Jem Bendell
Founder and Director, Lifeworth.com and Lifeworth Consulting
Adjunct Professor, Asia Pacific Centre for Sustainable Enterprise, Griffith Business School
Distinguished Visiting Professor, IE Business School

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Professor Bendell explains that the damaging effects of the financial crisis on companies are making some business leaders ask deeper questions about our economic system. Increasing inequality also presents risks to business, according to the International Monetary Fund and World Economic Forum. Meanwhile, as the costs of natural resources rise and our population reaches 7 billion, so more business leaders are wondering whether the world can support more and more economic growth. Professor Bendell, explains that management consultants and business schools have largely failed to provide business leaders with insight on these questions, and help them develop appropriate strategies. Throughout 2011 more business thinkers shared initial ideas on creating a new form of capitalism, but were too narrow in their analysis, according to Bendell.

He says we need to uncover our hidden assumptions in order to develop new insights into the strategic implications of our current crises. He describes how the current debate about the merits of economic growth is illustrative of how the wrong assumptions lead to meaningless and unresolvable debates. Professor Bendell explains that there are now four main views about the role of economic growth in society – pro-growth, no-growth, green-growth, and beyond-growth. These positions seem irreconcilable, and yet they are all based on a false assumption that the nature of money, and its mode of creation, is neutral in its effect on society. He explains how better understanding the monetary system could help resolve the impasse on growth, and lead to new approaches from business, even including new business opportunities.

The interview echoes arguments in his 2009 book “The Corporate Responsibility Movement”, where he suggests the fundamental reform of capitalism is now an issue for responsible business leadership. The interview follows up Professor Bendell’s TEDx talk on the hidden cause of the financial crisis, which is rapidly becoming the most watched speech on monetary reform available online. During 2012 Professor Bendell will be helping Griffith Business School develop its research and events to explore redesigning capitalism for sustainable development.

Interview at Griffith University, December 2011

Click here to view the embedded video.

Speech at TEDxTransmedia, September 2011

Click here to view the embedded video.

Some in this space prefer to look away from the growing crises, and busy themselves with a growing market for CSR advisory and reporting in emerging markets or the increasing (yet relatively few) examples social enterprise and ’shared value’ partnerships. But others are thinking about how their work relates to the critical issue of transforming our economic and social systems to be more fair and sustainable, as we discussed in our last review “Capitalism in Question.”

Front cover of Ethical Corporation issue 1

Over the past 16 years working in CSR I’ve sought to encourage and apply a “movement mentality”, being conscious of how we are working on something greater than building the reputation or business of an employer or client. We need to be clear that we are working as a social movement to transform all business and finance. So these times of instability require us to discuss with each other about how to have a far greater systemic effect that we currently have in our silos. They require us to look deeper our own sectors and how they contribute to systemic problems, and could contribute to systemic solutions. For instance, can people in responsible investment continue to consider the realm of high frequency trades and derivatives to be beyond their concern? Why accept impotence if you entered finance to have a greater impact?

Having difficult conversations with colleagues is essential if we are to see deeper change that matches the challenges of economic governance today. Having unusual conversations with those outside our normal professional community is also now critical – listening to critics who are engaged in OccupyWallStreet and other campaigns is key. Learning together in this way, we may discover a more systemic agenda for our work, and begin healing capitalism. For your employees to learn in this way, they will need to get out of the office, and onto the streets. That’s why your company needs to OccupyWallStreet.

My own journey in CSR has led me to an understanding of systemic flaws, some of which are described in my book “The Corporate Responsibility Movement”. One systemic flaw I overlooked for too long is our monetary system. Beneath the financial and environmental crises lies a hidden crisis in the way our money is created. The way private banks create about 97% of our money as debt, out of nothing, and charge interest on it. That monetary policy choice is a cancer at the heart of our economies, meaning that our real economy, and our real wealth found in our environment and communities, is chewed up to service compound interest on perpetual debt. I explained in my TEDx talk in Rome last month that the solutions involve both monetary reform and scaling complementary currencies. Although many of the protesters’ initial demands are fairly mainstream reforms of banking and political process, discussions about the underlying causes of the current crises are happening and new initiatives around monetary reform are springing up.

Initially it may seem difficult to see how companies can usefully engage in these issues. But I believe they can. All forms of business can begin to accept complementary currencies as payment, and offer to pay their employees partly in a complementary currency. Mobile phone companies can help scale complementary currencies through collaborating on sms payment systems. Retail banks can open accounts in complementary currencies. All firms can integrate complementary currencies into their philanthropy and community engagement. Firms can switch their accounts to banks who practice full reserve banking, such as the JAK members bank. Firms can encourage local governments to issue their own mutual credit systems, and for all governments to tax transactions in complementary currencies in such currencies, not national money. Firms can also back campaigns for ending fractional reserve banking, such as Positive Money, in the UK.

Although much can be done, it would be naive to think that all firms and banks can find a win-win approach to monetary reform and monetary alternatives. Some banks will lose out if the right changes are implemented. Their commercial interests are our common enemy. Individuals in such banks could consider to donate their wages to groups campaigning for real change or creating real currency alternatives, like Community Forge. They could also leak documents to help future prosecutions, or expose the attitudes and approaches in their banks. And they could apply for jobs at banks that practice full reserve banking or provide innovative peer-to-peer lending. Movements need people on the inside and outside, but key is that we make sure we are having an impact, not just making excuses.

Responsible companies should back protests for fundamental economic reform, like OccupyWallStreet. They should do this both for commercial reasons, given the economic damage caused by the current financial system. But they should also do it as an expression of the shared concerns of their stakeholders, including their staff and owners.

It is time to cut out the cancerous monetary system. Otherwise we have no chance of healing capitalism, for a fairer and more sustainable way of life.

–

l’ll expand on these themes in my next book “Healing Capitalism” (Bendell and Doyle, 2012 forthcoming Greenleaf Publishing). For now, to learn more, you can read the introduction to Capitalism in Question, and see the TEDx talk on money. I am currently researching how large organisations, including companies, can more effectively engage with complementary currencies. I’d welcome any information on this topic.

8th October 2011, www.twitter.com/jembendell

In the past year the criticism of ESG analysis and ratings increased in the wake of the Deep Water Horizon disaster. Earlier this year I published in the Journal of Corporate Citizenship an analysis of the flaws of ESG, and an article in the magazine Responsible Investor, which ignited some lively debate. One proponent of the existing industry of ESG analysts and retail funds even suggested my argument that a premium could be paid for certified ESG practitioners or products was somehow “Maoist.” That might come as a surprise not only to organic and fairtrade businesses, but also doctors, nurses and most professionals! Rhetoric aside, some in the industry think that ESG research should be left to continue its natural market-driven evolution. Yet such market-evolution is not satisfying the needs of many in the investment chain, and has not created the change many of us hoped for when promoting responsible investment. ESG professionals who are attracted to simplistic market fundamentalism, may be doing so as it aligns with their own choices and sense of self-esteem (what psychologists would call ‘confirmation bias’, and what less kind commentators might call selfish short-sightedness).

Collaborative innovation on market failures is a key aspect of well functioning markets; and in the ESG field, it is becoming clear we need some collaborative innovation, including some useful standardisation on transparency and governance. A substantive piece of research from the thinktank and consulting firm SustainAbility found that asset managers would also prefer more transparency and continuity in the methods of ESG analysts and raters. So, despite some market fundamentalist critiques, there is growing understanding of the need for new standards.

Aside from ESG analysis, questions are also beginning to be raised about the effectiveness of general commitments from asset owners and asset managers to responsible investment, and this may increase the need for credible information and metrics. The UN-backed Principles for Responsible Investment (UNPRI) is gradually increasing its requirements on its members, and increasing transparency on their performance. However, the question remains: how do we know a more responsibly-managed fund when we see one? Or how do we recognise a highly responsible fund manager when we meet one?

In other industry sectors, the past 15 years has witnessed the creation of voluntary standards on environmental, social and governance issues by processes involving stakeholders from civil society, business and government. In particular, the Forest Stewardship Council and Marine Stewardship Council, which I was once involved in, have grown to have global reach, with 11% and 6% of their respective global trades being covered by their certification schemes. A similar multi-stakeholder standards, accreditation and certification system could play a useful role in the standardising and communicating of both ESG analysis and the practice of responsible asset management – an ‘Investment Stewardship Council’. The conformity assessment industry, and related organisations, including ISO and ISEAL, would be key to informing such a process. Given the importance of investment decisions for incentivising or discouraging voluntary corporate responsibility, more clarity in this area will be useful for responsible companies, investors, civil society and governments. An ‘Investment Stewardship Council’ could complement existing initiatives, such as the UNPRI, and provide a means for pioneers of best practices to be rewarded in the marketplace.

For such an initiative to develop will require significant support to convene asset owners and asset managers, on the one hand, and global civil society on the other, to drive forward an agenda that innovative ESG analysts will be able to respond to help develop appropriate standards. For such a process to develop requires 2 challenges to be overcome.

First, is a shift in thinking by people working in “responsible investment” towards understanding that the core of greater responsibility is to be accountable to a wider set of stakeholders than ones owners, shareholders or clients. Paradoxically, many “responsible” fund managers ask their investee firms to be more accountable to society, without questioning the accountability of the ones who invest, the processes through which they assess companies, or their own systems of incentives and governance.

These issues are avoided by focusing on the ideas that considering ESG issues should be limited to either, on the one hand, what is financially smarter investing, or on the other hand, what the ethical preferences of the investor are. Yet might responsible investing really mean investing in ways that are accountable to those affected by that process, particularly those with little power who are impacted a lot? Might responsible investing not simply mean being a smarter investor, or a more caring investor, but mean being more accountable and promoting accountability of investments in general? I first advanced this idea of “capital accountability” in a UN study in 2004, as the natural maturation of the ESG and responsible investment fields, and have been disappointed to see the lasting ethical immaturity of these fields. Indeed, some new initiatives to improve ESG practices are opaque, focused on the client, and do not involve stakeholders, let alone being accountable to stakeholders.

The reason for this lack of awareness of the ethical limitations of current ESG work, could be the lack of civil society campaigning. This is the second difficulty I see in the development of a process to form an ‘Investment Stewardship Council’. The existing Stewardship Councils required active civil society campaigning over many years, which challenged not only the practices but also the ethical assumptions and responses of companies. In the field of finance, we see NGOs and others are quite limited in their analysis and activism on financial issues, despite its importance. Perhaps that is partly due to the brain-drain of business and economics savvy NGO people into the private sector in the past decade. In addition, those remaining in the campaigning NGOs are increasingly sceptical of what voluntary initiatives can achieve. If more ex-bankers joined NGOs with the aim of transforming investment, this could help build the field of professionals who can engage.

Seeing these limitations, we may rely on wise and committed asset owners and their trustees to move this agenda forward, encouraging engagement and dialogue between NGOs and investors on how to improve the voluntary ESG field, in addition to any regulatory innovations needed on mainstream financial and monetary systems. Such asset owners would do well to look at the Global Initiative for Sustainability Ratings, which was launched in June by CERES and the Tellus Institute. These two organisations previously launched the Global Reporting Initiative, that has become the de facto global standard used by 2,000 companies worldwide for corporate reporting on environmental and social performance. The GISR already includes some leading investors and businesses, such as the Calvert Group and Bloomberg. Its success in dealing with the issues I’ve described above may depend on how well it engages a broader range of civil society actors in elaborating standards.

If you have a vocational commitment to transforming finance, business and economy, for positive social and environmental outcomes, I recommend signing up to the Standards and Governance group at The Finance Innovation Lab and also becoming involved in the GISR.

Professor Jem Bendell
www.twitter.com/jembendell

There was a time when the growth of such corporate social responsibility (CSR) standards was hailed by some politicians and business leaders as evidence that governments did not need to intervene in markets for sustainable development. Yet the statistics of success do not justify such a a view, as simply inverting the numbers above, we see that worldwide 89% of timber and 94% of the wild fish catch are not certified as sustainable, while problems with deforestation and fisheries collapse are just two of many global challenges requiring international collaboration by governments.

The publication of the 2011 World Investment Report today shows that many governments have moved well beyond excuses for inaction, and are now actively leveraging private CSR standards to achieve public outcomes. This form of collaborative regulation by governments arises from the dual challenges of needing to make markets more sustainable and socially inclusive, on the one hand, and limited resources for enforcing regulations on the other. In this new policy arena, governments are using systems where businesses pay the costs of their own regulation, through certification schemes.

The UN report comes at an important time when governments are assessing what they can commit to do to promote sustainable development, at the twentieth anniversary of the Rio Earth Summit, coming next year in Rio De Janiero. If 1992 was about governments calling on business and civil society to work together for suatainable development, it appears that Rio 2012 may be about business and civil sociuety calling governments to join in and help to scale the approachges they have pioneered over the last 20 years.

As someone who heeded the original call of Rio to for collaborative innovation towards sustainable development, and had the privilege of working on the early phases of both the FSC and MSC, Im delighted to see this new agenda emerge. Its been a pleasure to work with UNCTAD on the CSR sections of this years World Investment Report.

Perhaps we are witnessing the birth of a new policy agenda on business regulation worldwide, where governments move beyond traditional hands-on or hands-off approaches to markets, and instead seek to nudge business towards more responsible and sustainable behaviours. As the UNCTAD report points out, in this new era we must remember to promote the effectiveness and accountability of any governance mechanisms. Only if these new approaches help empower those affected by trade and industry and have little voice at present, will they achieve a sustainable scaleable place in our global economy.

You can download section 3E of the World Investment Report 2011.

Professor Jem Bendell is director of Lifeworth Consulting. His last book was “The Corporate Responsibility Movement”

www.twitter.com/jembendell

A typology of cross-sectoral partnerships, based on the type of activity involved:

* Sponsorship
The company provides funds for a public interest organisation to carry out its activities, often in return for some brand profile.

* Donation In-kind
The company provides its services, or staff or goods, for free or for significantly reduced cost. The business benefits from brand profile, and staff learning and motivation.

* Marketing
The company associates a cause with its products or services, and donates funds to the partner depending on sales, or the partner licences its name to the company. The company benefits from increases sales and brand profile.

* Co-financing and/or Joint Operation of Projects/Enterprises
The company works with the public interest organisation to co-design, or co-establish or co-finance a project or enterprise to achieve a public purpose. The company benefits from securer long-term returns on investment.

* Consultation, Research and Learning
The company participates in ongoing dialogues with partners to learn about public issues and to co-fund relevant research and educational activities with partners. The company benefits from learning, new knowledge, understanding and trust.

* Business Process Improvement
The company engages public benefit organisations to advise on improving the social, environmental, ethical or developmental impacts of its internal operations. The company benefits from expert, cheap and credible advice, as well as the benefits of the changes implemented and an enhanced reputation

* Standards and Guidelines Development
The company engages public benefit organisations to define best practice and how to implement it, including related monitoring and certification systems. The company benefits from a framework for organising internal improvements, and the brand benefit of meeting credible standards.

* Progressive Business Development
The company engages public benefit organisations to develop socially or environmentally preferable products and services, or to make existing products and services available to under-served markets or for unmet social needs. The company benefits from business development that might otherwise have been impossible or financially unworkable.

* Advocacy and Lobbying
The company works with partners to influence the attitudes, behaviours or policy positions of consumers, the general public, specific organisations or politicians on matters of common concern. The company benefits from more effective advocacy and lobbying, brand profile, an enhanced reputation, and the operational benefits of a positively influenced business environment.

* Multiple Actions
The company works with partners on a specific issue or area, to develop a wide range of potential activities, including those listed above and perhaps other new types of activity to address the issue. The company benefits from a framework for working with multiple partners on addressing the issue, with various positive outcomes depending on partnership activities.

Personally, I get more excited by the latter forms of partnership, as they have potential for far wider impact. The need for, and ways of creating such partnerships, you can read about in Evolving Partnerships: Engaging Business for Greater Social Change (out April 2011!)

Keep up with this stuff via http://twitter.com/jembendell

http://twitter.com/jembendell

So to briefly recap: the resignation of the entire Standards Board from AccountAbility, a leading organisation in corporate responsibility and organisational governance arena, sparked a vibrant and personal debate about the organisation’s new direction. The organisation is perusing a consulting services orientation, and therefore away from an one focused on building a field of practice.After initial criticism of the directors, and then a defence of their new approach, attention has shifted to supporting new networks to facilitate the further use and development of stakeholder engagement standard AA1000, as well as reflection on the lessons for organisational governance, and thus accountability in general, from what happened at AccountAbility.

That lesson-finding is what has piqued my interest. As I specialise in how organisations relate to and engage stakeholders, I followed AccountAbility’s work from the start, and appreciated its publications, conferences, and standards development. However, some key dimensions of accountability appeared to be avoided in the organisation’s work and standards. The current drama between AccountAbility and its stakeholders could provide an opportunity to draw lessons for future practice by those who seek more democratic accountability in economy and society. Although not privy to first hand experience of the changes at AccountAbility, there seem to be some general lessons:

1. there is a difference between hard and soft accountability and risks from not appreciating the difference;
2. efficiency should not be used as an argument against principles of democratic governance, but democratic governance mechanisms be made more efficient;
3. clarifying and expressing a political philosophy is not unprofessional but actually of practical importance;
4. it is not any accountability that we value but democratic accountability to those significantly affected by decisions;
5. the expression of certain values does not reduce the importance of organisational governance in shaping the nature and legitimacy of an endeavour;
6. we will need more governmental measures to harden soft accountability innovations, and that will require clearer understanding of the need for, and nature of, democratically accountable standards organisations;
7. this field of practice requires new professional institutions that exhibit a new professionalism which focuses not only on the needs of the client but also on a clear public purpose;
8. we would collectively benefit from expressing our sense of participating in a social movement, and developing networks and organisations dedicated to maximising the transformative impact of all our work in in this field.

I’ll briefly explain each of these potential lessons. The first, that there is a difference between hard and soft accountability and are risks from not appreciating the difference, is an analysis that has been advanced by many in civil society in the past decades, in response to rising voluntary corporate responsibility. One criticism of corporate responsibility work is that it often ignores power relations, including the distinction between mandatory and voluntary mechanisms of governance. Many NGOs and trade unions, therefore, have criticised CSR as distracting us from needed innovations in holding corporations and investors accountable through law. They have highlighted how terms like “accountability” are used in vague ways by some CSR and sustainability organisations, ignoring the fundamental different between choosing to give an account (due to one’s own views on the benefits of stakeholder engagement for learning, organisational performance, or on moral cause for doing), and procedures for being held to account by stakeholders whether one likes it or not. AccountAbility’s work also avoided this distinction. In a paper for the UN in 2004, I explored the different assumptions and ideologies between those pushing for voluntary responsibility and others seeking more mandatory accountability, hoping to contribute to a synergy of approaches.

In 2009 AccounAbility changed their governance to place all power in hands of the directors. The new organisation had a Standards Board, Governing Council and Charter, which appeared to keep the same semblance of stakeholder governance. Semblance being the operative word, as it appears all executive power was placed in the hands of the directors who could then decide by majority. We might ask: if following a Charter is optional, is it really a Charter? If a Governing Council can be ignored, is it really a “Governing” council? If a Standards Board can be ignored, is it really a “board”? Should grand titles be used for what are optional mechanisms, when the real power is held in other roles in the organisation? Probably not if it distracts us from where real power lies, and thus what real, i.e. mandatory, accountability exists.

I’m toying with an idea… that there is no such thing as voluntary accountability, that it is an oxymoron. Because to wish to give an account, to receive advice, etc, is not accountability. To do such is to chose a form of responsibility and openness (depending on how its done). By not making this distinction and helping even to obfuscate it, some of AccountAbility’s stakeholders made decisions that lost them their real mechanisms of accountability over the organisation and so they have came to experience first hand what the difference between real accountability and “voluntary accountability” means.

The change in organisational governance happened in 2009, in the name of greater effectiveness and efficiency. There may have been difficulties with the existing system, but that does not imply a need to reduce democratic control. This could be a second lesson: that efficiency should not be used as an argument against principles of democratic governance, but democratic governance mechanisms need to be made more efficient.

We should also reflect on why the key difference between voluntary and mandatory mechanisms were ignored, despite the strong voice of civil society on this issue. Might it be that in the push to professionalise matters of responsibility and stakeholder engagement, a technocratic language was developed and deployed that seemed apolitical and practical? In such a context to be “taken seriously” by large institutions, discussing matters in terms of “power” and “rights” and “justice” would not have helped. It is certainly not the usual language of accounting and conformity assessment – the two professions that standard-setting relates to. This is the third potential lesson: that clarifying and expressing a political philosophy is not unprofessional but actually of practical importance. Some may not like to hear a language of power and rights, but perhaps to normalise such language in business contexts is part of the challenge? And to continue to marginalise them, part of the problem?

The case of AccountAbility also reminds us that we need to refine our understanding of what forms of accountability we value. It is a mistake to view the current incarnation of AccountAbility as less accountable. It is very accountable to its current directors. That is a form of accountability that its staff have experienced in the past year – like us or lump it. In the report on NGO Accountability I wrote for the UN in 2006, I stressed the importance of understanding the desired situation as democratic accountability – where decision makers are accountable to those affected by their decisions, where they can change decisions and decision makers if they so choose. I briefly shared these ideas in AccountAbility’s own journal. That could be the fourth lesson: it is not any accountability that we value but democratic accountability to those significantly affected by decisions. Therefore we need to be clearer about these political views in our work, and not avoid them with the convenient and sloppy use of terms like “multi-stakeholder”. Invite a few people together and you have a “multi-stakeholder” process. Mussolini’s government was multi-stakeholder – many fascist regimes invited together the “wise” from different parts of society. Today “multi-stakeholder” could be a code word for corporatism if we do not stress the importance of empowering those affected by decisions – of promoting democratic accountability.

Taken together, these lessons should remind us that the expression of certain values does not reduce the importance of organisational governance in shaping the nature and legitimacy of an endeavour. We must speak of values but not rely on people in positions of power expressing them. If organisations are to play an important role in securing or serving the public good then we must not rely on the moral character of their senior office holders. That idea is the basis of the concept of national democracy and the separation of powers in a state. i.e. accountability to the people is key, not the responsibility of those with power. This fifth insight is important for those of us who work in the emerging field of social enterprise. There is a key difference between an organisation that is non-profit and that which is for-profit; there is a key difference between an organisation which is member governed and that which is run by its executive. The growing interest in measuring social investment and social impact aside from consideration of the organisation undertaking the work is therefore problematic. On the one hand it ignores how for-profit enterprises can contribute to economic inequality, which underlie many social and environmental problems. More generally though, it stems from a reductionist mindset that does not appreciate the evolving nature of how people address social challenges, and how the governance of their organisations shapes how they adapt.

If you are appreciating the speculation here on what we could learn from the recent goings on with AccountAbility, then you will appreciate the need for a new era in work on corporate accountability. Consequently a sixth lesson comes into view: that we will need more governmental measures to harden soft accountability innovations. If we want executives to pay more attention to the well-being of their employees, consumers, communities and the environment, then we will need more effective law. This law could combine existing innovations in private (or voluntary) social and environmental standards – it could make them mandatory. More governments are passing laws that require companies to meet a relevant private social and environmental standard, such as the Forest Stewardship Council (FSC) for timber companies. If this government backing for private regulatory systems is to grow, which it must, then we will need a clearer understanding of the need for, and nature of, democratically accountable standards organisations. Otherwise, governments might be backing standards that are not in the best interests of affected stakeholders.

Not all standards organisations recognise the need to be democratically accountable, and some are even run for profit. When I was helping formulate the concept for the Marine Stewardship Council (MSC), I lost the arguments that it follow the FSC model, which provided opportunities for all stakeholders to engage. The argument from the large consulting firm to advise on organisational governance was that there were more efficient systems of governance that would move faster. They failed to realise that standard setting on sustainability issues is as much a political as a technical issues (and rightly so!). Today the FSC accounts for 11% of worlds forests in production and the MSC about 6% of the world’s fisheries, while the MSC received vastly more start up investment, so although I see impact from both, I don’t see greater efficiency from unaccountable governance. The ISEAL alliance has gone some way to defining credible standard setting, but failed to specify democratic accountability as core to credible standard setting. There is a role for government to play here, and I have been hoping for sometime that the UN might help in clarifying credible multi-stakeholder standard setting.

Some of the upset expressed about the change of direction from AccountAbility is because the organisation was serving an emergent profession and, for some, playing a role in a new social movement for the transformation of economy and society. It was not only a community but a sign-post for that community. Many people saw AccountAbility becoming a professional institute for an emergent profession of people working towards more engaged and progressive organisations, economies and societies, however it is they define that. It didn’t, and that need and opportunity remains. Some groups like Net Impact have the potential but are not there yet. In any process towards professionalisation in this space, we should remember that professionalisation is a two-edged sword. Not only can it enhance the performance of practitioners, it can also lead to protectionism and privilege conservative voices, thereby restricting innovation (For instance, I recall with fondness the days when there were no Professors of CSR to pointlessly pontificate from ivory towers). The seventh lesson is therefore that our field of practice still requires new professional institutions that exhibit a new professionalism which focuses not only on the needs of the client but also on a clear public purpose.

Yet more than a profession, many people operate in this space as their vocation. That helps explain why so many people have responded collectively to the changes at AccountAbility and created their own networks in an instant. That is why if you search “corporate responsibility movement” you will see over 55,000 hits. I just discovered that the first hit is my last book. In it I draw from the lessons of past social movements to suggest how our work on corporate responsibility is, and should, evolve. The eight and for now final lesson Id like to suggest is that we would collectively benefit from expressing our sense of participating in a social movement, and by developing networks and organisations dedicated to maximising the transformative impact of all our work in in this field. We may have for-profit portals and information services, such as CSR Wire, Just Means, CSR International, CSR Asia and my own Lifeworth. We also have business clubs like BSR, WBCSD, IBLF and many others around the world. Yet there are no social movement organisations for our work, where we can learn how to become more than the sum of our individual actions. Anita Roddick spoke of a social movement for responsible business that she said had failed in her lifetime because it had become co-opted by large consulting firms and lost its transformative ambition. Will we also be lamenting lost potential in our last interview?

Hmm.

The answer to that has to be no…

…even if we fail.

If someone has some funding and time to help, I’d be happy to turn Lifeworth into a non-profit association of its members committed to transforming economies (as we enter our 10th year we have 7000 subscribers around the world so would have a head start). It seems a bit presumptuous to offer to build a movement organisation.. but I suppose someone has to do it. Id happily join another if you are starting one… but only if its an efficient democracy!

It is important we learn from our set backs as well as our successes. That was my message to the UN Global Compact’s participants on its 10^th anniversary – what if we are failing? Where is the ambition for real transformation? How can we build practical programmes of work with that ambition? It is in this spirit of seeking more transformative ways of working in future that I have developed some ideas on the lessons from the changes at AccountAbility.

There is an added reason why I wasted my weekend on this polemic.. its a sense of urgency. Because the issues I outline above will only become more important in the coming decades. A resource crunch is coming, due to the double effect of depleted resources and disruptions to agriculture, production and transportation from climate change. A quick look at recent history tells us that at times of crisis, powerful people use fear to justify efficiency and effectiveness over democratic accountability and fairness. It is important we learn to define, defend and advance democratic accountability in all institutions of society.

Perhaps AccountAbility will go on to be a great consulting services company. Looking at the massive overheads and insidious sycophancy of the mainstream competition, it has a fantastic market opportunity (unless it apes those consulting firms). Inadvertently, its directors have done the movement to transform economies a great service – by providing lessons to clarify our vision of what is needed and how. So if AccountAbility, as it once was, is dead, long live accountability!

(Acknowledgement: Thanks to Maya Forstater whose blogs and tweets got me thinking.)

We analyse, educate and advise on global changes in business-society relations and how to influence and respond to these changes in helpful ways (Enterprise Trends). Our activities and outputs in 2010 responded to this growing desire for transformation, working with the UN, GTZ as well as CSR networks in Asia to contextualise the key challenges for CSR and responsible investment in the coming years. We also analyse, educate, and advise on the specific practice of cross-sector relations, including partnerships between business and public interest organisations like the UN and NGOs (Engaging Change). We find that the desire to attempt transformational change counters some of the negative effects of growing demands for numerical scores on project effectiveness in a challenging funding environment. Social change can be tough, and requires new ways to assess progress, although not ones that see a partnership’s existence itself as the goal. We brought that perspective to our work with UN agencies and NGOs during the year, as well as through the teaching of courses and publishing of papers.

Our third work programme is the focus of our corporate strategy advisory work, where we help high-end brands to develop their approach to achieve social and environmental excellence (Authentic Luxury). It is topic we were busy with in 2010, but mostly with research, lectures and media. The companies in this sector are not moving as rapidly as we had imagined they might, given the strong business case for prestige brands to out perform on social and environmental issues. We worked with a couple of companies on their CSR strategies, but are yet to see wider demand for support to develop and execute ambitious and creative approaches.

Below we summarise some of the activities, and more importantly, the resources we have produced as a result, most of which are freely downloadable via the links. In addition we highlight what’s coming next, and how it relates to the key responsible enterprise and responsible finance challenges of 2011.

Enterprise Trends

The contemporary incarnations of CSR and Responsible Investment have been around for some time. So what is its extent, worldwide? And what does it mean for the actual social, environmental and governance performance of companies and investors? It is time for some global analysis on these questions. So we worked with the UN Conference on Trade and Development (UNCTAD) to co-edit their first global overview of the state of CSR and RI communications. The main conclusion was that as commitments to CSR and RI are now so widespread yet communications on impacts so diverse and unclear, it is time to see more standardisation, with public interests in mind. I shared some insights from that at a session on the future of CSR communications at the CSR Singapore conference. During the year we conducted a study on the performance of environmental, social and governance (ESG) analysts and raters, speaking to leaders and stakeholders in this sector from around the world. My interview with UNPRI Executive Director, Dr James Gifford was recorded. In February we will publish the study, which identifies 9 flaws in current mainstream ESG practice, and makes recommendations for how to fix them, including the development of a multi-stakeholder code of conduct for ESG analysts and raters. The study will be serialised and open for discussion on the ESG Investing discussion group. In 2011 we will also continue our work with UNCTAD to map the progress of private standards for CSR and RI, and what the public policy implications may be.

2010 saw growing interest in the role of business in development. Our interest in development does not arise from companies and investors beginning to engage in this issue, but from a long standing interest in in cultural exchange, how societies progress or not, and shared global challenges. From that perspective we see potential, but also some gross assumptions from people coming at development from the business world. We released our study on this area, outlining the need for a new management system for pro-development business. That followed up a keynote at the launch of the first MDG Scan report by National Committee for International Cooperation and Sustainable Development (NCDO). We also published a major study on a key issue for social progress that has been almost entirely overlooked by CSR and RI until now – economic inequality. Given government spending cuts in many parts of the world, rising prices for basic needs, while banker salaries and bonuses remain high, matters of economic inequality are likely to gain more attention in 2011, and demand more attention from the private sector. In addition to this research work, we were pleased to help the UN, GTZ and ArcelorMittal in Liberia. My colleague Emma Irwin designed and facilitated a workshop to help executives to understand the financial and moral imperatives of integrating Human Rights into their management systems, as well as how to begin that process.

Aside from the rising interest in development, the six CSR trends I identified in my last book, The Corporate Responsibility Movement, appeared to strengthen during 2010. I presented these trends of standardising, mainstreaming, integrating, levelling, enterprising and yoyoing to special events hosted by CSR Singapore and CSR Geneva. The growing desire for transformational change inspired more people to explore ‘design thinking’ as a mechanism for developing products and business models that can help create fair and sustainable societies. My colleague Ian Doyle led an exploration of what ‘design thinking’ can offer CSR and sustainability professions, which we published in the Journal of Corporate Citizenship. I shared some of these ideas in a keynote at a workshop for youth on design thinking for social change, run by Syinc in Singapore. I reflected on how there is no magic bullet for social change, and that an ability to struggle with forces of inertia is key to our effectiveness.

If we seek transformation then we seek to understand the root causes of the problems we experience, and a vision of the kind of system we wish to bring into being. In looking back at 2009 we sensed that more people in the CSR and RI fields were having such discussions: and therefore capitalism was being debated. Our annual review of CSR was called “Capitalism in Question” and in it we offered a concept of economic system that integrates principles of capital and democracy. In 2011 we will share this further by an article in Singapore Management University’s Social Space, and in the book Healing Capitalism, to be published by Greenleaf in September, co-edited by my colleague Ian Doyle.

Engaging Change

Sensing what is needed is different from knowing how to bring it into being. A core theme of our work for over a decade has been the potential and pitfalls of cross-sectoral collaboration as one method for generating social change. Given the growth in cross-sectoral partnerships over the last decade since my last book on the topic, Terms for Endearment, I had decided to research the latest thinking and practice and share analysis on how to take partnering to the next level. Some outputs from this included a special issue of the leading journal ‘Business Strategy and the Environment’. Contributors to the special issue look at experiences of partnership from across the Asia-Pacific, and bring new insights into what really drives partnerships and what the future holds. With my co-editors Eva Collins and Juliet Roper, we identified a new ideology that partnership is always useful in creating change, and that struggle and conflict are unhelpful – something we termed ‘partnerism’. 2010 was also the 10^th anniversary of the UN Global Compact, a cross-sectoral collaboration between business and the UN, and something I have followed since discussions with Georg Kell in 1998 about the initial idea of it. To coincide with the anniversary, the Journal of Corporate Citizenship published my reflections on how it must now address economic governance issues, which I then developed further into a series of proposals, after attending their Global Leaders Summit in New York.

How should public interest organisations attempt to have more systemic impact through their partnering with private sector? That is the subject of my next book, Evolving Partnerships, which is published by Greenleaf in April 2011. It provides tools for strategic review and planning so that UN agencies, NGOs and others can upgrade their partnering for greater social change. It should be available for ordering next month. I will continue to integrate these insights and approaches into my teaching and training on stakeholder relations and partnerships, including at the University of Geneva and Griffith University.

We are also applying our approaches to our training and strategic advisory for UN agencies. My colleague Ian Doyle led a seminar on private sector engagement for staff of the United Nations International Strategy for Disaster Reduction (UNISDR). As global value chains have become longer and more complex while natural disasters are increasing, so business continuity is becoming more important, and we believe there can be a convergence with reducing community exposure to natural hazards and increasing their resilience. We have also begun advising the International Labour Organisation (ILO) on its strategy for engaging the private sector in innovative ways. In particular we are looked at what can be done to encourage and support voluntary action against forced labour, a form of enslavement for over 12 million people today. Hopefully we will see some outcomes from this work during 2011.

The network Lifeworth Consulting co-founded, CSR Geneva, continued to bring together people from different sectors to discuss the role of business in addressing global challenges, with over 700 participants. Last year my colleague Janna Greve produced its first directory of members. In the coming year we will organise some events to help the international community better understand how to engage business, so sign up now to be informed.

Another collaborative network initiative that I helped to conceive, while at WWF-UK, gained momentum during 2010. The Finance Innovation Lab is promising because it provides a multi-stakeholder space to explore the systemic flaws and fixes of our financial system. In my advisory capacity to both the Lab the community currency charity CommunityForge, I helped CommunityForge engage the Lab, and create a new working group on the need for innovation in community currencies to promote a sustainability transition. The head of CommunityForge, Matthew Slater also happens to also be my web developer, and co-leader our innovation centre in Auroville (India) during the first part of 2010. In the coming year we will be publishing our study on why and how larger corporations can support and start using community currencies. I also hope to advise the Finance Innovation Lab on an effective approach to internationalising, given the global nature of the financial system.

Clearly we still believe in the power of partnerships, but in 2010 we were reminded of the pitfalls of attachment, where people’s sense of esteem becomes attached to the existence of a project, and the manner of its organising, rather than seeing it merely as a tool, and one that needs testing for the job at hand. No matter what tools, topics and resources are deployed, personal character is key to transformative action.

Authentic Luxury

High-end brands play a major role in the world, signalling what constitutes success and respectability, for many, across cultures. Asia continued to be the boom market for luxury brands during 2010, and thus grew their potential to shape awareness of sustainability challenges in a key part of the world. We have worked on CSR in the luxury sector since conceiving a project on this topic for WWF-UK in 2007 that led to the publication of Deeper Luxury, which stimulated a lot of media interest, including a TV documentary. In 2010 we saw the interest in this area grow steadily. Having introduced colleagues at Eco Chic Fashions and the UN with the idea for the UN’s first professional fashion show at its European headquarters, it was great the idea come together at the beginning of the year, profiling many ethical designers from around the world. I then joined the UN’s Biodiversity Platform, which is encouraging companies in the luxury sector to promote biodiversity conservation.

I was pleased to judge the Walpole British luxury association’s CSR awards, which were won by Six Senses Resorts, and give a keynote on sustainable wellness at the Wellness Summit in Singapore, which reflects how sustainability considerations are growing in the spa and wellness industries. A video of that talk is embedded below. The interest in these topics is global, as reflected by the world’s first Centre for Studies on Sustainable Luxury, in Buenos Aires, which I helped to launch. We will be working with them next year to offer courses on sustainable luxury in Latin America, launching the world’s first sustainable luxury awards, and co-developing the online professional Authentic Luxury Network.

I spoke about the future of fashion in Brisbane, at the Asia Pacific Centre for Sustainable Enterprise (APCSE), which I helped to found the year before, and they recorded it. As part of the research for a book due out in October, that I have been writing with APCSE on sustainable luxury, I worked with a fashion designer and sustainable materials producer in Southern India, to create a prototype of a form of high-end global sustainable luxury. The organic, hand woven, natural dyed denim sherwani we created appeared in Vogue and Marie Claire, by way of some great photos by award winning photographer Paulo Pellegrin, modelled by yours truly (no, not a career move). I wore the sherwani to the centenary fashion show of men’s luxury fashion house Ermengildo Zegna, and after Anna Zegna introduced me to the work of artist Michaelangelo Pistoletto, then ran a workshop on sustainable fashion for textile companies and designers in at his foundation in the northern Italian town of Biella. The sheer fun of working in Italy means I really hope their efforts to encourage CSR in high-end fashion take off in 2011 and that we are able to help further.

One of our strategy clients in 2010 was a high jewellery brand based in London. That helped us to deepen our understanding of the challenges and opportunities facing the jewellery sector, which I discussed on the radio. My colleague Ian Doyle presented his insights from our research on jewellery at the Paris 1.618 sustainable luxury fair, the Atelier for Sustainable Luxury (now the Sustainable Luxury Forum), and at De Beers’ stakeholder consultation. After interviewing dozens of experts about key issues, benchmarking 10 high jewellery brands on their CSR, and identifying leading innovations, we will publish a report responsible jewellery in March.

Also in March we begin teaching the world’s first MBA module on sustainable luxury, at the leading IE Business School, in Madrid. I hope the large luxury brands will be ready to hire the students to transform their companies. However, the luxury industry is not the most innovative and efficient sector that I’ve experienced, and the current commitment from large incumbent brands has been inconsistent. Perhaps the students would do well to establish or join the kind of niche luxury brands that are in the Authentic Luxury Network – the one’s that emerge from the Zeitgeist, rather than repackage the old.

In addition to our consulting business we maintain a CSR jobs and events portal. We’ve designed it in a way that means its full of jobs and events, a useful free one stop shop. But we haven’t designed it in a way where it makes money. So in 2011 we will need to reflect on where next for the portal, after 10 years of providing CSR jobs info to the emerging CSR movement and profession. In 2011 we will open a Geneva office again, based at the new Geneva Hub. We will remain a boutique consulting outfit, only seeking a few clients in the year, working where we can plant seeds that may have a lasting positive impact. We will likely continue to do pro bono work where we get excited about the change potential. We have been doing that by staying small and limiting both overheads and financial expectations. In such a company, what is key is the creative dedication of people who believe their work should be about more than money, status or fun. Therefore I’m grateful to my colleagues who see life that way. Thanks to Ian Doyle for his consistent focus and adaptability, to Janna Greve for her positivity, Hanniah Tariq for her insights, Emma Irwin for her professionalism, Nicky Black (now with De Beers) for her voluntary support, Anne Ellersiek for her phenomenal brain and Matthew Slater for his reliability and moral inspiration.

Each year for the past nine, we have published an annual review of CSR. Not any more – the developments with web2.0 mean that we will provide commentary on an ongoing basis with our RSS feed. In addition, our next book, Healing Capitalism, will review the last few years in CSR and RI.

I believe that this year we will see many more questions raised about economic fairness, about the ethics of the use of power, and we will see increasing cynicism about how business behaves, and a growing spirit of critique. Consequently, there will be more calls for corporate accountability, and a clearer understanding that a responsible business is one that seeks more systematic transparency and accountability from business as a whole. We will also see ISO26000 becoming referenced as the definition of CSR, for good or ill. The implications of Web2.0 for business-society relations will unfold further, with particular implications for fashion brands. We will begin to realise that these new communications tools mean that everything in commerce has an alternative. Even the currencies we use.

Thanks for your interest in our work, and I hope you have success in making waves with your own. You can follow me during 2011 on twitter @jembendell.

Jem Bendell, Director, Lifeworth Consulting.

Here is that keynote on sustainable wellness:

Click here to view the embedded video.

Our proposal responds to the growing efforts to review the developmental impacts of core business operations. The term ‘Inclusive business’ describes the belief that business can have a greater positive impact on development by adapting their core business to encourage development outcomes, rather than through corporate philanthropy, or new base of the pyramid initiatives that target the poor as consumers, or support for social enterprises. [1] ‘Inclusive Business’ is defined by the United Nations Development Programme (UNDP) as ‘business models that create value by providing products and services to or sourcing from the poor, including the earned income strategies of non-governmental organisations.’[2] The focus is less on small enterprises seeking to address social needs profitably, but large firms being able to adjust their core businesses to benefit more people as either consumer, employee, or supplier.

A report in April 2010 by the International Finance Corporation (IFC) entitled ‘Scaling Up Inclusive Business’ marked a watershed in the discussion of business contributions to development, as it uncovered some myths and mapped out a new agenda.[3] First, they found that most companies that  engage in more inclusive business practices do not do it for reputation, risk management or innovation promotion. Those traditional drivers of voluntary responsibility are not sufficient to make a real difference to investment strategy. Instead there has to be an obvious model for sales growth for companies to invest significantly in including more people in the sphere of their positive impact.

Second, they did not find any success from specialist base of the pyramid approaches, but a “whole pyramid approach.” Beth Jenkins and her co-authors explained that: “most of the commercially viable, scalable examples… take more of a “whole pyramid” approach in which the poor are segments within a much broader overall market, supplier base, or distribution network… Cemar, for example, was required by law to electrify the entire state of Maranhão in Brazil’s low-income northeast region. The company was permitted to charge higher-income, higher-usage customers higher tariffs – enabling it to cross-subsidize those with low requirements and abilities to pay, with the government providing additional subsidies.

Their third key finding is the essential role of governments in creating enabling conditions and even imperatives for inclusive business. One of the most successful examples in the report was from the Philippines, and the often highly charged issue of private provision of water services. The report highlighted how the Manila Water Company is effectively providing water for impoverished communities due to the company and the government planning to ensure the successful meeting of public need and private expectations. Through a series of partnerships between the company, municipal governments and local communities, low-income neighbourhoods not only have access to water but are themselves central to the efficiency and cost-savings components of Manila Water’s inclusive business model. The resulting benefit to the community is superior service and water quality while actively participating in keeping the costs of water low.[4] In many countries the private provision of water by large corporations has created criticism and even protest. Perhaps one of the most important means of ensuring that the costs have been kept down and thus maintained Manila Water’s licence to operate is that the government required the company to cross-subsidise, so that they charge wealthier consumers more in order to fund the infrastructure for poorer consumers. This suggests a key government role to encourage some forms of inclusive business, including through regulations that require inclusive practices in return for licences.5

A fourth finding was the general lack of good examples of inclusive business by large firms. “Large-scale success stories – reaching large numbers of poor people directly or via replication – are still the exception, not the rule,” wrote Beth Jenkins and her co-authors.6 Given the companies in their investment portfolio are receiving funds from a development-oriented institution one might assume some examples of inclusive business, yet only about 100 were found to have a potential inclusive business dimension, in addition to about 100 micro-finance initiatives. That is roughly 13% of the IFC investment portfolio.[7]

The fifth finding, and main purpose of their report, is the need for greater collaboration on enabling conditions for inclusive business, if they are to be mainstreamed beyond the current low level. For this purpose, more collective action is called for on issues such the dual evaluation of business activities, the development of in-depth market information on the needs, aspirations, capabilities, and limitations of low-income consumers and producers, as well as on awareness-raising, education, and training for low-income consumers, suppliers, distributors, and retailers. In a seminar on this topic co-hosted by IFC and Harvard University, participants described a need for “greater transparency [from potential donors to inclusive business projects] about what is possible and on what terms; faster decision-making and execution; and more judicious, strategic communication with external parties and the public at large.”[8]

In the Journal of Corporate Citizenship, we argue that donors will need to become clearer about what kinds of projects are worthy of support and what management systems need to be in place to promote success. Some donors have measurement systems, such as the IFC’s own “Development Outcome Tracking System”, however such systems do not yet include the social and environmental standards that are already agreed by the wider international community as important aspects of sustainable development. Other goals, such as the MDGs, and standards, such as the ILO conventions, were not designed for business directly, while the UNGC only provides generic principles that are not comprehensive (not including health, for instance). Attempts to make broad goals such as the MDGs relevant to companies by using them as the basis for measurement tools, as with the MDGscan.org, are useful for bringing attention to core business contributions to development, but they do not assess the full impact of business. For instance, the data on employment creation does not distinguish between a decent job and forced labour. Standards such as the ISO 26000 social responsibility standard, which was published in November 2010, will prove useful, but as it focuses mostly on reducing negative impacts of business practice, it will not be sufficient for guiding inclusive business and social enterprise, where the intention is to generate positive impacts in specific ways.

Therefore we argue in the Journal of Corporate Citizenship that it is time now for a more holistic and integrated approach to business contributions to development and their measurement – a form of “sustainable inclusive business”. We suggest a management system could be developed to improve large companies’ contributions to development. To help with that process, in the article we identify the important personal qualities of managers (Box 1) and the characteristics of business projects (Box 2) that we have identified enable beneficial engagements by large enterprises in low income communities. We think that these qualities and characteristics should be sought in any potential recipients of funds for sustainable inclusive business projects, to ensure that such projects do help their intended beneficiaries in an effective, efficient and sustainable way.

Box 1: Personal Qualities of Managers of Sustainable Inclusive Business

There are key personal qualities that are important for business executives in large corporations to move their organisation towards helping poverty reduction in a sustainable way:
1) Active: aspiring to be a conscious agent of sustainable development in ways that involve core business
2) Coherent: addressing both the positive and negative impacts on low income communities of current and planned business activities, leaving no issue ignored for long
3) Self-aware: focusing on your new USP – your ‘Unique Serving Points’ – by identifying the special capabilities you bring to a particular situation
4) Transformative: seeking enterprise opportunities that disrupt obstacles to social progress.
5) Creative: using methods and indicators that promote creative team-working to innovate new solutions
6) Inquiring: learning together with unusual colleagues, sharing your own approaches while appreciating low income communities and their organisations as co-innovators, while increasing your understanding of the complexity of development issues (including by applying the project characteristics ).

Box 2: Project Characteristics of Sustainable Inclusive Business Initiatives

A particular business project should have the following characteristics in order make a positive contribution to sustainable development. Projects that do not exhibit these characteristics may create some benefit, but risk causing new problems in the communities they affect, and therefore having unintended negative consequences for both sustainable development and the performance and reputation of the organisations involved:
1) Provides products, services or decent work to lower-income communities in ways that stimulate more sustainable production and consumption patterns as a whole
2) If out-competing goods and services produced by locally-owned operations, then offers superior eco-social qualities to existing options, and provides local employment
3) Supports a mixed-ownership economy
4) Provides new sources of capital to community members
5) Provides community members with new access to markets, on stable and transparent terms
6) Transfers appropriate technology and skills to community members
7) Generates a return on investment that is acceptable to the company to be part of a scalable business, without future reliance on cash or in-kind subsidy from government or voluntary sector partners
8 ) Supports good governance and enabling conditions in the local community and nationally, in accordance with relevant UN principles on human rights and development
9) Involves mechanisms for participatory monitoring, evaluation and learning that address each of the preceding characteristics, to inform future strategy and operations.

The references are available in the full article in the Journal of Corporate Citizenship, in the ‘World Review’ of Issue 39. To reference this source, use the following: Bendell, J, Doyle, I and T. Sarker (2010) World Review, Journal of Corporate Citizenship, Issue 39, Greenleaf Publishing, UK.