There are a lot of wise people advocating pathways to sustainability. The Regeneration Roadmap is a project of Globescan and SustainAbility and aims to promote engagement and collaboration between NGOs promoting sustainability, and the private sector.
This video, from the Regeneration Roadmap website, features an impressive array of sustainability champions, including David Suzuki, Gro Harlem Brundtland and Rajendra Pachauri advocating for change.
Engagement processes are at the leading edge of sustainability. The Regeneration Roadmap is an initiative of Globescan and SustainAbility aiming to achieve sustainable development within the next generation. Their focus is on the private sector to drive a lot of change. This video features global thought leaders articulating the road to sustainability. As you watch, notice how pivotal engagement is a agency for change.
Mobilizing the Response from The Regeneration Roadmap on Vimeo.
Gro Harlem Brundtland, a past Norwegian Prime Minister and Director General of the World Health Organisation. She is currently a Special Envoy on Climate Change for the United Nations. She places engagement at the heart of change.
Personal engagement, personal commitment and building confidence with other people and other nations is the only way to move forward.
The video reinforces the need to generate positive discourse around sustainability, articulate a vision of a sustainable planet and create a culture to embed sustainability as a way of life.
For more videos by these gifted thinkers go to the Regeneration Roadmap website.
The renowned economist Jeffrey Sachs pinpointed the foundations of a prosperous economy in a recent article. He states: [1]
His post celebrated the life of the late Václav Havel, the Czech playright, who spoke out against the communist regime. His determination to speak out against the suppression of human rights by the communist government saw him imprisoned on multiple occasions. On the collapse of the communist regime, the new Federal Assembly unanimously voted him President of Czechoslovakia.
What is the connection with engagement? Among Václav Havel’s writings is the essay The Power of the Powerless where he decries those societies who force their citizens to “live within a lie”. He was a strong advocate for people having a voice. Moral leadership is about seeking the best interests of the community rather than pursuing a personal agenda. Being imprisoned for speaking out for others is strong evidence of moral leadership.
Corporations have the potential to be as oppressive as a corrupt state if they choose to pursue only their self-interest – and there is plenty of evidence of this (for example, the Enron story). Fortunately, there is a change of consciousness happening as corporates are wising up to the reality of a hot, flat and crowded world and the folly of a myopic short-term focus on profit. Whatever the motive, be it a crucible-forged awakening, altruism or enlightened self-interest, forward thinking corporates are manifesting moral leadership.
Sustainability is inextricably linked to concern for a broad range of stakeholders. To identify and honour stakeholder aspirations requires engagement and a willingness to hear their diverse voices. According to Jeffrey Sachs:
Without restoring an ethos of social responsibility, there can be no meaningful and sustained economic recovery. [2]
So thank you Václav Havel and thank you Jeffry Sachs for being two more voices pointing to a better way to work and live together on planet earth.
[1] from The Power of Living in Truth by Jeffry Sachs.
[2] from The Price of Civilization: Reawakening American Virtue and Prosperity by Jeffry Sachs
In 1983 Judy Wicks started the White Dog Café in Philadelphia. It has become an exemplar for a community-based enterprise.
Where I live, community enterprise is slowly but surely being eroded as an increasing number of national or international chain stores supplant local stores. While this typically provides benefits such as cheaper goods the longer-term impacts are not beneficial for the local community (more about this in a later blog).
The White Dog Café started off as a restaurant, and remains a restaurant, but it has become the centre of a local network of suppliers, customers, employees and community interests. In the early years of the restaurant, Judy became increasingly troubled that the meat on her menu came from industrial farms. She changed to free range pork and then other meat and chicken and free range eggs. If produce is available locally, and is preferably organic, the White Dog Café purchases it in preference to imported food.
Initially Judy regarded locally sourced production as a point of difference for her restaurant, but her thinking evolved to consider the greater good and she went about engaging other restaurateurs in the concept. Her engagement with local farmers and growers created momentum for the establishment of the Fair Food initiative. Farmers and growers benefit from having a larger market for their produce locally. This animal welfare aspect of the White Dog Café remains one of her strongest motivators.
A restaurant depends on a web of services to operate. As Judy sorted out the produce for her menu, she became aware of a series of expanding possibilities to make the restaurant more sustainable and support the local community. She sourced renewable electricity and created a solar-heated water supply. Organic waste is composted and other waste recycled where possible. Local products are used whenever possible – for example locally produced soap is purchased for hand washing. For those products not available locally, such as tea, sugar and coffee, Fair Trade sources are used.
The invisible had works when we live in the same community.[1]
Staff also benefit from the sustainability philosophy – Judy pays a “living wage”. The Restaurant also supports a number of local community service projects such as Crime Victim Services and many others.
The mission statement of the White Dog Café is “Serving our customers, serving each other, serving our community and serving the earth”. Business decisions are based on serving the greater good, growing consciousness and increasing happiness.
After 30 years in the restaurant business Judy decided to sell the restaurant to help her focus on the promotion of sustainability. She wanted to keep the mission of the White Dog Café alive, so she found a local purchaser and retained the rights to the name of the business. To perpetuate the sustainability agenda she set up a Social Contract that keeps the White Dog Café on the same trajectory. The purchaser is able to set up other branches as long as they have 51% local ownership. This video outlines Judy’s perspectives, the restaurant’s operations and the Social Contract.
Above all, Judy has show how one business can generate social good by building rich networks in its local community. Do you know of other examples?
image credit: Real People Eat Local
“Social capital… reflects the community skills that have co-evolved with individual skills. People working together generate webs of social capital”. So say Jessica Lipnack and Jeff Stamps in Virtual Teams. Social capital is built on rich social networks.
It is a delicate thing. Social networks are forged from trust and as anyone who has suffered from infidelity in a relationship can tell you, trust builds up over time and but is very easy to destroy. According to Stephen Covey, trust becomes established when individuals demonstrate character and competence. Where these intersect trust and credibility is established.
Stephen Covey’s model of trust
We can easily see the beneficial consequences of trust and the accumulation of social capital when we consider those societies where trust and social capital has been shattered. Many of us can only imagine what it would be like to live in community where there is frequent violence, abuses and threats. In circumstances such as these the dismantling of social capital is accelerated when the state is perpetuating abuses.
Social capital is relevant for all social units: families, cities, businesses and nations. According to Lipnack and Stamps:
People generate wealth in dense networks of horizontal relationships in two primary ways because they lower transaction costs [and] increase opportunities for cooperation.[1]
A simple example is the knowing a friend will meet you as agreed, although a week has elapsed since the meeting was scheduled. You can probably think of a friend like this – and, by contrast, those that you would always contact to confirm the meeting. The extra workload, even if it is only small as illustrated in this example, reveals an added “transaction cost” to the relationship. Stephen Covey Junior provides another example in The Speed of Trust. A New York street vendor selling hot dogs found long queues dissuaded potential customers. He decided to enable customers to make their own change. This freed him up from dealing with cash and enabled him to provide much quicker service. His customers appreciated being trusted.
Now take these small gains and multiply the effect in large organisations (such as businesses) and their multiple stakeholders. The difference between a high trust and low-trust environments is clearly substantial.
Better World Books exemplify the development of social capital. They are a social business, motivated to do good. The profits flow, and they disburse much of them by supporting literacy initiatives around the world. According to Kevin Jones Better World Books “is now approaching $60 million in revenues with healthy profits and a compound annual growth rate of 35 percent. It’s donated more than $11 million to nonprofit groups helping to give the gift of literacy.[2]
Better World Books stock comes from donations from individuals, educational institutions and libraries. They are sold for a reasonable price to fund the company’s philanthropy. The Good Capital Social Enterprise Expansion Fund (SEEF) invested in Better World Books to aid it through its establishment phase. So we have a company who have a philanthropic supply chain, have staff who are no doubt inspired by the company’s mission, social enterprise investors, customers who buy into the mission and an increasing cohort of beneficiaries of literacy programmes. This is a potent recipe to build social capital that extends well beyond the boundaries of the company.
As Professor Muhammad Yunus says, every problem can be solved with a social business. The challenge for more conventional companies is how to use this dynamic and learn from its masterclass of engagement and social capital accumulation.
Here is a YouTube video of Better World Books. Note that the figures presented are four years out of date (reinforcing their incredible growth).
[1] Jeffrey Lipnack and Jessica Stamps: Virtual Teams: People Working Across Boundaries With Technology (2008)
http://www.netage.com/pub/books/VirtualTeams2.html
[2] Kevin Jones, Swimming in a Sea of Love: Why a Philanthropic Supply Chain is Key for Scalable Growth. in CSWire
You have probably heard about or read Blue Ocean Strategy by W. Chan Kim and Renée Mauborgne. It has been translated into 42 languages and sold over 2 million copies – so it fair to say it has made quite a splash. The authors came in a second spot on the Thinkers 50 for 2011. Their ocean metaphor is compelling – most businesses form strategy to compete in the red ocean. There is intense competition and there’s blood in the water. The smart ones migrate to new market spaces – the blue ocean.
It is exciting to look at this book through the lens of sustainability. A central concept is value innovation. A part of the process is driving down costs and increasing customer benefits, creating a new market space. The sustainability connection is the social good created.
The four billion people who make less than $2.00 a day are excluded from the market place. By driving down costs the poor can participate a little more in the market place and, more importantly, raise standards of living for their families.
There are some great examples coming out of the developing world – examples of innovation that we can learn from. Grameen Shakti, one of the family of Grameen companies, provides renewable power technologies to the rural poor in Bangladesh. To enable the poor to purchase biogas digesters or solar panels has required a suite of innovations creating an exemplary example of a blue ocean strategy. The panels are assembled and installed by women given appropriate technical training, also creating employment opportunities. The solar panels provide light at night, and improved fuel-efficient cooking stoves create a healthier home environment. Children are able to study in the evenings and the healthier air eliminates some health issues.
This image of a woman in a sari installing a solar panel on a Bangladeshi roof represents sea-change in the lives of rural Bangladeshi women. Opportunities for technical training and benefits generated by the new technologies transform lives. See more about Grameen Shakti in this YouTube video.
A “first world” example is the innovations created by Better Place through their radical business model for electric vehicles (EVs). Shai Aggasi has developed the concept of the “battery swap” enabling EV drivers to call into switching stations and quickly swap a battery. A core innovation is separating the cost of the battery from the cost of the car. He anticipates that economies of scale will reduce the cost of travel down to 2 cents per mile.
Shai Aggasi has integrated the value innovation concept into his business model. He recognises that mass adoption of new technologies depends on creating products and services that are cheaper than existing options. Your can learn more about his thinking at this TED talk.
This is the crux of the matter. Those introducing innovations into red ocean markets are either increasing buyer value or reducing price. Blue ocean innovators such as Muhammad Yunus and Shai Aggasi are doing both.
Unfortunately the companies that are selling EVs through conventional business models are relying on the red ocean strategy of increasing buyer value, but at significantly higher prices compared to comparable vehicle. I realise that they will want to recoup their investments, and that batteries are expensive. On the other hand electric motors and transmissions are simpler than internal combustion equivalents.
To reap the sustainability harvest, perhaps we will have to wait for developing world entrepreneurs such as Rajan Tata to deliver a blue ocean EV.
Last week the NASA astronaut Ron Garan, and the great Muhammad Yunus addressed the Global Social Business Summit. They conveyed a similar message, but from totally different perspectives. Ron Garan is one of those elite who have seen the planet from the outside, and as with several of his peers, the experience had a transformational impact. They see things from a new perspective – the “orbital perspective”. Svetlana Savitskaya, the first woman to walk in space expressed it this way:
When in orbit, one thinks of the whole of the earth rather than one’s country, as one’s home.
At the conclusion of his talk, Ron Garan presented a spectacular video of the return to earth of his spacecraft, Soyez TMA-21 in September this year. Here is a short segment from YouTube. (The music is Peter Gabriel’s Down to Earth).
Soyez TMA-21 re-entry
Muhummad Yunus connected back to Ron’s talk beautifully stating how it is an “unfortunate thing that we can’t keep this home as a home for a happy family”. He then spoke about the worm’s eye perspective. When he returned to Bangladesh from study in the United States, his country was experiencing warfare and famine. He found his economic theories hollow and impotent in the face of human tragedy. When he went to the neighbouring village he learned about life from the ground level – the worm’s eye view. Here he is explaining the concept.
The bigger you grow – the more distant you get away from the ground level.
Muhammad Yunus’s strength is his ability to operate from both perspectives.
Following Ron Garan’s space experiences he has dedicated his efforts to improving life back here on earth. He is a member of Engineers Without Borders, the founder of both the Manna Energy Foundation and Fragile Oasis.
Although Ron Garan adopted the posture of a student before the master (Muhammad Yunus), both men epitomise the quality of leadership required for our “fragile oasis”.
On reading Harvard Business Review’s September 2011 article, The Higher Ambition Leader, I am struck with the parallels to the concepts championed by Muhammad Yunus and Ron Garan. The article extols the leadership by CEOs of companies such as Standard Chartered, an international bank. The bank’s vision is to be “the world’s best international bank” by “combining global reach with deep local knowledge to become the ‘right partner’ for its customers”.
The article is centred on studies of three companies whose CEOs manifest higher ambition:
to create long-term economic value, generate wider benefits for society, and build robust social capital within their organizations all at once.
These lofty ideals are achieved through creating powerful strategic visions, world class levels of engagement and a constant leadership focus on achieving the strategy.
The examples of Ron Garan and Muhammad Yunus, alongside the three companies featured in the HBR article illustrate the importance of engagement. Campbell Soup’s CEO “relentlessly drove progress on two measures: total shareholder returns and the level of employee engagement”. Employee engagement levels at Campbell Soup exceeded Gallup’s benchmark of 10:1 for world-class engagement. By 2010 the company achieved “a ratio of 17 engaged employees for every actively disengaged one”. Is it a coincidence that, for the six years up to 2010 Campbell Soup achieved a cumulative total shareholder return of 64% (S&P packaged food index return is 38% and the S&P 500 return is 13%)? I don’t think so.
The leadership described here is becoming the default standard of leadership. We need leaders with both the worm’s eye view and the orbital perspective – those who can focus on the needs of their communities and companies, while also committing to sustaining our fragile oasis and its communities.
With the new year looming, smart companies are considering their development options for the coming year. The smartest will be looking to further develop their engagement capacity. In an earlier post, we looked at the direct benefits of engagement. Here is a sample of some of the indirect benefits of engagement for each of the main stakeholder groups.
I emphasise that this is just a sample of the increasing evidence of the efficacy of stakeholder engagement. These indirect benefits are those that aren’t immediately visible in the bottom line, but over time provide tangible benefits for the organisation and its stakeholders.
The seismic financial shocks that rocked the world in the latter years of the first decade of this century have been devastating for financiers. And it looks like they will continue for some time. According to the Daily Mail, in a week in August 2011, three trillion dollars was wiped off the value of global sharemarkets.
While engagement itself, will not remedy the volatility of investments, it has huge potential to soften future impacts – if you factor in the ethos underpinning engagement. For example, the U.S., banks that gorged on cheap finance, distributed it with insufficient due diligence and then on-sold them to other banks. Banks with an engagement ethos would balance their profit motive with the interests of all stakeholders. Our recent experience demonstrates how a singular focus on profit creates a series of compounding negative consequences.
New McMansions are demolished in Victorville, CA earlier this year to free the city from liability resulting from possible vandalism, crime and fire danger. (LA Times photo)from Sprawled Out.
Rudy Karsen and Kevin Kruse’s book We, reveals strong links between effective employee engagement and benefits to employee health and family life. They cite a study from Iowa that found that job stresses on one partner in a relationship creates a similar level of stress for their spouse. Similar effects were found for children. The British medical journal found that dissatisfied workers were 2.4 times more likely to die from a cardiac event.
The most obvious benefit from customer engagement is that engaged front line staff generate better ambiance and customer experience. And brand loyalty is built through engagement. According to Tom Peters, women don’t just buy brands, they join them. If a company is able to facilitate connections between female consumers it also connects them to the brand. Tom claims that women tend to be more relational in their purchasing, and he stresses that the purchasing power of women continues to climb.
Over the last few decades, the attention of consumers and NGOs has shone light into the dark places of the global supply chain, often revealing shocking abuses. Engagement has enabled consumers to learn more about the conditions people suffer when growing, harvesting or extracting resources and processing them for wealthier markets. Initiatives such as Fair Trade and Sustainability Standards have generated huge benefits for disadvantaged communities. Participating companies benefit from enhanced reputation. Technology such as the Internet and satellites makes it difficult to hide. Satellite images revealed the true extent of the gulf oil spill, debunking the claims of those who sought to minimise it.
All of the above impacts on the community.
Pepsico have recently partnered with USAID, the United Nations Food Programme and 10,000 Ethiopian farmers to grow chickpeas. They will be used for food supplements for the starving, for the local Ethiopian market and for Pepsico’s humus. Multiple community benefits will accrue. For example, the health of Pepsico’s range of brands will be improved with the greater use of chickpeas. This aligns with another initiative from the company to reduce levels of saturated fat, sugar and sodium in their food. There are anticipated flow on effects to the health of consumers.
I welcome any comments about indirect benefits of engagement that you have encountered.
Pepsico are engaging with partners and the Ethiopian Government in an initiative to improve chickpea production. Chickpeas are an ideal crop – they grow well in Ethiopia, the have great nutritional values, including high protein and, being a legume, help build soil fertility.
Chickpeas – image credit and history of human use
The plight of the poor in Ethiopa rarely comes to our attention – it has to compete with our fixation on the economy and other more pressing news. Ethiopia is currently experiencing another drought and famine. And Ethopian resources are further stretched as refugees continue to flood in from its drought and war afflicted neighbour, Somalia,
Pepsico, in partnership with USAID, and the UN World Food Programme, will work with 10,000 farmers in Ethiopia to help them reap a twofold increase in sustainable chickpea production using irrigation and advanced agricultural practices. Other partners include the Stellenbosch University in South Africa. The increased volume of chickpeas will have three markets:
This is a great example of the good that companies such as Pepsico can generate as they build their own internal awareness of the plight of the world and the interconnectedness of the systems that sustain us. The cynical might deny the element of altruism, that I believe, is undeniably manifest in Pepsico’s thinking. (This earlier post discusses altruism as a sustainability driver).
“With the ingenuity, power and reach of the private sector, we can make great strides in ending the malnutrition and hunger that is threatening the lives of millions,” said Josette Sheeran, Executive Director of WFP. “The world knows how to prevent malnutrition. The hunger we are witnessing today in the Horn of Africa is preventable with local solutions that support small farmers in being part of the solution. Enterprise EthioPEA will change the lives of tens of thousands of children and will chart the course for future partnerships to help stamp out hunger around the globe.” (from the Pepsico website)
Among the evidence of Pepsico’s intent is the partners it chooses to work with, and the people it employs to champion such projects. Here is a video featuring Derek Yach, the current the Senior Vice President, Global Health and Agricultural Policy, PepsiCo Inc. He was previously the Professor of Global Health at Yale School of Public Health, and Executive Director of the Noncommunicable Diseases and Mental Health cluster at the World Health Organization (WHO). In the video he elaborates on the project.
Pepsico are also aware of the health risks that many of their products pose back home. Their 2010 sustainability report includes goals to reduce the quantities of saturated fat, sugar and sodium in their products.
from the Pepsico Sustainability Report
Derek Yachs believes that the future of Africa depends initially on more effective and sustainable agriculture. This quality of thinking and effective engagement with partners will see corporates such as Pepsico transform the global economy and society.
Effective stakeholder engagement contributes both directly and indirectly to the bottom line. This post provides a sample of some proven benefits of stakeholder engagement for the major stakeholder groups. What is exciting, is that the generic communication skills at the heart of engagement are effective in diverse stakeholder settings. Surely engagement capability has to be a top priority for organisational development.
Some of the examples here have been in other posts – they are assembled here to demonstrate the multiple benefits of stakeholder engagement.
Companies with better CSR performance “face significantly lower capital constraints”. Beiting Cheng, Ioannis Ioannou and George Serafin’s research, Corporate Social Responsibility and Access to Finance, confirms their hypothesis that:
…better access to finance can be attributed to reduced agency costs, due to enhanced stakeholder engagement through CSR and reduced informational asymmetries, due to increased transparency through non-financial reporting.
An impressive array of research and anecdotal reporting evidences the vital importance of effective employee engagement. Here are a couple of examples:
By engaging employers, companies are engaging their engagers.
Gallup also provide impressive figures for those companies that engage effectively with customers.
Our studies reveal that customers who are fully engaged represent an average 23% premium in terms of share of wallet, profitability, revenue, and relationship growth than the average customer. Actively disengaged customers represent a 13% discount in those same measures.
This video from Walmart reveals efficiencies generated by the partnership between the company and Peterbilt, who supply trucks. The partnership is helping Walmart to achieve its target of a 100% increase in transport efficiency by 2015 from a 2005 baseline.
While I can’t support this anecdotal evidence with figures, the director of a local company attributes an effective relationship with suppliers with the survival of his company. When the company was experiencing difficulties, several suppliers extended credit to help the company through.
Witold Henisz led a major Wharton School research project delivering evidence of the financial benefits of effective stakeholder engagement in gold mines in Spinning Gold: The Financial Returns to External Stakeholder Engagement. The research team studied the impact of stakeholder engagement on the financial performance of gold mines and gold mining companies. They created an index based on 50,000 stakeholder events from the activity of 26 gold mines.
By incorporating this index in a market capitalization analysis, we reduce the discount placed by financial markets on the net present value of the gold controlled by these firms from 72 to between 33 and 12 percent.
Increased productivity of the effective engagers where able to start mining earlier than poor engagers. You can read more about this here.
This is just a sample of the increasing evidence of the efficacy of stakeholder engagement. Please add any others as a comment.
