“We all believe that for companies to succeed into the future they must play a greater role in contributing to solving the problems that society faces, including environmental degradation, poverty and the abuse of human rights”.

So begins a new report - Tomorrow’s Global Company - produced by a team of senior figures from global businesses – including Dr. Reddy’s - and non-governmental organisations (NGOs), brought together by the Tomorrow’s Company think-tank.

The project brought together people from companies and organisations based in Europe, Asia and North America: ABB, Alcan, Anglo American, Amnesty International Business Group, BP, Dr. Reddy’s, Ford, the International Institute for Sustainable Development, Infosys, KPMG, Leaders’ Quest, McKinsey, Standard Chartered, SUEZ, and SustainAbility.

The team has spent the past year examining the role global companies should play in what it describes as “a period of unprecedented change – characterised by a rising population, rapid economic growth, the spread of globalisation, pressure on the environment and continuing social, political and cultural divisions.”

The team’s report argues that global companies have a unique role to play in confronting the challenges of a changing world. It says: “They can use their global presence, power and expertise to deliver practical solutions such as developing low-carbon power, ensuring decent working conditions and creating products specifically designed for low-income consumers.”

But the team said that to fulfil their potential to deliver such solutions, companies need to ‘expand the space’ in which they operate in three ways:

• Redefining success - defining and measuring success in a way that integrates social, environmental, human and financial factors;
  
  
  
• Embedding values - defining, living by, and being judged by strong positive values; and
  
  
  
• Creating frameworks - supporting sound national regulatory frameworks and international agreements, working with governments, NGOs and others to create them.
  

G V Prasad, CEO of Dr. Reddy’s who was a member of the team, said: “This inquiry was fascinating because it brought together people from very different backgrounds – some from large global companies, others who have been among their critics. What was striking was the consensus we reached on these three factors which everyone strongly believed to be critical in enabling companies not only to create value for their shareholders but also make a real difference in tackling the world’s big problems.”

In discussing ‘redefining success’, the team looked to the example of Henry Ford, who saw the success of his company in terms of the progress it brought to society – offering access to affordable cars and providing well-paid employment at good wages. Following these objectives also delivered great financial success. Similarly today, the team said, success needed to be redefined in terms of long-term benefits that companies can provide for society and the environment through their products and services. The report says companies should seek to win support from investors and others for such an approach, challenging the view that investors are only interested in short term gains. It points out that growing numbers of financial market players are studying long term social and environmental impacts, one example being the ‘Principles for responsible investment’ initiative which urges companies to disclose details of performance in environmental, social and governance (ESG) issues. It has support from over 180 leading institutions representing over $8 trillion in assets under management.

The Tomorrow’s Global Company team also say that companies’ values are critical in determining their influence in society. “If they fail to set high standards, others outside the company will find it easier to tolerate corruption, fraud and human rights violations. However, if they do act as role models, they will add value to the health of the societies in which they operate”. It adds that values are good for business because they build loyal teams, solid reputations and trusting relationships. It says that companies should use their values to guide their decisions when faced with difficult choices, such as how to respond when governments of countries where they are accused of human rights abuses.

As well as redefining success and embedding values, the team says that companies should play a part in creating stronger frameworks of law and regulation, rather than resisting them as many have in the past. The report says that the market has proved a powerful force for economic growth and innovation, but that major problems remain unresolved - such as climate change and areas of persistent poverty. It argues that better frameworks are needed to direct the power of the market to resolve such issues. For example, the report suggests that companies should support policies which limit greenhouse gas emissions and therefore encourage energy efficiency and clean technology products. The team says that companies should press governments to create such frameworks and work with NGOs and others to create voluntary agreements until statutory ones are introduced. Examples of such voluntary self-regulation include the Kimberley Process that seeks to prevent the sale of ‘conflict diamonds’ and the Equator Principles that make funding for major projects dependent of high standards of social and environmental responsibility.

The inquiry included 55 interviews and 16 consultations in Australia, China, Europe, India, and South Africa. The results of this work were then shared with the Inquiry team, which started meeting in 2006 under the co-chairmanship of John Manzoni, Chief Executive for Refining & Marketing at BP (and recently appointed President and CEO of Talisman) and Nandan Nilekani, CEO and Managing Director of Bangalore-based Infosys Technologies. The final report was developed as a result of discussions over a series of meetings.

The Tomorrow’s Company organisation itself originated in an inquiry that reported in 1995, advocating “a future for business which makes equal sense to staff, shareholders and society.” It’s Founder Director Mark Goyder said: “Over 10 years ago, our major inquiry on Tomorrow's Company argued for the inclusive approach, and helped to shape discussions on the role of business in society. Now, Tomorrow’s Global Company sets out how global companies’ can ‘expand the space’ in which they operate. This thinking will be developed through the dialogues that we have now started about the report and we trust they will have an impact in shaping the future agenda for business leaders.”

Visit: www.tomorrowscompany.com