Ladies and Gentleman,
I am pleased and honored to address this Conference on Corporate Social Responsibility (CSR) organized by the China BCSD, and I would like to thank our host, Mr. Wang Jiming, Executive President of the China BCSD, for this opportunity.
In what follows, I am going to provide a global perspective on what we today at the World Business Council for Sustainable Development (WBCSD) see as the main issues on the global business agenda for sustainable development. I hope this perspective will be useful in setting a broad context for the discussions on China’s specific sustainable development challenges, which will be the main focus of today’s conference.
WBCSD
Before turning to the key challenges for business on the sustainability agenda, let me first share with you some background on the organization that I am chairing. The WBCSD is a coalition of 175 international companies united by a shared commitment to sustainable development. Our members are drawn from 35 countries and more than 20 major industrial sectors and are represented in the council by their CEOs or equivalent. Sinopec is a member of the WBCSD and we are very fortunate to count Mr. Wang Jiming as a Council Member.
The WBCSD also benefits from a Regional Network of 50 national and regional Business Councils for Sustainable Development (BCSDs) and partner organizations representing many more local business leaders. We are particularly pleased to have welcomed the China BCSD in our network earlier this year, which was the result of joint efforts of the WBCSD, the China Enterprise Confederation (CEC), and leading national and foreign enterprises in the country. I am delighted to observe how the China BCSD is flourishing under your leadership, Mr. Wang, and I am pleased to witness the incorporation of additional members to the China BCSD today, which will further strengthen this organization and its ties with the WBCSD.
FromStockholm to Johannesburg
Turning to the topic of my presentation, let me start by highlighting that the history of sustainable development is roughly 30 years old. It started in 1972, with the UN Stockholm Summit on the Environment. Twenty years later, in 1992, at the Rio Earth Summit, the focus broadened to Environment and Development. And in Johannesburg in 2004, for the first time, a global summit, the World Summit on Sustainable Development, looked at all three pillars of sustainable development (economic, environmental and social) in an integrated way.
The journey from Stockholm to Johannesburg has been focused on norms and principles for sustainable development. Johannesburg marked the start of a new phase with an emphasis on implementation of sustainable development.
For business, in 30 years, the focus of the sustainable development agenda has shifted from awareness creation around sustainable development challenges to implementation, solutions and issues management.
A world under stress
Today, two years after the World Summit in Johannesburg, the world is under stress. Governments have not been able to progress on the Doha Round on world trade rules, nor have they reached consensus on a global framework to address climate change. They have also fallen behind the ambitions of the United Nations Millennium Development Goals set in 2000. UN Secretary General Kofi Annan and UK Prime Minister Tony Blair have called this a “crisis in implementation”.
From a bi-polar to a tri-partite world
In our new tri-partite world of governments, business and civil society, we are witnessing a shift in balance between the partners. The dominance of governments has diminished. Business is increasingly being recognized as a solution provider but trust in business has been eroded following the stream of corporate scandals. And civil society has demonstrated a limited capacity to join in the partnerships it was calling for in Johannesburg. So this is not a very “happy group of campers”.
Two sustainable development agendas
Looking ahead, I see two sets of issues that companies need to address.
First, the public policy agenda covering a number of societal themes, driven from outside of business. Solutions to these will define both the future sustainability of our society and the role of business.
The second type of issues are driven from within business and center around what we call the Business Case for Sustainable Development. We believe that sustainable practices can lead to a win-win for both companies and sustainable development.
Societal themes
Sustainable production and consumption
Since the Earth Summit in Rio in 1992, business has done much to improve its production efficiency, and we know how to go further. Sustainable consumption is a much more difficult issue for business. Changing consumption patterns is a long-term process. The tools for achieving this are also politically sensitive and emotional. Who is going to decide what you and I can consume?
Societal infrastructure and services
Governments find it increasingly difficult to deliver societal infrastructure and services like water, energy, healthcare, pensions, transportation, etc. to meet the demands of growing populations. More will be asked of business to support government actions via partnerships and privatization. But this raises many difficult political challenges – not the least the question: who pays and how much?
Energy and climate
Economic growth requires energy. But there are growing concerns about access to energy, especially for the poor, and for future energy security. Up to the middle of the century, the growing energy demands will largely be met with carbon-based fuels. This underpins the concerns for climate change. It seems that society will be faced with a carbon-constrained future, in which carbon emissions will carry a cost in some form.
The WBCSD presented a report in September, Facts and Trends to 2050: Energy and Climate Change. In this, we highlight the options for society to reduce GHG emissions to levels that will reduce the risk of global warming. The changes required in our energy systems are huge.
Let me also note that even if the Kyoto Protocol now looks likely to be ratified, we still lack an international framework that includes all the major economies and emitters of GHGs.
Development and poverty
Issues of poverty and development remain one of the biggest challenges to sustainable development. Official Development Assistance (ODA) alone will not solve the problem but business’ ability to support especially the LDCs (Least Developed Countries) is not clear. The WBCSD’s Sustainable Livelihoods project is trying to tackle these issues – and I am happy to see that there will be a special session on this important project at today’s meeting.
Ecosystems
For business, ecosystems such as forests, water, agriculture, air, and biodiversity provide essential raw materials for production and assimilation of wastes. Although we recognize the importance of protecting our ecosystems, we still have a limited knowledge of their resilience. As long as nature’s resources and services are free, there will be no incentive to change as we do not protect what we do not value.
Corporate Responsibility
More will be asked of business to contribute to well functioning societies, both socially and environmentally. However, business cannot and should not replace governments. A growing debate about the role and responsibilities of governments, business and civil society can be foreseen. We will also be asked to be more transparent and report on our performance.
Risk
A key aspect of sustainable development is the uncertainties around ecosystems, social and technological developments, and political actions which can significantly impact the business sector.
Business assets
A company’s ability to manage the societal issues on the public policy agenda will influence its valuation.
The market valuation of companies has changed during the last 25 years from being mainly based on physical assets like land, raw materials, buildings and machinery to being primarily made up of intangible assets like reputation, brand, the ability to work with stakeholders and adapt to changing societal expectations.
One estimates that up to 75% of the market capitalization of a typical company today is based on such intangible assets.
The Business Case for Sustainable Development
Let me now turn to the Business Case for Sustainable Development. There are a number of actions companies should take to address sustainable development because it makes perfect business sense – not because they are forced to by public policy and other outside pressures.
WBCSD members have defined the following elements of the Business Case for Sustainable Development.
1. Risk reduction
This connects to my earlier comments on risk.
2. Operational efficiency and effectiveness
Improved resource efficiency, what we call eco-efficiency, means less pollution and higher efficiency. Having no accidents requires efficient operations. And good relations with the local communities in which you are acting will facilitate operations and approval processes for new or extended activities.
3. Recruitment and retention of talent
Employees are increasingly looking at corporate reputation and values in determining their employer of choice.
4. Enhancement of value creation
Companies are increasingly trying to give products and services green and socially responsible characteristics.
There are also major growth opportunities in looking at earlier unserved markets in developing countries.
5. License to operate and innovate
Companies that are proactive in responding to pressing social and environmental concerns will find it easier to maintain their licence to operate and innovate.
6. Protecting the resource base of raw materials
Major industry sectors depend on the sustainability of the natural resource base for their existence and success.
7. Market access
Last but not least, and this might be particularly important for India: enterprises that are part of an international supply chain or directly export to major consumption markets are increasingly being requested to provide certification that they are managing their environmental and social issues in a responsible manner.
Looking ahead
Building on my previous observations, I would like to make four general observations.
First, realizing a sustainable society is a shared responsibility for governments, business and civil society. It requires actions on three levels:
The normal operations of companies are crucial for sustainable development. Companies provide economic growth and jobs; they pay taxes and contribute to resource efficiency via technology and innovation.
Businesses can do much to encourage eco-efficient practices, but they need an enabling framework from society if they are to move forward with any greater speed. It is the role of governments, in consultation with business, to create the conditions that allow business to contribute fully to sustainable development.
Financial markets are key in the pursuit of sustainable development because they hold the scorecard, allocate and price capital and provide risk coverage and price risks. If financial markets do not understand and reward sustainable behavior, progress will be slow.
Second, the borderline between business and the rest of society is shifting. More is expected of business as a contributor to societies. And the challenge for us in business is that we cannot succeed in a society that fails. But where is the proper limit of our responsibility? We neither can, nor should, replace governments in their role.
Third, I feel there is a growing convergence between the sustainable development challenges and the general business agenda. Business is thus in a strong position to positively contribute to a sustainable development and enhance its license to operate and innovate. But this requires continued leadership, transparency, a positive engagement with stakeholders and action. Simply put that we ‘walk the talk’.
Fourth, sustainable development requires a long-term view – it is an intergenerational issue. It is about handing over the planet to the next generations so that they may meet their needs.
To conclude
By some measurements (such as purchasing power parity), China is already the second biggest economy in the world. China is also the world’s third biggest trader, and holds the largest foreign-exchange reserves after Japan . In it’s quest for growth and prosperity it may become the world’s biggest economy within the next two decades. We should celebrate this economic miracle that has the potential to generate sustainable livelihoods for millions of people currently living in poverty. It presents huge opportunities for entrepreneurs, government leaders and private citizens.
But this phenomenal economic growth will put increased pressure on China’s natural ecosystems and the carrying capacity of the whole planet. There can be no solution to global sustainable development without solutions to China’s own sustainable development. It is a challenge that concerns us all. I would therefore like to commend the business leaders gathered under the umbrella of the China BCSD. I believe the council provides an important platform for governments, business and society leader to engage in constructive dialogue and action to put China on sustainable path.
Let me finish where I begun, extending once again my warmest congratulations to you Mr. Wang, and to the members of the China BCSD, and wishing us all a long and mutually beneficial cooperation.
ENDS
