Editor's Choice, August 2017: Better Business Better World

'If progress is too slow, there may be no viable world to do business in'. That's a pretty strongly worded warning, particularly when it comes from CEOs and leaders of the world's most influential institutions. A sense of urgency, indeed crisis, underpins the analysis of the Business and Sustainable Development Commission, in their call for a deep-rooted overhaul of business operations and business behaviour.

I have read a great many reports about the need for business to contribute to social progress and environmental stability - or in modern parlance, to deliver the Global Goals (originally known as the Sustainable Development Goals) “Better Business Better World” stands out as one of the more urgent, relevant and action-oriented reads in this space.

The core argument of the report is clear if fairly unsurprising:

• Despite rising incomes and reductions in poverty over the last 30 years 'our current model of development is deeply flawed.' Carrying on with business as usual, will exacerbate, not address, the problems we face hitting planetary boundaries and leaving millions in poverty.
• Achieving the Global Goals will require a change in business operations, and relatedly in financial flows, how markets are governed, and which markets develop. i.e. The Global Goals need business action.
• Delivering the Global Goals will open a host of business opportunities, worth $12 trillion per year by 2030. i.e. Business can benefit from delivering the Global Goals.
• The most significant market opportunities are focused in four sectors and five business models, straddling north and south.
• There are a host of things that business leaders can and should do now.

It's important to know by whom and for whom: the Business and Sustainable Development Commission was set up at Davos in January 2016 and launched its report at Davos in January 2017. The high-level audience reflects the high-level authors:  CEOs of Unilever, Ericsson, Aviva, Mars Inc, JP Morgan and many more, alongside leaders of UN agencies, the ADB and international foundations.

I read it because of the authors. I enjoyed it for different reasons.

1. The sense of urgency that these leaders - quite frankly - convey. The context is pervasive: collapse in trust in business and institutions. This is of course as much about northern economies as southern. The need to rebuild a social license for business is the reason to act. This quote is worth reflecting on: 'uncertainty and the return to a much more nationalist politics in many countries have displaced the assumption of steady global integration. Many commentators have declared that globalisation has already peaked.'  If globalisation is waning, what is next?

2. The report gives estimates of the market size of each opportunity. The 60 fastest growing market opportunities opened up by achieving the Global Goals across the world in just four key economic systems could be worth up to US$12 trillion a year for the private sector by 2030. This is equivalent to around 10% of global GDP. The four systems are food and agriculture, energy, cities, and health and well-being.  I have no way of knowing the robustness of the $12 trillion estimate of market opportunity - I have my doubts, but in a sense, so what? The number is big.  The point is to flag to business the key areas of market growth, which are well summed up in the visual here:

3. A relatively hidden but very interesting part of the report maps five different business models that are already emerging, against the sectors of opportunity. The five are:

• The sharing economy (swapping, renting, lending, such as car-shares)
• Lean models (think low-cost cataract operations)
• Circular economy (recover and reuse materials in a 'cradle to cradle' model)
• Big data and machine learning (mobile information, machines connected to the internet)
• Social enterprise models (intentionally combining commercial with social or environmental objectives)

Most of these models are already developed in one or two areas, but not many more. They help business people think laterally about how to take proven models into whole new sectors.  Now that would be a truly interesting take on 'replication'.

4. This is definitely NOT just about what business leaders should do. It calls on them to work with policy makers and market shapers for fundamental changes in regulation and pricing. The report is unequivocal about the need for carbon pricing, but goes further to argue in general for social and environmental externalities to be priced. Every company needs to pay a living wage, and under-pricing of resources such as water need to be addressed. This will ensure a level playing field and further incentivise business action. Ultimately, they argue, this could mean fiscal systems being more progressive, putting less burden on labour income and more on pollution and under-priced resources.  I'm delighted to have these voices calling for this.

5. Similarly, they argue that financial markets need to change to drive capital into businesses that deliver Global Goals, instead of those that chase short term profits. Business leaders can strengthen the flow of capital into sustainable investments by pushing for three things: transparent, consistent league tables of sustainability performance linked to the Global Goals; wider and more efficient use of blended finance instruments to share risk and attract much more private finance into sustainable infrastructure; and alignment of regulatory reforms in the financial sector with long-term sustainable investment. Because the report is addressed to business leaders, the recommendations for government and investors are written more indirectly, but they are profound and worthy of much more consideration.  It would be good if the next equivalent WEF report or commission focused on this topic alone.

6. The analysis is very relevant to emerging economies, but is global in focus. It covers North and South, environmental and social concerns. This reflects the scope of the Global Goals, northern concern about citizen distrust, and the high-level audience.  Rather than distracting from needs for new business models in developing countries, I think it strengthens the case, positioning business models that work for low-income people in a broader system change.

The report is candid on the risks of inaction. It's less candid on the risks of taking these steps- not surprisingly given why it was written and for whom. What are the trade-offs with profit and margin?  Who will take the risks, and may get swallowed by competitors or take-overs before the envisioned newly functioning market system emerges?  How much failure will be tolerated?  It would be great if next steps dwelt on this.

I recall reading the Brundtland Commission report, over 3 decades ago: “Our Common Future” was a clarion call for a fundamental shift in behaviour. As a precursor to the 1992 Sustainable Development Summit (Rio Summit) I do believe it achieved something at the time - not that it was enough. Today, there are many more voices and sirens calling for change. That may make it hard for any single report to get cut through, or may mean this report is part of a rising wave. Either way, if you are interested in both the big picture narrative that is evolving and some of the detail (of which there is plenty, in different places in this 122-page report), this is worth a read.