Brunswick SOCIAL VALUE Review The Role of Business in Society No. 1 2020 BRUNSWICK

SOCIAL VALUE REVIEW

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NO.1 ISSUE FOCUS

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2020 CLIMATE GEOPOLITICS Doug McMillon Walmart CEO Dame Ellen MacArthur Circular Economy Pioneer Alan Murray on Fortune’s Companies that Change the World

PARIS: 180 Steps in a Luxury Palm Shoe Oil Traceability • NEW YORK: • ESG The ConcordiaRegulation Super • Gender Summit Pay •Gap BEIJING: Hot Art Market Brunswick is a strategic advisory firm focused on critical issues. Our purpose is to help the great value-creating organizations of the world play a successful role in society.

We advise on critical issues at the center of business, politics and society, and help our clients— the leaders of large, complex organizations—understand and navigate these interconnected worlds.

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editors in chief Lucy Parker & Jon Miller contributing editor Kevin Helliker managing editor Carlton Wilkinson creative director Frank Tagariello senior writer, deputy editor Edward Stephens project manager Caitlin Koons editorial advisor Vanessa Quarrie The Brunswick Review is printed on Revive print production MerchantCantos 100% recycled, made using post-consumer printed by CPI Colour waste fibers and manufactured without the cover photograph Jason Schmidt/Trunk Archive use of any secondary bleaching. feedback [email protected] Copyright © Brunswick Group LLP 2020 CONTENTS BSVR

ISSUE FOCUS: CORPORATE STAKEHOLDERS 31 6 CLIMATE GEOPOLITICS EMPLOYEES 7 THE DATA Numbers and charts TAKING A STANCE 31 showing current and future effects of Research says employees want to hear climate change on water supply, ice their leaders speak up on social issues. mass, food insufficiencies, surface SOCIAL ADVOCATES temperatures and more. FEED THE WORLD 34 10 GEOPOLITICAL IMPACT Region by The Head of the World Food Programme global region, we look at grave says it relies heavily on private-sector consequences expected in the years expertise, services and funding. ahead—if not already arrived. REGULATORS EU SETS THE PACE 37 12 BRUNSWICK GEOPOLITICAL More stringent EU climate regulations VIEWS: will become the world’s gold standard. 13 Shifting Power Balance in a Low-Carbon World Countries that lead the quest for BUSINESS ACTION 39 renewable energy will enjoy a political edge, says Pascal Lamy, SIME DARBY 40 former World Trade Organization One of the world’s largest palm oil Director-General. producers is stepping up to raise the bar on supply-chain traceability. 15 Inevitable Policy Response P olitical progress on climate change AFRICELL 44 is hard. But Anthony Gardner, former How a telecommunications firm helped US Ambassador to the EU, says stem an Ebola outbreak in Sierra Leone. science and public opinion will BRAMBLES 49 demand it. The company is helping big businesses 16 Policy Portfolio Model meet their sustainability ambitions. Robert B. Zoellick, former head of US TAKEDA 52 climate policy negotiations, sees enduring value in the Rio Climate How the pharmaceutical company leapt Change Framework Treaty of 1992. up the Access to Medicine Index. 17 Trade Can Catalyze Climate Action Those sounding climate-change SYSTEMS THINKING 56 alarms often bash globalization. But it can be part of the solution, says Kate CIRCULAR ECONOMY Fall, former Deputy Chief of Staff to ELLEN MacARTHUR FOUNDATION UK Prime Minister David Cameron. From world record-beating sailor to 18 The Climate Leaders of the Future world-leading circular-economy pioneer. Lord Charles Powell, former Private Secretary and Advisor to two UK SOCIAL BUSINESS AGENDA 64 prime ministers, sees a need for climate leaders like Margaret PURPOSE Thatcher. PITFALLS OF PURPOSE 64 19 INVESTORS & CLIMATE CHANGE Stated commitments to social value are all the rage. But where’s the action? There’s a sense that 2019 marks an inflection point for the investment B CORP community on climate change. ALT-CAPITALISM 68 Some for-profit companies are certifying 24 THE CORPORATE CLIMATE their commitment to social value. During the “decisive decade,” mounting financial pressure will turn corporate 15 leaders into climate leaders. PLATFORMS 72 RANKINGS 28 LEADER PROFILE ALAN MURRAY 72 Fortune’s CEO says its Change the DOUG McMILLON World list documents a real movement. As CEO of Walmart, he has delivered 28 benefits to shareholders and other BRIEFING 77 stakeholders. Now, he is bringing that sense of purpose to his new role as GENDER PAY GAP Chairman of the US Business Is regulation the solution to this Roundtable. 56 persistent problem? brunswick social value review - no. 1 - 2020 3 most challenging issues, helping to shape their In particular, as the need to mobilize in response world is asking: In the face of these issues that social strategy in this new context. • Many busi- to the climate crisis becomes more evident all the need to be tackled, is business part of the problem ness leaders today feel like they’re in the firing time, we explore how some businesses are acting or can it be part of the solution? Is your company FOREWORD line—caricatured as part of a greedy elite, making with a fresh sense of urgency. • While these topics taking out more value from society than it adds WELCOME TO THE FIRST EDITION OF THE their profits at the expense of wider society. Every are now showing up on the radar screen, a con- in? At Brunswick, we believe that the world needs Brunswick Social Value Review. It is born of our CEO we work with is concerned about low levels fusion of terms jostle for attention, often making business, now more than ever. If we want a clean belief that to be a leading company in today’s of trust in business. And at a time when the under- it hard to determine where to focus. “CSR” was a energy revolution, if we want to feed a growing world you need to deliver financial value along- lying model of capitalism is being challenged, revolution in thinking when Nike published the population, if we want effective bio-substitutes for side social value. Every business leader knows the they find themselves at the center of a live debate first corporate responsibility report in the 1990s. plastic, if we want new affordable medicines, we ultimate imperative is financial value; without it around the purpose of business. • These days they “Sustainability” grew up with concerns about need the engine of business. We need the innova- there is no business. But companies are increas- are also expected to make it clear where they stand the damaging environmental impact of business. tion, the organizing power, the know-how and the ingly asked to be explicit about how they create on a daunting list of societal issues—inequal- “Citizenship” aims to recognize how companies scale that business can bring. • That’s why we have social value. • As societal issues have risen up the ity, climate change, diversity, access to healthcare, fit within the broader social contract. And today launched the Brunswick Social Value Review, to boardroom agenda, we at Brunswick have built privacy and many more. Yet, through this clamor, “ESG” is on the rise in all parts of the world as show what it looks like close-up when businesses a specialist Business & Society capability to help you can discern a new sense of confidence in some investors begin to call for transparency and met- set out to become part of the solution; to explore companies navigate this complex landscape and to companies as they embrace this new expectation: rics that demonstrate that the companies they how companies can create social value alongside engage with this vocal stakeholder universe. Over They are turning their attention outward to take invest in have a grip on the risks arising from soci- financial value, hand-in-hand. The Review will the last nine years, our global Business & Society on the issues that society is bringing to their door, etal factors. Each term points to a different aspect aim to cast a rigorous and analytical eye on the team has worked with some of the world’s largest and finding new ways to apply their scale, resources of the conversation or evolution in the topic. But developments in this space: it will profile the pio- companies and biggest brands, in the most con- and expertise to make a positive impact. We report they share a common wellspring: a question about neers, dig into the difficult issues, and show what tested and highly regulated industries and on the on some of those companies in this publication. the role that big business plays in the world. • The leadership looks like in today’s business world. u BY LUCY PARKER & JON MILLER Partners leading Brunswick’s global Social Value offering

The world is asking: Is business part of the problem or can it be part of the solution? At Brunswick, we believe that the world needs business, now more than ever.

4 Or what happens when repeated powerful Brunswick’s JON MILLER looks at the ISSUE FOCUS storms and sea-level rises combine to cause climate science and potential impacts. devastation and make homes uninsurable on the US East Coast? THE CLIMATE GEOPOLITICS And what new opportunities emerge when the balance of power globally is no longer determined by who happens to be sitting on the most oil, coal or gas, but by how efficiently countries can generate, store and distribute renewable energy? What happens to global trade when the major

PG. 7 CLIMATE SCIENCE PG. 12 GEOPOLITICAL PG. 19 INVESTORS & CLIMATE driver of new market growth is demand for BRIEFING Key data on climate, PERSPECTIVES Views from CHANGE A review of changing physical impacts and the Brunswick’s geopolitical investor attitudes—with inter- low-carbon products and services? energy transition. advisors, including Robert B. views and fresh research. What we are looking at here is re-drawing PG. 10 GEOPOLITICAL IMPACTS Zoellick, Pascal Lamy, Lord PG. 24 THE CORPORATE Near-future implications for Charles Powell and Anthony CLIMATE What companies are the political map—with significant strategic key regions, looking at poten- Gardner. doing on climate and what tial winners and losers. leadership looks like. implications for businesses: Climate changeDAT CARBON EMISSIONS & SURFACE TEMPERATURESA

can be regarded as a “critical issue multi- Both continue to climb—and show no signs of abating. plier” that cuts across business functions, Total Carbon Emissions Global mean temperature and across sectors. Already, businesses are Per Year dierence in celsius (ºC)* counting the cost of climate-related sup- 10,000 1.2 ply chain disruptions, and anticipating a 1.0 8,000 tougher regulatory landscape on carbon. 0.8

The Brunswick Social Value Review will 6,000 0.6

begin each edition with an in-depth focus 0.4 4,000 on a global issue. We will explore different 0.2 perspectives, asking what it means for busi- 2,000 0 Temperature dierence in ºC dierence Temperature

ness and what business leadership looks like. Millions of metric tons of carbon 0 -0.2 We begin with Climate Geopolitics. 1850 1875 1900 1925 1950 1975 2000 2025 * NOAA Global Temp CLIMATE CHANGE IS NOT LIKE OTHER ISSUES. leading to more internal displacement and migration,” The climate crisis is complex and inter- The UN Security Council has recognized it as a “threat he said. “It is increasingly regarded as a national secu- sects with political, social, economic and multiplier.” In January 2019, the UN World Meteoro- rity threat.” • In November 2019, Brunswick hosted a demographic factors. As Rosemary DiCarlo, FOOD INSECURITY logical Organization (WMO) was invited to brief the briefing at Chatham House in London to explore the the UN’s political affairs chief, told the The UN’s Food and Agricultural Organization warns: Security Council on climate risks. “Climate change has climate crisis through a geopolitical lens: What happens meeting of the UN Security Council in “For decades, the number of hungry people had been declining—this isn’t true anymore.” a multitude of security impacts,” Professor Pavel Kabat, when the Russian tundras melt and Russia becomes the 2018: “The risks associated with climate- Chief Scientist at the WMO, told the meeting: “Rolling most fertile country on the planet, in a food-stressed related disasters do not represent a scenario CURRENT SITUATION: 26.4% of the world’s population faces moderate or severe food insecurity—about 2 billion people. back the gains in nutrition and access to food; height- world? What happens when the disappearance of the of some distant future. They are already a ening the risk of wildfires and exacerbating air quality Himalayan glaciers and collapse of the river systems reality for millions of people around the FUTURE PREDICTION: Population rising to 9 billion people food CHARTS:PETER HOEY CHARTS:PETER challenges; increasing the potential for water conflict; destabilizes the region, particularly India and Pakistan? MELFORD MICHAEL PHOTOGRAPH: globe—and they are not going away.” production must increase by 70%

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WATER INSECURITY F S D CLIMATE-RELATED DISASTERS A climate crisis disaster happens, on A third of the world’s biggest Extreme climate-related disasters average, every week, says the UN. groundwater systems are have doubled since 1990. already in distress. One estimate places extreme weather the cumulative price drove almost 29 mil- They might be the most economies could be dev- tag of those frequent lion people to need easily imaginable con- astating, and could inspire disasters at $520 emergency assistance sequences of a warmer mass migration or armed billion annually. The or humanitarian aid. planet: drier land and conflict. Such projections steep economic costs Climate scientists less water. According are unsettling, yet today’s are mirrored by severe predict that, as the to UN Water, by 2030 situation is more dire humanitarian ones. planet continues as many as 700 mil- than many realize. The Centre for to warm, extreme lion people worldwide Every continent has Research on the Epi- weather events will could be displaced by areas of water scarcity, demiology of Disasters become more com- “intense” water scarcity, and more than 2 billion found that, in 2018, mon and destructive. and by 2040 one in four people today live in coun- S: E E EMDAT children under the age tries experiencing high of 18 will be living in water stress. Nearly half areas “of extremely high of the world’s population water stress.” already live in poten- The effects on public tially waterscarce areas, G The past 4 years have been the hottest health and national according to UN Water. on record, as have 20 of the past 22 years. MASS EXTINCTION PERCENT OF SPECIES ARE Based on an assessment of 100,000 THREATENED species by the International Union for 30PERCENT ENERGY TRANSITION F R the Conservation of Nature. WITH EXTINCTION SHARKS & RAYS Renewables are set to penetrate the 27 global energy system more quickly than P any fuel in history, according to BP. Meanwhile, Shell tapering off over the R projects that demand following decades. 33PERCENT 25PERCENT 41PERCENT 34PERCENT 27PERCENT 14PERCENT for renewables is set In a controversial to exceed demand for move, the European R REEF CORALS MAMMALS AMPHIBIANS CONIFERS CRUSTACEANS BIRDS fossil fuels within a Investment Bank generation. However, announced it would growing populations stop funding fossil-fuel and emerging econo- projects. Their rationale mies will combine to was that such projects E P see fossil fuel usage were bound to become I S ANTARCTIC ICE MASS & RISING SEAS continue to climb until obsolete, and thereby, S: S S S about 2025, gradually poor investments. As the world’s largest ice sheets in Greenland and Antarctica melt, sea levels rise. Renewable energy is the fastest-growing The red line at right sea levels had risen 3.2 Rate of shows a steady decline inches (81 mm) above change in the Antarctic Ice the 1993 average. As . mm per year Mass, one of Earth’s two oceans warm and ice polar ice caps and the source of energy, contributing half of the sheets continue to melt, largest mass of ice on sea levels will continue the planet. The blue line to rise. This spells Rate of change 1 gigatons shows the consistent problems for those who per year rise in global sea levels. live on or near coast- growth in global energy supplies and S H S H A I M GT In 2018, according to lines—which, according the National Oceanic to the UN, constitutes and Atmospheric about 40 percent of the S: ASA

Administration, global world’s population. HOEY PETER CHARTS: becoming the largest source of power by 2040.

8 brunswick social value review - no. 1 - 2020 brunswick social value review - no. 1 - 2020 9 ISSUE FOCUS CLIMATE GEOPOLITICS Geopolitical IMPACT

RUSSIA’S economy is driven by fossil fuel exports, making a significant INDIA has ambitious transition targets, particularly for wind energy. transition to renewables difficult. But the physical impacts could also However, climate change will melt glaciers that feed the Indus, Ganges, transform the vast, frigid tundra into the world’s largest expanse of arable Mekong and Yangtze rivers. At first, summer flooding will increase, but land, critical for a food-stressed world. Already, President Vladimir Putin late in the 2040s, the major rivers systems will collapse, creating a risk has made expansion of infrastructure investment in the Arctic a priority; of widespread famine and population displacement, which may threaten the possibility of new navigable trade routes could add momentum. the political stability in the region and inflame longstanding tensions.

UNITED STATES MIDDLE EAST countries have in place economic transition strategies to CHINA has invested heavily in renewables and next-gen nuclear power. The strong tech sector makes the US well positioned for the clean move away from their dependence on fossil fuel exports. But the region However, its river systems will become severely depleted as ice on the energy transition. However, the country will also be hit hard by is already living off a critically low 1,000 cubic meters of fresh water per Tibetan Plateau and Tanggula Mountains melts. The northern summer physical impacts. Loss of snow on the western mountains may person per year. River depletion will make traditional farming and graz- monsoons may disappear, and agricultural productivity fall. Heavily exacerbate severe water shortages and wildfires in California. A ing next to impossible. The future will depend upon large-scale desalina- populated coastal cities will be affected by sea-level rise and mass rise in extreme storms threatens Florida and the entire Chesapeake tion technologies and the affordable energy to power them. internal migration could result. Bay area. Combined with rising sea levels, these may lead provid- ers to stop insuring homes in the most affected regions, resulting in Dust Bowl-like migrations away from afflicted states.

CLIMATE CHANGE IS REDRAWING THE MAP, make homes on the US East Coast uninsurable. The not just of the physical world, but the political and eco- unpredictable weather patterns of Africa’s Lake Chad nomic. Every square inch of the globe faces jeopardy, but are putting the 30 million people who depend on its look at key risks to particular areas and their likely out- water at risk. • Mass migrations from any of these out- comes can give a glimpse into the extent of the threat. • comes are likely to strain the resources of neighboring As the tundra melts, Russia stands to become the most communities and nations. Meanwhile the transition to fertile country on the planet, even as Southern Europe renewable energy sources will shift the balance of global EUROPE’S solar and wind development will benefit most of its econo- CENTRAL AFRICA’S high solar potential may allow a level of energy inde- is set to lose arable land due to extreme heat. The rising energy trade. And all of it together means a very differ- mies, and climate change may benefit agricultural productivity in Nordic pendence. However, the livelihood of the residents of Lake Chad, a source countries. But vast stretches of arable land in Southern Europe may be of water to more than 30 million people, is at risk as unpredictable and frequency of extreme storms, fueled by warmer oceans ent geopolitical world is on the horizon. lost to extreme heat. Even with an expected decline in Europe’s popula- severe weather conditions are making the area unliveable. Similar impacts tion, food security and food prices will become a political issue. Rising in many parts of Africa could lead to an increase in political instability and PHOTOGRAPHS: FLAVIO VELOSO, SEPPFRIEDHUBER, FRANCKREPORTER, YIN WENJIE, THIERRY RANNOU/GAMMA-RAPHO, GERALDINE HOPE GHELLI/BLOOMBERG, ALL VIA GETTY VIA ALL IMAGES GHELLI/BLOOMBERG, HOPE GERALDINE RANNOU/GAMMA-RAPHO, THIERRY WENJIE, YIN FRANCKREPORTER, SEPPFRIEDHUBER, VELOSO, FLAVIO PHOTOGRAPHS: and accompanied by dangerous sea-level rise, could Let’s take stock of the risks by region. VANDIVIER KEVIN PHOTOGRAPH: sea levels may cause populations to retreat from the northern coasts. conflict, as well as mass migrations across the continent and into Europe.

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“Instead of competing to secure supplies VIEWS on the politics of climate of fossil fuel resources, nations will change from Brunswick’s find that competitive advantage will come Geopolitical Team from efficiency in capturing, storing and distributing energy from renewable sources.” PASCAL LAMY Brunswick’s Chair of Europe, Former Director-General of the World Trade Organization The Brunswick PASCAL LAMY, Brunswick’s Chair “Already, there are signs that a more robust of Europe and former Director- regulatory policy response to climate General of the World Trade Organiza- change is likely. When it happens, it will tion, on the global energy dynamics. force companies to completely rethink their energy use, as well as the ‘carbon content’ of or more than a century, the need for their products and services.” energy security has defined geopolitical rela- tions, and the production and trade of fossil ANTHONY GARDNER fuels has become deeply woven into the fab- Brunswick Senior Advisor, F ric of the global economy. The energy sources that Former US Ambassador to the European Union power our modern world are undergoing a period in the Obama administration. of rapid change, and a transition is taking place—

away from fossil fuels and toward renewables. As this “The policy-portfolio model encourages a transition accelerates, it will have significant geopo- menu of diverse policy responses: tools that litical implications. • Ensuring a secure supply of address both sources and sinks of carbon energy is a strategic priority for every country. Not dioxide and other greenhouse gases, and only is energy required for a country’s industrial energy conservation and efficiency.” development and economic growth, it underpins ROBERT B. ZOELLICK Brunswick Geopolitical Principal, Former President of the World Bank and former head of US Shifting POWER Balance climate policy negotiations. in a Low-Carbon World “The view that there is a trade-off between economic growth through trade the smooth running of national life. Serious dis- and progress on climate change is ruptions to energy supply have negative economic becoming outdated.” impacts and can undermine social and political stability. Consequently, energy policy is a matter of KATE FALL national security, and it is fully integrated into for- Brunswick Geopolitical Executive Director, Member eign policy in most countries. The global balance of the House of Lords and a former Deputy Chief of • Staff to UK Prime Minister David Cameron. of power between nations and regions has therefore been largely, if not only, shaped by energy. The logic “Corporate leadership on climate is straightforward: Countries that are able to export change must go beyond the reduction of a company’s own emissions to help enable policy and provide space for politicians to make tough decisions.” LORD CHARLES POWELL Brunswick Geopolitical Principal, Former Private Secretary and Advisor to two UK prime ministers. PHOTOGRAPH: MIGUEL NAVARRO/GETTY IMAGES NAVARRO/GETTY MIGUEL PHOTOGRAPH: 12 5brunswick social value review - no. 1 - 2020 13 ISSUE FOCUS CLIMATE GEOPOLITICS energy resources in the form of fossil fuels have Public pressure and scientific reality “supplier power”; countries which import those World SOLAR Potential resources have “buyer power”; and countries with will force governments to impose control over the transit routes of those resources Fossil fuels are unevenly distributed geographically. However, the two maps below climate regulations, says Brunswick’s have an important intermediary power. Much of Worldshow that Solar renewable Potential energy potential is spread across the globe. ANTHONY GARDNER. modern global history can be described as the inter- World Solar Potential play of these powers. The transition to renewable energy sources will therefore have major geopolitical impacts. Renew- The Inevitable POLICY Response able energy is now the fastest growing source of energy and will become the largest source of power urrently, government action on climate by 2040, according to the BP Statistical Review. To change is not sufficient to alter the trajectory examine the implications of this, the Global Com- of global temperature increases (see “The mission on the Geopolitics of Energy Transforma- CData” on Page 7). Yet both scientific evidence tion has been established, and I am pleased to be one and overwhelming public opinion demand effective of its commissioners. Renewables have a couple of solutions, forcing governments and regulatory bod- key characteristics that are very distinctive and will ies into action. Much more decisive action is needed change the role of energy in international relations. Global Horizontal to keep the global average temperature rise close to Irradiance W/m2 First, a key characteristic of fossil fuels is that they Global Horizontal 2˚C, let alone achieve the Paris Agreement ambition are concentrated in specific geographic locations Irradiance W/m2 of “well below” 2˚C. and these locations are unevenly distributed across 175 200 225 Already, there are signs that a more robust regu- national boundaries. Renewables, on the other hand, 175 200 225 latory policy response to climate change is likely. are much more evenly distributed. Most countries World WindWorld Potential WIND Potential When it happens, it will force companies to com- have either sun or wind (see the maps at right). In World Wind Potential pletely rethink their energy use, as well as the “car- theory, this has the potential to equalize the supply bon content” of their products and services. of energy, enabling every country the prospect of The European Union will be leading the way. The energy independence. EU is moving toward more ambitious 2030 tar- In practice, realizing this potential will require gets for emissions reduction. The incoming Euro- substantial investment. Current patterns suggest pean Commission wants to introduce a kind of that emerging markets may leapfrog developed fossil WTO-compliant “carbon tariff” on merchandise fuel-based economies: The “Big 3” emerging econo- imported from countries that are not meeting their mies – China, India and Brazil – account for 63 per- climate change obligations. It will seek to invest €1 cent of renewable energy investment, and China sig- trillion in green technologies over the next seven nificantly outstrips all others (see the chart at right). years and to extend the EU’s Emissions Trading Sys- A second characteristic of fossil fuels is that they tem to cover the maritime sector and to reduce the are stocks, whereas renewables are flows. Oil, coal 5km Wind Map free allowances allocated to airlines over time. Mean Wind Speed at 80m and gas have a physical mass that exists at a specific 5km Wind Map Moreover, it will enshrine into law a commit- Mean Wind Speed at 80m location: They must be sourced, transported and 7 13 20 mph ment to achieve net zero carbon emissions target stored. Once used, they are exhausted. Renewables by 2050 and to establish rules of global applica- 7 13 20 mph are, as the name suggests, inexhaustible. Thus energy tion to determine when banks and funds can claim supply is likely to become less easily disrupted and to launch “green” products or investments. EU vulnerable to “chokepoints,” and the global energy Finance Ministers have announced that the bloc’s economy will be less susceptible to the volatility Renewable Energy INVESTMENTS in 2017 multi-billion-euro financing of fossil fuel projects caused by oil prices and currency fluctuations. should be phased out. Most countries that depend heavily on the export RenewableMeanwhile Energy in Osaka, theInvestments G20 struck a deal that of fossil fuels are already pursuing strategies to diver- China $126.6 steps toward a net-zero commitment. “Climate billion sify their economies, and many countries that are change will determine the destiny of mankind, so US $40.5 billion net importers are already investing in renewables. it is imperative that our generation makes the right Instead of competing to secure supplies of fossil fuel Japan $13.4 billion The “Big 3” emerging choices,” said Chinese Foreign Minister Wang Yi. resources, nations will find that competitive advan- economies—CHINA, INDIA Political progress will of course not be easy. The India $10.9 billion and BRAZIL—account for tage will come from efficiency in capturing, storing 63 percent of renewable The “Big 3” G20emerging agreement itself is described as a “19+1” deal, and distributing energy from renewable sources. Germany $10.4 billion energy investment economies–China,since the US has reiterated its decision to with- India and Brazil–

This contest may redraw the geopolitical map. HOEY PETER MAPS: AND CHART DORFMAN MATT ILLUSTRATION: draw from the Paris Agreement. In Europe, the accounted for 63% of renewable energy 14 brunswick social value review - no. 1 - 2020 investment.brunswick social value review - no. 1 - 2020 15

Source: Bloomberg Finance ISSUE FOCUS CLIMATE GEOPOLITICS

Czech Republic, Hungary and Poland are resisting more ambitious targets. Overcoming these barriers will be tough—but many are convinced that it’s only a matter of time. TRADE Can Catalyze Climate Action Even in the US, where the Trump administration any of those who lead the charge to Trade and climate rise of antibiotic resistant superbugs. It’s a sobering has withdrawn from the Paris Agreement and is put climate change front and foremost of list. All this requires global political will. In other rolling back key regulations designed to limit the global politics are among the first to critique talks need to come words, if we’re going to solve these problems, we use of fossil fuels, many major cities and states are Mglobalization, seeing the two as competing together, argues need the world to come together as an interna- taking steps on their own, determined to move goals. But they may be mistaken—dangerously so. Brunswick’s tional community, not fragment into competing ahead. Importantly, that includes California, which The world knows no boundaries when it comes KATE FALL. economic blocs. ranks as the fifth largest economy in the world. to huge global issues like climate change but also Hence the power of trade. Relationships driven The Principles for Responsible Investment, other critical issues such as the decline in biodiver- by trade promote peace, prosperity and trust, all an investor initiative associated with the United sity, cybercrime, the threat of pandemics and the of which helps underpin international collabora- Nations, speaks about the “inevitable policy tion. The view that there is a trade-off between response” and estimates that the peak of regulatory economic growth through trade and progress action will come around 2023 to 2025—when the Opportunities in the on climate change is becoming outdated: for exam- Paris Agreement’s “ratchet mechanism” really kicks ple, the Comprehensive and Progressive Agreement in, starting with the “global stocktake” in 2023 and a for Trans-Pacific Partnership contains provisions third round of climate pledges in 2025. Policy Portfolio Model on carbon emissions and cooperation on energy efficiency. But we need to do more to bring the Some likely areas of regulatory By Brunswick he rio climate change framework treaty two together. action are becoming clear: of 1992 designed a global approach built upon The frustration, however, is that trade and cli- CARBON PRICING: Emissions trading schemes or Geopolitical national action plans. This encouraged specific mate change talks operate on parallel tracks. carbon taxes are in place in 40 countries, and border Principal steps and the tracking of results, which nation For example, the delegates to the United Nations tariffs on the carbon content of merchandise are T ROBERT B. states review at periodic United Nations Framework Convention on Climate Change annual meetings being discussed. Convention on Climate Change conferences. These tend to come from foreign ministries and depart- CARS: The Netherlands has banned the sale of ZOELLICK, former reviews update scientific assessments and analyses of ments dealing with energy and environment; new internal combustion engine cars by 2030; President of the several other countries and a number of major cities World Bank and the combined effects of the nations’ plans. whereas trade negotiations are led by ministries have announced similar plans. Some countries are In essence, the Rio approach combines local and of finance, trade, infrastructure, development and scaling up subsidies and regulatory support for former head of national customized initiatives—commitments technology. electric vehicles. US climate policy with worldwide evaluations based upon ongo- Finding ways to bring together these parallel ENERGY EFFICIENCY: Minimum energy efficiency negotiations. ing scientific input. The process builds in feedback conversations may help to spur on global action standards already exist for private and commercial loops. This model encourages a menu of diverse on climate change. For examples, tariffs deployed buildings, as well as manufactured goods, and these may increase. policy responses, through which countries, cities, against those countries that are not reducing emis- ENERGY POLICY: Public funding, subsidies and companies and civil society groups can innovate, sions; or a border-adjustment tax based on the tax incentives for zero-carbon power will grow, experiment, combine, act and evaluate. carbon content of imported merchandise; or other including for renewables, nuclear and bioenergy This policy portfolio model includes tools that measures like reduction of tariffs on “green goods,” production. address both sources and sinks of carbon diox- such as clean energy technologies. And, perhaps COAL: The UK is already on track to phase out coal ide and other greenhouse gases, and energy con- most significantly of all, the linkages between trade power generation by 2025, and other countries are servation and efficiency, especially in transmis- and fossil fuels subsidies could be re-examined. likely to follow suit. sion lines; forestation and avoided deforestation We have seen how the global trade system can BIOSEQUESTRATION: Carbon capture efforts (including biodiversity practices); soil carbon that aid international cooperation on issues such as through natural land-based solutions such as refor- estation are set to expand. could enrich agriculture; resilience and adapta- poverty alleviation and stimulating growth in tion measures; carbon pricing and markets; non- developing economies. Now, a conversation needs These policy actions will have major implica- carbon energy sources; technology innovation and to begin about how to integrate the economics of tions for businesses across sectors and stakeholder diffusion for countries at various stages of devel- trade and development with the economics of cli- groups. Investors will inevitably re-evaluate asset opment; and financial support, including from mate change. The more that businesses step up to allocation in light of these expected policy shifts multilateral financial institutions as well as the the plate, as drivers of innovation and change, the and engage with investee companies on their plans private sector. more we can harness their creativity as part of the to mitigate losses and exploit new opportunities. u Both public and private sectors can benefit solution to climate change. u from learning about the full mix of these climate- anthony gardner, a Brunswick Senior Advisor and kate fall is a Brunswick Partner. She is a member of the a former US Ambassador to the European Union in the carbon options and recognizing how they might House of Lords and a former Deputy Chief of Staff to UK

Obama administration, is based in Brussels. best plug in. u STAUFFER BRIAN ILLUSTRATION: IMAGES. VELOSO/GETTY FLAVIO PHOTOGRAPH: Prime Minister David Cameron.

16 brunswick social value review - no. 1 - 2020 brunswick social value review - no. 1 - 2020 17 The CLIMATE LEADERS of the FUTURE ew people would name margaret thatcher as one of history’s green heroes but, in the late ’80s, the British Prime Minister helped put cli- Fmate change on the global agenda. In a speech to the UN General Assembly, she set out emerging evidence on “global warming,” saying: “It is mankind and his activities that are changing the environment of our planet in damaging and dangerous ways.” More than half of all industrial CO2 emissions have occurred in the three decades since then. The speech’s themes, which I helped draft in my role as the Prime Minister’s Private Secretary, are more rel- evant than ever. “The environmental challenge that confronts the whole world demands an equivalent response from the whole world,” she said. “Every country will be affected and no one can opt out.” That speech is a stark reminder of the importance of leadership. To many, it doesn’t look as though today’s politicians are confronting climate change with the seriousness it requires, leaving leadership to come from some unconventional constituencies— three, in particular: cities, citizens and corporations. First, cities. They are the lifeblood of the global economy, generating more than 80 percent of global GDP. They use around two-thirds of generated energy and produce 70 percent of the world’s carbon emissions. And they are on the frontline of climate impacts: Many of the world’s largest cities are suscep- tible to coastal flooding and to extreme heat. In the US, over 400 municipalities signed on to the Climate Mayors’ initiative, following President Cities, citizens and power capacity. Continued innovation in technol- Trump’s decision to withdraw from the Paris agree- ogy and markets will give citizens a leading role in ment. Global networks are also forming, such as the corporations are the energy transition. C40 or the Global Covenant of Mayors, aimed at low- stepping into a Third, corporates. In her speech, Thatcher criti- ering emissions and building resilience to impacts. climate leadership cized “the simplistic tendency” to blame big business Second, citizens. As the costs of renewable energy void, says Brunswick for global warming: “Far from being the villains, it is generation continue to fall, consumers of electricity Geopolitical on them that we rely to do the research and find the can become producers—either for their own use or solutions,” she said. Corporate leadership on climate to sell on through the grid. Hundreds of millions of Principal LORD change must go beyond the reduction of a compa- micro-producers could generate energy and share CHARLES POWELL, ny’s own emissions to help enable policy and provide it peer-to-peer, without the need for traditional former Private space for politicians to make tough decisions. energy utilities. In regions of the world without Secretary and Advi- Leadership from these parts of society might power supply, distributed renewables are a poten- sor to two UK prime help us meet the challenge laid down by Margaret tial solution. In developed economies, the domestic Thatcher over 30 years ago. As she told the UN— renewables market is fragmented and a coherent ministers. sounding as much like an Extinction Rebellion consumer proposition is yet to emerge, but there activist as a world leader: “It is life itself—human are indications that consumer uptake will be strong. life, the innumerable species of our planet—that we In Germany, a 2016 study showed that private citi- wantonly destroy. It is life itself that we must battle

zens owned 31.5 percent of installed renewable to preserve.” u HERSEY JOHN ILLUSTRATION:

18 brunswick social value review - no. 1 - 2020 ISSUE FOCUS CLIMATE GEOPOLITICS INVESTORS & CLIMATE CHANGE: What’s Really Going On?

iting a record number of shareholder resolutions being filed on climate change, the think-tank The Center for American Prog- ress concluded investors were finally “pay- ing more attention to climate change when Cchoosing their portfolios.” In August, that report will be a decade old. Its findings have aged well in one respect: They could be cut-and-paste into reports today. But they’ve also held up poorly: We’re reach- ing the same predictive conclusions a decade later. Yet there’s a sense that 2019 marks an inflec- tion point for the investment community on cli- mate change. McKinsey estimates nearly a quarter of global assets under management are invested according to ESG principles, while the investment

Investors are increas- ingly noisy on climate change, but is there a gap between words and actions? Brunswick’s CHRISTOPHE GUIBELE- GUIET and JESSICA ATKINS investigate. ILLUSTRATION: MIGUEL DAVILLA MIGUEL ILLUSTRATION:

19 ISSUE FOCUS CLIMATE GEOPOLITICS research firm Morningstar says climate is the larg- are asset-owner-led alliances, such as the Transition est investment topic within ESG. More than $200 Pathway Initiative (TPI). However, the most signifi- CLIMATE CHANGE IN REPORTS & EARNINGS CALLS billion in green bonds were issued in the first 10 cant collectives on climate change are broad-based months of 2019—smashing a single-year record global alliances, including Ceres and the UN’s Prin- Earnings call mentions of climate change have increased sharply. with a quarter still to go. The largest asset manag- FINDINGS ciples for Responsible Investment (PRI)—global Just 8 mentions on earnings calls occurred in 2012, with 28 mentions by 2018— versus 74 mentions in the first 10 months of 2019. ers are creating new teams to engage with compa- networks of both asset owners and asset managers, nies on climate change, while smaller firms focused as well as businesses and NGOs. Almost 450 compa- FROM OUR INVESTIGATION Annual reports solely on the issue are emerging. Still, there’s evi- nies are UN PRI signatories. Brunswick’s deep dive into the reality of investor uarterlyAnnual reports reports dence to suggest that, just as in 2010, a gap remains Investor alliances are focused on governments as engagement on climate delivered some interest- Earninsuarterly calls reports between words and actions: ing observations in the following five areas: well as businesses. Some have done the seemingly Earnins calls • In November 2019, an estimate by Cerulli Asso- 1. INCREASED ENGAGEMENT FROM INVESTORS unthinkable: ask for more regulation. A group called ciates, a research and consulting firm based in ON CLIMATE CHANGE. The Investor Agenda—a sort of coalition of coali-

Boston, found that nearly 90 percent of public In a new study of roughly half of the world’s 500 tions—organized a statement urging governments market assets in the US are held by signatories largest companies, research by Brunswick found worldwide to take more action. It was signed by of the UN Principles for Responsible Investment, that, more than ever before, these businesses are 515 institutional investors managing $35 trillion in a coalition that views climate change as “the talking to investors about climate change, and inves- assets. Most are directing their attention at compa- highest priority ESG issue facing investors”— tors are asking more climate-related questions. nies: for example, 200 institutional investors, with a and yet less than 5 percent of those signatories Mentions of climate change in quarterly reports combined $6.5 trillion in assets under management, “formally use ESG considerations in their invest- are up by a third since 2015, while mentions in recently signed a joint letter calling on US publicly ment decisions,” according to Cerulli. 2019 marks annual reports are up nearly 30 percent. Mentions traded corporations to align their climate lobbying COMPANIES ARE TALKING ABOUT THE ISSUE • From June 2018 to June 2019, only 13 share- of low-carbon strategy on earnings calls have more with the Paris goals. holder proposals on climate issues reached a vote an inflection than quadrupled since 2014. The issue has become a A number of other investor alliances are pressur- percentIn 77 percent of the earnings calls mentioning climate change, among the 1,500 largest companies in the US, point for the fixture of investor-investee engagement. ing companies to act: the mentions occur only during the company’s presentation. according to research by Georgeson, a share- But there are a number of caveats. In earnings calls Last September a group of the world’s largest % of mentions of “climate change” in earnings calls • % of mentions of “climate change” in earnings calls holder engagement consultancy. investment where climate change was mentioned, only 28 per- pension funds announced a commitment to Asset managers (and CEOs) are still often judged cent of the mentions came during the Q&A section, make their combined $2.2 trillion portfolio zero- •  community on shorter-term results. “From the financial suggesting either analysts weren’t interested in the carbon within the next 30 years as part of the UN 77% on climate results side, people are not cutting you a lot of topic or, more optimistically, that questions on cli- Net Zero Asset Owners Alliance. 77% change. slack,” Nestlé CEO Mark Schneider told the New mate change were already being addressed through • The Carbon Disclosure Project (CDP), a non- York Times in 2019, in an article titled “Nestlé other channels, in particular private conversations profit that works with some of the world’s largest 28% Says It Can Be Virtuous and Profitable. Is That with the CEO and the board. “Climate risk” was companies to disclose their environmental 28% Even Possible?” mentioned only five times in all 2018 earnings calls impact, reports that more than 7,000 companies with nearly half of the largest US-listed companies, are disclosing information at the request of 525 Presentation &A SO WHAT’S GOING ON? and only four times as of November 2019. institutional investors with $96 trillion in assets. PresentationMentions No mentions &A Are investors really paying more attention to cli- • Climate Action 100+, a $35 trillion alliance, led Mentions No mentions mate change—and if so, how much more, and 2. INVESTOR ALLIANCES ARE PROLIFERATING— efforts to publicly pressure cement producers, an where? What are they doing differently in 2019 AND DOMINATING THE CONVERSATION. industry responsible for 7 percent of man-made than 2018—or 2010? Is climate change really “Investors concerned about climate change have emissions, to be carbon neutral by 2050. “LOW-CARBON STRATEGY” IS ON THE RISE changing investment? We set out to answer those never been better organized,” The Economist • Ceres, an investor network whose members questions, and the methodology for our investiga- reported in May of 2019. They were pointing to have more than $26 trillion in combined assets, In recent years, the focus on low-carbon strategy has broadened beyond tion had three levels: the fact that a number of muscular, new investor pressed fast-food companies in 2019 to set annual and quarterly reports to earnings calls. • Primary data analysis, looking at eight years’ alliances have formed to force companies to both tougher greenhouse gas emissions targets. worth of earnings calls, quarterly reports and enhance quality of climate reporting and to set Annual reports uarterly reports annual reports from almost half (228) of the 500 aggressive carbon reduction targets that align the 3. ASSET MANAGERS FACE PRESSURE FROM Earnins calls largest global companies. business with the Paris Climate Agreement’s goal of ASSET OWNERS. keeping a global warming increase below 2°C. As asset managers press companies for better dis- Secondary research, synthesizing the findings of • Our investigation found a number of different closure and governance, asset owners are making more than 100 reports and articles on climate types of alliances. For example, there are regional similar demands of investors. One asset manager change and the investment landscape since 2017. alliances: such as the Asia Investor Group on Cli- we spoke with said they take calls from their asset- Interviews with investors from the US, Europe • mate Change and the Australia-New Zealand- owner clients to discuss climate change “almost and Asia, as well as heads of Investor Relations based Investor Group on Climate Change; or the every day.” In their internal monthly fund manager working in industries ranging from consumer Institutional Investors Group on Climate Change, calls, “half of the time is spent on discussing carbon goods to energy and mining. which has a largely European membership. Some HOEY CHARTS:PETER pricing,” reveals another. Another told us, “There

20 brunswick social value review - no. 1 - 2020 brunswick social value review - no. 1 - 2020 21 ISSUE FOCUS CLIMATE GEOPOLITICS is no conversation possible today with asset own- “Divestment can be a bit of a blunt instrument,” institutional investors found that 93 percent believed Disclosures, considered the standard by which com- ers and pension funds without a clear policy on cli- Adam Matthews told the Brunswick Review earlier climate change still wasn’t being priced in. panies measure and disclose climate risks, issued mate change.” this year. Mr. Matthews is Director of Ethics and recommendations in 2017. The Sustainability Part of the pressure is demographic: Younger gen- Engagement for the Church of England Pensions 2. LEGAL TANGLES OVER STRANDED ASSETS Accounting Standards Board Foundation is looking erations form an increasing percentage of asset own- Board and Co-Chair of the Transition Pathway Ini- AND CLIMATE IMPACTS. to establish industry-specific disclosure standards ers (and asset managers) and are now “ready to invest tiative, which leads groups of major shareholders, The European Investment Bank in November 2019 across ESG topics, including climate. Attempting as sustainably as they shop,” according to Bloomberg. collectively worth $13 trillion, in efforts to shift the announced it would stop funding fossil-fuel com- something similar is the Global Reporting Initiative. They are pressing investors to disclose and measure practices of corporations, fossil fuel extractors and panies. The rationale wasn’t moral, but financial, the climate impact of their own portfolios. Another “We take calls others on the issue of climate change. according to the company’s Vice President for energy, 4. A FOCUS ON THE LONGER TERM. is regulatory: Accounting for climate-related risks is from our “But the Church of England recognizes the value Andrew McDowell. “From both a policy and from “Climate change is where short-term thinking and being increasingly considered as part of a company’s of divestment,” Mr. Matthews said, “particularly a banking perspective, it makes no sense for us to long-term consequences collide,” observed Hank fiduciary duties, Mercer reported in 2019. asset-owner where companies produce more than 10 percent of continue to invest in 20-to-25-year assets that are Paulson, former US Treasury Secretary and CEO of Combined, these have made climate risk an issue clients to their revenue from thermal coal and tar sands. We’ve going to be taken over by new technologies and do Goldman Sachs. Investors are expecting climate to that leaders of investment firms have to take owner- discuss climate taken a view that those companies are simply not not deliver on the EU’s very ambitious climate and be integrated into longer-term corporate strategy, ship of. More than half of the investors polled by the change almost part of the transition—they are at the wrong end of energy targets,” Mr. McDowell told Bloomberg. especially through a company’s scenario analysis. European Corporate Governance Institute in 2019 the spectrum. We don’t believe they will survive in a In other words, the bank expects oil, coal and gas There is also a shift toward assessing company said the issue had “C-level responsibility.” As one every day,” an world consistent with the Paris targets. to become stranded assets. As the FT reported, this strategy and performance in the context of the sys- corporate Investor Relations expert noted, “This is asset manager “On the larger question, it is completely legiti- “might prompt activists to launch suits against other tem that a company operates in. Many companies in all quite new to the investors as well, so investors are told us. mate to engage with companies on this, because it private-sector lenders. After all, if they lend to the gas “Climate retail and consumer goods have long value chains, trying to work with the companies that they hold to allows the owners of companies to really drive posi- sector this might be a possible breach of fiduciary and investors will increasingly seek information on understand it better themselves.” tive change. When you divest, you can’t do that so duty, given the potential future losses.” change is climate risks in these chains. As one investor told us, effectively from outside. But we’re also clear engage- In October 2019, Exxon Mobil defended itself where “Taking a systemic approach is becoming common 4. GEOGRAPHICAL DIFFERENCES. ment has to have a deadline.” against a lawsuit brought by New York State, claim- short-term practice when looking at the performance and risk of Beneath the umbrella term “investor” lie important The Church of England investing bodies look for ing the company defrauded shareholders by down- a company with a large supply chain.” regional differences. Of the 373 signatories on Cli- good faith efforts to meet established climate-goal playing the risks of climate change to its business. thinking and mate Action 100+, an alliance that represents nearly timelines. “If we can’t demonstrate that you’re on a The trial was decided in the company’s favor, but the long-term 5.INVESTOR ENGAGEMENT WILL ONLY INCREASE. half the world’s invested capital, only 20 came from credible path to below 2°C—then you are a candi- decision may not prevent other such attempts. consequences Hurricane Sandy was an important inflection point Asia, South America and Africa combined. date for us to divest,” Mr. Matthews said. Meanwhile, more than a dozen “public nuisance” for investors when it hit the US East Coast—includ- Regional representation, however, doesn’t neces- lawsuits have been filed by cities in the US against collide.” ing downtown Manhattan—in 2012. Wall Street— sarily correlate with meaningful action. Sharestudy energy companies for the costs of climate adaptation, HANK PAULSON, the actual location and the investment network it looked at investors with the highest percentage of What Should BUSINESSES EXPECT? and repairing damage from unprecedented hurri- former US Treasury represents—was physically threatened by the “super- Secretary and CEO of voting in favor of climate-friendly proposals, and canes, floods and wildfires. These possible legal com- Goldman Sachs storm.” The New York Stock Exchange had to close. those with the lowest. The 10 “worst” investors on 1. A POLICY RESPONSE INVESTORS HAVEN’T plications could be among the most concrete forces The insurance industry was left with a $25 billion climate were all from the US, while the 10 “best” PRICED IN. that shape investment flows and investor behavior. bill. Investors who had ignored climate change before were based across Europe, Canada and Japan. A Since 1997, there has been a 20-fold increase in cli- began to take it more seriously. study by the CFA institute found that 66 percent mate change laws globally, according to Carbon 3. METRICS WILL PROVE CRUCIAL. An increase in extreme weather events and rising of investors in the UAE factored the environ- Brief, totaling more than 1,400 climate change laws Progress on climate change relies on “two impor- sea levels are expected to impact many financial cen- ment into their investment decision-making—58 worldwide today. Everyone we spoke with expects tant factors,” according to Mark Carney, Gover- ters, confronting investors with the realities of climate percent in the APAC region, and less than half in more and expects it to be more forceful (as Anthony nor of the Bank of England: The first is consistent, change. At the same time, the world will be increas- the Americas. Gardner writes in “The Inevitable Policy Response,” robust disclosure, and the other is that “market ingly looking to investors to play a role in encourag- on Page 15). Public demand is finding its way to the and policymakers must continue to work together ing the transition to clean energy. 5. THE DIVESTMENT DEBATE IS LARGELY ballot box: The Green Party doubled its number of to determine the most decision-useful metrics for Already, investors are fully in the frame. Brunswick SETTLED—AMONG INVESTORS. seats in European Parliament in 2019 and public cli- climate-related financial disclosures.” research found the number of publications mention- “If you care about climate change, this is a dereliction mate-change concern is growing in many countries. Investors want disclosures to be more granular ing both climate change and the top asset manage- of duty,” Oliver Shah, Business Editor of the Times, Fiona Reynolds, CEO of UN PRI, recently wrote and consistent, and also tied to financial projections ment firms nearly doubled in just one year—those wrote in November. Mr. Shah was arguing against a in the Financial Times that she foresees “an inevi- and concrete risk analysis. A recent analysis from include mentions of BlackRock, Vanguard, Fidelity, course of action proposed by activists: cut ties with table policy response by 2025 that will be forceful, ShareAction found that among resolutions filed on Legal & General Investment Management (LGIM) high-carbon-emitting companies. “As a shareholder, abrupt and disorderly because of the delay. This will climate change in 2019, nearly a third were on dis- and Schroders, among others. As climate impacts you have an ability to influence a board that you create considerably greater disruption than many closure, although the complexity of climate change accelerate, the activity of investor engagement on cli- don’t have on the outside,” Mr. Shah countered. investors and businesses are prepared for today. The often renders such figures inexact. The FT’s Gillian mate will only increase. u The investors we spoke with broadly shared Mr. implications of this mispricing go far beyond the Tett sees these metrics as crucial. “The new front for christophe guibeleguiet, a Partner, and jessica Shah’s sentiment: Engagement is often a better energy sector, rippling throughout the economy…” green revolution rests on warrior accountants.” atkins, an Executive, are with Brunswick’s Business & option to help companies become more sustainable. Investors agree. A 2019 survey by BNY Mellon of The Task Force on Climate-Related Financial Society practice, based in London.

22 brunswick social value review - no. 1 - 2020 brunswick social value review - no. 1 - 2020 23 F of 300multinational companies found thatseven of costsThose are expected to mount. A 2019survey to extreme climate thelastdecade. events within companies have losses due reported significant all fashion brands, carmakers, and consumer goods million intransportationexpenses. the world’s largest chemical producer, almost severe shallowingoftheriverin2018costBASFSE, the Rhineriverduetoshrinkingglaciers—anot-as- This year, boat traffic wasbroughtto astandstillon losses of€ ice-cream Unilever, seller which thatyear estimated and shampoo and adirect hitto thebottom lineof 24

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lar trajectory in other sectors, too. (See Pages 19–23 told me. theworld’sof biggest companies oil andgas recently [climate],” asenior investor relations figure at one [Environment]; thoseare and95percent on C of are about ESG. Within that, they’re mainly about E “In thelasttwo years, thequestions we now get half off altogether.off lion dollars, CDP’s analysis found, could written be were their assets at - risk.of a tril Almost of a quarter found thosebusinesses estimated about$970billion companies disclose their environmental impact, a non-profit the many thathelps world’s of largest supply disruptions” thelast12months. within CDP, ten had out of “already experienced climate-related brunswick value social review Climate Investor interestandcapitalare followingasimi- PRESSURE FROMALLANGLES The World ofFinance

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PHOTOGRAPH: ANDREAS RENTZ/GETTY IMAGES air traffic growth could fall by half asa growth result. could fall air traffic by half this flights year, the bank leading to predict thatUS shame”)“flight hasled to one in four taking fewer to Swiss bank UBS, of the rise ing” acompany for its stance on climate. According university found one inthree is Americans “reward- warming, aseparate study while global from the to fight in consumer activism thanpolitical activism versity found areAmericans more likely to engage commercially.expressing itself A study by Yale Uni- for 30years.the subject nearly concern That is MORI, a market research company that has tracked record levels around theworld according to Ipsos Public concern about climate change hasreached ommendations for banksandpolicymakers. for Greening theFinancialSystem, publishing rec- financial organizations to createwith the Network banks fromCentral five continents have partnered the lasttwo years, environmental citing concerns. companies within andcountries of ratings graded two other major agencies, credit-rating have down - itissues,ratings Fitch while andS&PGlobal, Ratings more explicitlywill factor into thecreditworthiness mate in2019, data firm that risks climate signaling 2019. Moody’s acontrolling bought stake inacli- as “renewable energy” or “non-renewable energy” in vider, with labeling companies experimented briefly mate-focused investors. FTSE Russell, anindex pro- Europe, is developing products and indices for cli- Euronext, which sixstock owns exchanges across even central banksare becoming greener aswell. UN Net Zero Asset Owners Alliance. the thenext of lio zero 30years within aspart carbon tomitment make- portfo their combined $2 trillion the world’s largest pension fundsannounced acom- tor developments yet, lastSeptember acoalition of progress on thatpathway. theboldestinves In one of - executivetie remuneration performance against with below well keeping warming +2°C, global of andto theParisthe business with Climate Agreement’s goal ing, aggressive set reduction that targets align carbon companies climate to- report enhance of the quality Finance Ministers. theG20 Board of atthebehest Financial Stability Disclosures (TCFD), aframework initiated by the up to theTask Force on Climate-Related Financial change isaligningwiththeiractions.) for ananalysisofhowinvestors’rhetoriconclimate brunswick value social review Stock exchanges, agencies,credit-rating and investorA number of alliances are to forming force More businesses are than850global now signed C onsumers andEmployees (Swedish flygskam for

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become the CLIMATE CLIMATE the climate carbon hascarbon new North Getting to Getting net-zero agenda. Star forStar ISSUE FOCUS FOCUS ISSUE GEOPOLITICS career-advancement opportunities. tant tothemthanflexible-workingarrangementsor “public environmentalstance”wasmoreimpor- Fortune 1000employeesfoundthatanemployer’s to jointheGlobalClimateStrike,whileasurveyof from arangeofindustrieswalkedouttheirjobs it’s notjustAmazon.LastSeptember,workers most ambitiousclimategoalsintheindustry.And Six monthslater, Amazonannouncedoneofthe a shareholderresolutiontocompelhimdoso. its environmentalefforts,andthenwentontofile CEO JeffBezosaskingthecompanytorampup than 6,700Amazonemployeessignedaletterto mate concerns.InApril2019,agroupofmore the next three decades. It an predicts be there will economy reshapeand how theglobal thiswill over themostlikely response policy of to climate change to provide partners acomprehensivetium of forecast tively a consor $86 trillion, worth out has set with Investment (UNPRI), investors agroup of collec- and balance sheets. their climate on aneffect cashflows projections with the28companies linked had studied two thefirm of decisions,mate change strategic wasaffecting just companies global saidcli 80percent- although of into markets, analysis while by Moody’s found that risk thathas change asafinancial yet be to priced BNY Mellon found ninein10investors climate view businesses prepared? ittake,will theeconomy, itimpact how will andare questionsThe are: When ithappen, will form what warming. of degrees to permitted be to theworld let 3 glide will ernments citizens becomes noisier, itisimprobable thatgov- technologies cheaper,get carbon and pressure from world isto theParis meet Agreement. the emission their greenhouse gas pledgesif triple met,being wouldn’t sufficient: be must Countries cluded that those commitments, were they even if byreport theresearch body United inScience con- those commitments (Morocco andtheGambia). A the ratified Paris Agreement are track to meet on that have the185countries found only two out of governmentpendent analysis of climate action, largely inadequate. Climate Action Tracker, aninde- Government piecemeal sofarhasbeen action and Employees increasinglyshareconsumers’cli- In response, theUNPrinciples for Responsible indicatorsThe are suggest they not. by A survey forceful is inevitable. Some of form action policy Yet, climate change as the realities catch of up, low Governments andRegulators 25 - ISSUE FOCUS CLIMATE GEOPOLITICS inevitable policy response by 2025, and forecasts that companies setting their targets based on science, not traded corporations to align their climate lobby- carbon-intensive firms are likely to lose 43 percent regulation or voluntary commitments. A science- 3. POLICY ADVOCACY ing with the goals of the Paris Agreement. The New of their value due to policies designed to combat based target changes the question from “Are you As well as aligning their businesses to net-zero emis- York Times letter called for businesses to take three climate change. The most progressive companies, doing something?” to “Are you doing enough?” Tied sions and working to create systems change, busi- specific steps: according to UN PRI, could see their value increase to a 2°C goal, it requires companies to work back- nesses also have a role in creating an enabling policy 1. Advocate for policies at the national, subna- by nearly one-third. ward, considering both the role the sector plays in environment for action on climate. Research from tional and/or sectoral level that are consistent A science- meeting that target as well as their business within Climate Action 100+ suggests this isn’t happening with achieving net-zero emissions by 2050; the sector. yet: Although companies in most sectors are start- BUSINESS LEADERSHIP on climate based target 2. Align their trade associations’ climate policy Research by BloombergNEF found that, even ing to set emissions targets, far fewer are aligning advocacy to be consistent with the goal of net- In this leadership vacuum, ambitious action on cli- changes the four years ago, 81 percent of S&P 500 companies their lobbying activities (see chart below). zero emissions by 2050; and mate change is being powered by business. A study question had set emissions targets, but few were science- The idea of meaningful advocacy on climate 3. Allocate advocacy spending to advance climate of 1,000 business leaders across 99 countries by the from “Are you based. As of November 2019, more than 680 busi- coming from business may evoke a cynical response. policies, not obstruct them. United Nations Global Compact and Accenture nesses had publicly shared science-based targets. “Winds of change or unchanged windiness?” the FT found that 90 percent of CEOs said they were today doing This included leading companies in the world’s asked after a flurry of bold pledges from companies Some businesses are heeding the call. The fol- “personally” driving their companies’ climate and something?” largest-emitting sectors: Maersk, the world’s largest and countries at the 2019 UN General Assembly. lowing day, the Sustainable Food Policy Alliance— sustainability agenda. to “Are shipping company; BHP, the world’s largest in min- Such skepticism stems partly from companies hav- which includes food and consumer products giants What is also emerging is a clear model of what ing; Heidelberg, the world’s second largest cement ing pledged support for a range of social issues in Nestle, Unilever, Mars and Danone—ran the same that corporate leadership on climate change looks you doing company, and ArcelorMittal, the world’s largest the past, yet continued lobbying—or remaining letter in Roll Call, a US news organization, with the like. We believe it has three dimensions: enough?” steel producer. This level of ambition was unthink- members of trade associations that lobby—for poli- message “we agree.” able at the start of the year. cies at odds with those public pronouncements. 1. BUSINESS TRANSFORMATION. Climate-focused investors and activists are call- THE “SUSTAINABILITY REVOLUTION” Aligning the business with net zero 2. SYSTEM CHANGE ing out this dissonance when they see it. They’re AND DECISIVE DECADE carbon emissions Leading companies look to drive action beyond increasingly impatient with companies that they Last year, former US Vice President Al Gore and for- 2. SYSTEMS CHANGE. Acting their operational footprint. That means work- believe use their voice only to claim public credit mer Goldman Sachs Asset Management CEO David with peers and partners to drive ing with partners like NGOs, government bodies, rather than inform public policy. Eleven leading Blood wrote that the world was in “the early stages of systems-level change private-sector peers, and academic institutions, to environmental and sustainable business organi- a global ‘Sustainability Revolution’ that has the mag- 3. POLICY ADVOCACY. Advocating unlock change in the wider systems they’re part of. zations published an open letter in The New York nitude of Industrial Revolution and the speed of the to create an enabling policy We Mean Business, a nonprofit coalition work- Times in October 2019 urging CEOs to sincerely Digital Revolution.” environment. ing with the world’s most influential businesses, engage on climate policy, while 200 institutional The momentum is clear. Five years ago, science- aims to accelerate business action across four sys- investors, with a combined $6.5 trillion in assets based targets didn’t exist; now almost 700 companies 1. BUSINESS TRANSFORMATION tems critical to delivering a net zero economy: under management, recently called on publicly have set them. Within the space of a single election Getting to net-zero carbon has become the new power, transport, land use and the built environ- cycle, we have also seen climate-focused investments North Star for the climate agenda. At the 2019 UN ment. And the coalition might just have the breadth move from the margins to the mainstream and Climate Action Summit, more than 100 cities and 77 to make a difference: We Mean Business counts ARE COMPANIES LISTENING TO INVESTORS? coalitions now measure their collective investment countries pledged to achieve net-zero carbon emis- more than 1,000 companies, accounting for 25 per- NOT DOING ENOUGH power in tens of trillions of dollars. Research by the investor coalition Climate Action 100+ found that companies were The best advice I ever received on this came for President William Je erson sions by 2050. A group of some of the world’s largest cent of global GDP, as well as nearly 75 nonprofit responding to some investor demands, like making climate a board responsibility. The coming year will be more significant still. The businesses led the way: 87 companies, with a com- organizations as partners. Clinton.But very He few said. companies “just keep had running aligned theirthese lobbying numbers with up.” their And climate that is positions. what heat will be especially high for companies listed in we do. Run the impact numbers up while pushing the costs down. bined market capitalization of $2.3 trillion, com- Take transportation, which accounts for nearly a the UK. COP26, billed as “the most important gath- mitted to set science-based targets that align their quarter of CO2 emissions worldwide. The Climate Portion of Companies in Sector with Climate Scenario analysis ering on climate change since the Paris agreement,” Long-Term Emissions Target Board Responsibility for Climate business and value chain with limiting global tem- Group, a founding partner of We Mean Business, will be hosted in Glasgow in 2020. This when a 2019 Lobbying, Climate Positions Aligned perature rise to 1.5°C above pre-industrial levels and has helped create EV 100, a coalition of more than survey found that climate is a bigger concern in Brit- reaching net-zero emissions by 2050 (more than 177 50 major multinationals—including DHL, UPS Consumer ain than immigration, the economy, or crime. companies have made that pledge to date). and IKEA—that uses its combined investment Products Already 2020 is being called the start of the deci- A business’s value chain is on average five-and-a- power to stimulate mass demand for electric vehi- Industrials sive decade for climate change. What chance we have half times larger than the business itself, incorporat- cles, invest in the necessary charging infrastructure, of keeping warming at 1.5°C will be determined in Mining & Metals ing how a company’s products are sourced, made, and advocate for supportive policies that can boost the next few years. And though the answer is com- moved and used. To achieve these targets compa- EV uptake. It’s an area where businesses can lead, as Oil & Gas plex and demands leadership, the question compa- nies are powering their operations with 100 percent they account for half of all light vehicle purchases nies face from society will be simple: Are you part of renewable energy, pioneering breakthrough tech- (essentially, all vehicles except heavy trucks). Transportation the problem, or part of the solution? And why should u nologies, adopting circular manufacturing processes We Mean Business’s hope is that this kind of Utilities & Power we believe you? and reorienting their portfolios around lower-car- system-level approach, applied across other heavy- Producers phil drew is a Partner in Brunswick’s Business & Society bon products. emitting sectors, may unlock effective business 0% 50 100 practice, and based in London. He was formerly commu-

The pledges also reflect another key shift: action at scale. HOEY PETER CHART: nications director for Climate Week.

26 brunswick social value review - no. 1 - 2020 brunswick social value review - no. 1 - 2020 27 M company hasmade ambitiouscommitments to issues. societal of Under range nary McMillon, the accomplished by noother company intheworld. companies to seeking improve theworld—a feat secutive appearances on Fortune magazine’s listof cent on steady insalesandearnings. rises Walmartthe value of stock hassoared about50per McMillon Executive Chief became Officer in2014, beneficial canbe to shareholders. purpose of Since enue, Mr. McMillon hasproven thatabroad sense atlarge. society shareholders but alsoemployees, customers and forment calling public companies to notonly serve influential CEOsthatlast summer issued astate - theBusiness Roundtable.of That’s theUSgroup of Doug 28 created innovative for programs debt-free obtaining investing billions inwage increases, Walmart has last year.has doubled, December of as of Besides From alow pointinlate 2015, Walmart’s share price results. instantaneous the absence of efits, that worried astrategy Street,Wall in especially McMillon decided to wages andincrease raise ben- from Amazon initsUSstores, growth andsluggish years ago that Walmart competition faced serious regard to Walmart employees. Recognizing several other constituencies strong isespecially in serving some ammunition. intheUS,to shootings ithaseliminated thesaleof for thesameprice asregular detergent. In response percent more effective, usingmore without water— detergent thatis30percentdry more efficient and50 product. For example, Walmart worked on alaun- onhas focused improving product sustainability by reduce emissions waste, andlandfill carbon andit on jan. 1, walmart executive chief officer

Global retailers like Walmart face anextraordi- thatsametime,During Walmart made five con- theworld’sAs CEOof largest company by rev- Five years later, nobody isquestioning thatmove. Evidence thatshareholders by well served canbe McMillon atwo-year began term asChairman c MILLON -

DOUG Taking the By HARRY W.HARRY CLARK LEADER PROFILE US BUSINESSROUNDTABLE. to hisnew role asChairmanofthe Now hebringshissenseofpurpose shareholders andotherstakeholders. As CEOofWALMART, hehasrewarded piece of creating long-term value,piece of isuniquely Doug ments to workers andcommunities asacritical of corporate reaffirmingcommit - thesignificance all Americans. At is ourorganization when atime agrowing andinclusiveof economy thatserves understands leaderlooking who the importance leadership, Mr. Dimon said, is a forward-“Doug McMillon’sber of appointment to theRoundtable Chasegan &Co. In theannouncement lastSeptem- ceeds Jamie Dimon, JPMor andCEOof Chairman in thejob he’s only 53. still Walmart since founder Sam Walton. After six years the minimum wage. college degrees, on Congress andhecalled to increase brunswick value social review As Chairman of theRoundtable,As of Chairman McMillon suc- McMillon executive isonly thefourth to lead

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PHOTOGRAPH: DREW ANGERER/GETTY IMAGES LEADER PROFILE DOUG McMILLON experienced to lead by example and ensure our think most people understand that we’re not trying voice is heard.” to make a political statement. We’re just trying to Below, McMillon answers questions from Harry help create a safer environment. W. Clark, Senior Counselor to Brunswick. Why has Walmart invested so much in Did the intensity of response to the Roundtable education for associates? statement surprise you? In the end, it’s a win for us and a win for our asso- We did underestimate the response to the corporate ciates. It’s really encouraging to see the response of purpose statement and it generated more reaction our associates to these benefits. For example, through than we expected, both negative and positive, and our Live Better U. program, Walmart associates can that’s good because it’s an important conversation at earn a debt-free college degree for the equivalent of this time in our country’s history. a dollar a day. We introduced the program a year and While the statement made clear that we must pre- a half ago, and associates love it. We have 9,000 stu- serve and maintain America’s free market system, “While dents in classes now and nearly 18,000 accepted into we also should look at ways that all stakeholders can different a program to date. That’s in addition to 1,710 associ- benefit from the work of the market. stakeholders ates who have already completed a program. The statement both confirms what companies may have We’ve expanded the number of colleges and like Walmart do when it comes to our commitments degrees offered, including tech and healthcare to all stakeholders and challenges us to do more. competing degree options. All told, more than 156,000 asso- Member companies of Business Roundtable have concerns ciates have submitted interest forms, and I just done a lot when it comes to increasing wages, invest- in the short see this continuing to grow, especially given the ing in skills training and providing better access to high cost of tuition and the enormous time com- education. Business Roundtable will be doing more term, I mitment of pursuing a college degree. Live Better to advocate for solutions to increase opportunity for believe all U. removes those barriers for our associates. And Americans of all backgrounds. stakeholders’ when they’re done, they’re not saddled with years A common theme among skeptics of the state- of student loan debt. ment seems to be that the interests of different interests are I can’t speak to specifics as to how others may stakeholders will always be inherently at odds. inseparable approach this issue, but from conversations with While different stakeholders may have competing in the other CEOs, I know this is top of mind and we are concerns in the short term, I believe all stakeholders’ proud to have taken a leadership position. Investing interests are inseparable in the long term. long term.” in our associates is an investment in the future of our An obvious example is the environment, and the company. Because of technology, jobs are changing broad and long-term impact that comes from suc- fast, and we want a workforce that’s ready to adapt cessful efforts on environmental sustainability. Even if they decide to pursue a career outside of It’s the objective of creating long-term value that Walmart, they’ll be ready to contribute. makes for successful companies and more opportu- nity for all stakeholders. How do you ensure that Walmart stays on top amid such rapid change? Do Walmart associates expect you to take a As a company we’ve been on a journey of transfor- position on societal issues? mation and shared value over the past few years, Over the past few years, we’ve taken stances on several and to be able to adapt and change, it’s important to societal issues. I don’t know if our associates expect understand what won’t change. us to, but I don’t think they’re surprised when we do. We’re fortunate at Walmart that our founder We have 2.2 million associates all over the world. Sam Walton provided us with a great purpose and We’re not just in communities, we’re a big part of a strong set of values that we believe are timeless. We them. And our environmental sustainability efforts save people money, so they can live better, and we do are really investments in communities and people, so by having respect for the individual, acting with and I believe they’re appreciated. integrity, providing great service to the customer, As for gun safety, we already had made some and striving for excellence. Those are our anchors, changes in our policy on sales of firearms and our constants. ammunition, and we wanted to make sure we still But other than our purpose and values, every- harry w. clark is a served the sportsmen as we made commonsense Senior Counselor to thing else is open to change. I believe that’s key to changes we felt necessary in a changing world. I Brunswick. reinvention and growth. u

30 brunswick social value review - no. 1 - 2020 CORPORATE STAKEHOLDERS EMPLOYEES

TAKING a STANCE he business case for ceos taking a stand Employees Second, social purpose has become more embed- on social issues is growing. Whether it’s calls want to hear their ded in all aspects of corporate enterprise—strategy, for leaders to speak out on racism, guns or products, innovation—putting a company’s values gender rights, companies are increasingly leaders speak front and center. The recent surge in companies Texpected to have clear positions on matters up on societal “refreshing” their corporate values and mission state- affecting society as a whole. Even for concerns that issues, says ments is indicative of this. Naturally, that also figures don’t appear to directly impact operations, and even Brunswick’s into attracting talent. Younger employees have made on social issues that inflame polarized political views, MARIA FIGUEROA it abundantly clear that they prefer to work for com- customers and employees today expect that com- KÜPÇÜ. panies that are stewards of society. pany leadership knows when and how to use its voice Third, to boost productivity and employee to shape public discourse. Corporate leaders are hav- engagement, companies have spent a good deal of ing to get more comfortable speaking up. effort to reassure workers that they can “bring their Several trends have converged that mark this as whole selves to work.” But that carries a reciprocal: a genuine shift for businesses. For one, the rise of When the outside world challenges issues of iden- social media has inflamed deep divisions, leaving tity—gender, race, sexual orientation, disability and leadership from traditional institutions hamstrung. others—employees now expect that their companies Governments and even religious institutions are will stand up for them. often divided against themselves over the handling As a result, social issues today affect the bottom of social concerns. Society is looking to the world of line in ways that would not have been visible even

ILLUSTRATION: FABIO CONSOLI FABIO ILLUSTRATION: business to help fill that void. 10 years ago. Certainly leaders are becoming more

brunswick social value review - no. 1 - 2020 31 CORPORATE STAKEHOLDERS EMPLOYEES aware of how social concerns may be affecting their They also expect their business’s position to be been relegated to homes and communities were learning the context of employees’ lives and gauging business. But also, awareness among employees, cus- consistent, extending to employees the same level of encouraged in the PwC workplace. While a work in how feelings and views about the effectiveness of the tomers and other stakeholders is creating more direct concern on issues expressed to customers and those progress, Mr. Ryan’s institutional commitment to company’s stance and response may have changed. impacts. Hiring and employee retention, productiv- outside the company. No longer is it sufficient to reas- openness, building trust and understanding, allowed Align your message for all stakeholders—employ- ity, remaining competitive, relationships with part- sure employees internally and say nothing externally. a more honest airing of these concerns and demon- ees, customers, regulators, investors. With social ners, customers and clients—a downturn in any one A majority of respondents indicated that internal and strated the firm’s commitment. media, what you tell any one of these groups will be of these, brought on by a lack of response or poorly external audiences were equally important. PwC’s experience highlights the degree to which received by the others. Your communications must considered response to a social problem, can result in This sometimes means wading boldly into politi- companies must be prepared to respond quickly and be tailored to each stakeholder group, but you risk reputational harm. cal issues. Where the lines between social and political confidently, with a message of clarity and compas- losing the trust of everyone if the message to each is are blurring—race, immigration, LGBTQ rights, the sion, on issues that affect not only their relationships not clearly guided by the same core set of principles. THE NEW EMPLOYEE RELATIONS effects of climate change—it is critical to identify in with investors and regulators, but also their employ- Take the time to do scenario planning. Any event In a Spring 2019 survey of 2,048 US employees by advance where public comment from your business ees and the community as a whole. As a response to will carry unknowable variables that will affect a Brunswick Insight, two-thirds selected “the values of will be appropriate. As one corporate employee put it social issues becomes more expected, the need to be company’s response in some way. But you can limit the company” as the most important issue for a CEO 93percent in a recent employee engagement project Brunswick proactive has increased. Certainly, when a response the confusion by deciding now what issues are most to communicate. As a group, respondents ranked of finance- worked on, “Every political issue has become a social to a major issue in current events is perceived as important to the company, what an appropriate level communicating values higher even than company issue … What is the difference anymore?” inadequate—whether the Parkland, Florida school of response might be to a particular issue, who will strategy or profitability. Importantly, a majority see news readers shooting or a supply chain labor issue—employee respond to each group of stakeholders, through what the CEO as the face of the organization and its values, selected ANTENNAS UP morale, loyalty, retention and recruiting are affected channels and, if internal review is warranted, how with 58 percent selecting “setting the moral tone of “leadership Businesses could once afford to wait weeks or even and the business as a whole suffers. “If you’re car- that will be handled efficiently before it is sent. the company” as important to the CEO’s job. months to vet the right public affairs response to a rying all these concerns when you come to work— What’s clear is that any calculation for business Significantly, when asked to select factors they felt you recognize flare up; they now must be prepared to do so within whether you’re a woman, whether you’re black—and success must now involve how employees feel—how were important to consider when deciding to stay in and respect” hours. In social media analysis of recent situations— you can’t share how you feel, the fact that we have they are engaged, how comfortable they are being their current job, more than 90 percent of employee as an including the response to North Carolina’s so-called you in the seat means nothing,” Mr. Ryan told the personally represented by the business. What work- respondents chose “having leadership that they rec- “bathroom bill”—the window for attention in social Journal. “We want you to be here mind and body.” ers think and say about their business matters. ognize and respect.” Further, over 70 percent also important media has been 48 hours or less. A corporate response Leadership is coming to recognize that good chose “having a leadership stance on social issues.” reason that misses the mark can tarnish a company for years. BUILDING THE NEW BOTTOM LINE maria figueroa küpçü business practice now demands understanding and This visibility on social issues naturally impacts And employees look to those public moments as a Corporate leaders should be actively working to is a Partner, Head of engaging with the social context of their stakehold- for staying Brunswick’s New York Which Audience is hiring. A majority of respondents identified a lead- yardstick to measure how well their company is led gauge approachingShould Corporate social concerns Leaders that will demandWhich Issues Should ers’ lives. It has to come from the top and be reiter- in their office, and leads the Most Important for ership stance on social issues as an important con- and living by its stated values. a responseTake and a planPersonal out how St theyance will on handle them.Corporate Leaders Address ated in actions throughout the organization. There is firm’s US Business and Leaders to Focus on? sideration when weighing a job change or joining a current job. The key to addressing touchy social issues effec- In that process,Social keepIssues three? considerations in mind:and PotentiallySociety practice. Improve Survey ? no substitute for leaders having a deep understand- new employer. Our survey polled two groups: read- tively in real time is advance planning. In the wake Be prepared to deeply listen—first as a fellow research and analysis by ing of the values of the organization, communicating noah kristula-green, ers of finance publications, and employees at large of the shooting of 12 police officers in Dallas, Texas, human being and second as corporate leader. Make an Associate with them consistently to the business and to the world, companies. Of the two, the finance-oriented group in 2016, PwC’s newly installed US Chairman and sure this conversation is not a one-time event, but Brunswick Insight in and being prepared to act quickly and effectively to felt social issues were more important—73 percent Senior Partner Tim Ryan responded by scaling up a an ongoing process in which leadership spends time Washington, DC. stand by them when events warrant. u versus 61 percent in the general group. conversation with partners and staff firmwide to air Our respondents’ top three choices for social issues their concerns. This resulted in a determination to THE LEADERSHIP EMPLOYEES EXPECT company leaders should be working to address were: move more CEOs to not only lead similar conversa- diversity and inclusion, gender equality and income tions in their own organizations, but work together to Should corporate leaders take a personal Which issues should corporate leaders Which audience is most important for inequality. Collectively, the group ranked those issues advance issues of diversity across all workplaces. PwC stance on social issues? address and potentially improve? leaders to focus on? above more traditional business employment con- co-facilitated the creation of CEO Action for Diver- 7% Healthcare 47% cerns, such as job retraining, sexual harassment and sity & Inclusion™, a network that now includes over 15% Access 47% 20% 21% healthcare access. Moreover, between half and two- 650 companies, nonprofits and academic institutions. External No Sexual 47% thirds of respondents agreed that it is appropriate to Then, in November of last year, 26-year-old Harassment 41% Audiences 49% 54% Only when publicly disagree with the company if its position on Botham Jean, a PwC Senior Associate in Dallas, was Job 49% the issue 57% 55% social issues doesn’t match their own. shot and killed by an off-duty police officer in his Retraining 45% Internal & directly External a ects the Not every issue demands a public response. own apartment. Mr. Jean was black and the officer, Income 50% Audiences company Employees recognize the social dimensions of their Amber Guyger, is white. Ms. Guyger says she thought Inequality 49% Internal company’s business model and where the company’s she was in her own apartment and that Mr. Jean was Yes Gender 50% Audiences Equality resources can best be used. A pharmaceutical com- a burglar. “All of a sudden, it was one of our own,” Mr. 44% 42% 31% 24% pany should have a stance on access to healthcare, Ryan told The Wall Street Journal earlier this year. Diversity and 51% 23% which means taking a thoughtful position not only The national outrage and concern surrounding Inclusion 48% on global health issues, but also on healthcare legisla- the case were fueled by a heavy burden of questions, Employees Finance Readers Finance Readers Employees Employees Finance Readers Brunswick Insight Survey of 405 finance readers and 2,048 employees at large companies, conducted in April of 2019. tion, such as the proposed Medicare for All in the US. anger and fears. Conversations that had typically HOEY PETER CHARTS:

32 brunswick social value review - no. 1 - 2020 brunswick social value review - no. 1 - 2020 33 D 40 years. ping into famine. was credited keeping from with four countries slip- year hetook over itsleadership, theorganization theUnited of General retary Nations. In 2017, the Programme, Under-Sec atthelevel aposition of - nesses play. mission, andtherole andbusi thatcorporations - We talked to himabouttheorganization’s evolving experience to one only where affect aminority. they where and hunger poverty were the most common the last100years, aswe’ve moved from aworld has contributed over tochange insociety aradical including school meal programs, over all theworld. and has gone on to foster resource food networks, supplies. food disrupted It quickly proved effective morein Iran thatkilled and than12,000people a1962earthquake crises, with beginning of series project wasthrown immediately into a handling Unitedformed Nations could deliver aid. food The President D. Dwight Eisenhower thenewly to if see outgoing US atthesuggestion of was anexperiment Government. of Politicsof at Harvard University’s Kennedy School Foundation theInstitute andheisa1999Fellow of in Courage Award from theJohn F. Kennedy Library Representatives.House of He hasreceived aProfile 21,the age of to hewaselected theSouth Carolina the youngest inthestate’s history. Prior to that, at South asGovernor Carolina,ously served of one of Law,South Carolina School of Mr.- previ Beasley 34 more efficient by decentralizing decision-making tions. We’re working harder to make our operations to improve our emergency preparedness- andopera isto maintainthisleadership,priorities to continue other essentials to quickly. people ourtop Oneof community reliestarian on WFP to and food get ern inMarchAfrica thisyear—the entire humani of - emergency—for example, Cyclone Idai insoutheast- andsupplytics chain, there’s sowhen or an acrisis thebest. of best We- have inlogis expertise special In world, thehumanitarian WFP isconsidered the Food Programme? Whatare your top priorities? How have you shiftedthefocus for theWorld

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though, andthat’s conflict. of largely because We’ve seen hunger go upinthepastfew years, creates hasreduced hunger inmajor proportions. doubt inmy mindthat theeconomic it growth want to make to that economic system, there’s no wealth globally. Whatever tweaks might people prise, capitalistsystem thathascreated somuch went into thatsuccess, including thefree-enter million. That’s a huge achievement. factors A lot of has declined from more than1billion to about820 people about 7.5billion, hungry but thenumber of world’s population grew from 3billion about to That’s 60-year anearly inwhich the frame time are they different? How are theissues andhow thesameas1961 the entire world is. work thatfosters peace andstability, thebetter off increased hunger, sothemore we cando long-term a more peaceful one. Conflict isamajor driver of more stable politically, is andamore stable country becoming aregion or country utes of to theability national aid. Research suggests thiswork- contrib resilient. less inter need means the people That could go on andon. grown producealso uselocally for itself. thefood I preparedbe for the future—and inmany areas we keep children grams and canlearn inschool sothey other markets to ourschool flourish; profeeding - and thatenableswork agriculture on infrastructure Our Food for Assets put to help people programs grow. We’re thatsamephilosophy applying at WFP: but to create pathways sizes all to for businesses of Government played arole, notto dictate outcomes, textiles to andagriculture high-tech manufacturing. thestate’stransform economic production from SouthGovernor Carolina, of Iworked hard to nomic andtransformation. growth When Iwas emphasis foster thatcanhelp on programs eco- ourteams onand supports theground. and streamlining how ourRome helps headquarters brunswick value social review Today, it’s simply to notenough people, feed As economies stronger,get also moreget they We are resources alsoputtingadditional and

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PHOTOGRAPHS: TOP; WFP/MOHAMMED BOTTOM; FABRICE COFFRINI/AFP VIA GETTY IMAGES the them. Put simply, we from help need theprivate We’ll never thatZero meet Hunger without goal vate sector to involved be to inthefight end hunger. We absolutely business- leaders need andthe pri they engage withtheWorld Food Programme? How business can leaders take action? How can behind behind WFP’s motto: saving lives, lives. changing to succeed on itsown. That’s thecore philosophy tion thatenables acommunity, regionor country causes, andhow- we create transforma astrategic more isfocused goal on thelong term, on theroot development thatcanmake stronger. countries The to save lives, but alsoto change them, through a war that’s we what do. We have a dual mandate— course inan emergency like of though acyclone or brunswick value social review

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gap without theprivate sector’s without gap help. We the need ably around $10 billion, and we can’t that bridge ernments. But thetotal out there need isprob- for which ouroperations, come from mostof gov- base.skills that matchesfinds a waycontributing their of core grams. That’s thelist. just some of Each company ers andisatop funder for ourschool pro feeding - ics inthefield; Mastercard digital vouch - supports provides to on-the-ground our mechan training - emergencies; during tions people Renault Trucks basket;our food deploys Ericsson telecommunica - usimproveDSM helps of quality thenutritional build ourcapacity, funding. andto uswith help sector inthree areas: to provide expertise, to help We’ll receive about $7 billion this year a total of have tea. have tea. breakfast they only they cannot afford When area. Hassan intheBani fighting fleeing recent live inatentafter andhisfamily Saleh Food Programme. Director of the World David Beasley, Executive 35 CORPORATE STAKEHOLDERS SOCIAL ADVOCATES private sector more strategically engaged to truly You’re in the field in some of the poorest and help solve these problems. most fragile parts of the world. What part can When businesses work with us, they help us do digital technology play? more than simply feed people. They help us build If we are serious about the Sustainable Development economies that have stronger, more efficient mar- Goal of ending hunger by 2030, we have to do more kets. That’s a win-win—good for us and the people to harness the power of technology to deliver ser- we help, and good for the businesses that want to vices efficiently and also to raise additional resources. operate in those countries. And as I tell business We want to be fully data-driven in our opera- leaders all the time, if you want to really make a tional and organizational decision-making. To me, difference, a real and long-lasting impact on the one of the keys is to make sure we know in real time world, you need to work with WFP. who is receiving what help, where that help is being In 1820, 94 percent of the world’s population delivered and at what cost. There are three main rea- lived in extreme poverty. Now, it’s 8 percent. We can sons: First, to make sure that those who need help help drive that even lower if we effectively tap into “In 1820, the most are getting it. That’s a core humanitarian the unique capabilities of the private sector. principle, prioritizing assistance to those who need it the most. Secondly, we want to be both efficient and South-South cooperation is an important effective in that service delivery. Building up our dig- component of the WFP’s strategy. How are ital capabilities in biometrics and other technologies businesses joining in that cooperation? will give our donors the confidence that we are using One really important part of South-South coop- the money from their taxpayers effectively. eration is to make sure we’re supporting our coun- The other aspect has to do with advocacy, aware- try offices. They know how to build the best part- 94percent ness and fundraising. Only about 1 percent of our $7 nerships for local-level impact. So while we work of the world’s billion-plus this year will come from private sources, with global companies, we’re making sure that it population and there’s only so much more money we can raise is about offering local solutions and drawing on from governments. That means we need to do much local expertise because that creates a really impor- lived more to raise awareness about global hunger and tant resource. in extreme about what can be done about it and how people can One example is called the Farm to Market Alli- poverty. participate. We’re putting more emphasis on making ance, a public-private consortium which oper- sure people know how they can contribute. Bottom ates most specifically in Kenya, Tanzania, Rwanda Now, it’s line, with all the wealth in the world today, there’s no and Zambia. We have seven financial institutions, 8 percent.” excuse for children going hungry. agribusinesses and farmer’s groups all working together to try and make sure that smallholder Who is the most inspiring person you have met farmers can do more than subsistence farming. as the leader of the WFP? One of the biggest problems in agriculture is the WFP has given me a never-ending stream of inspir- lack of an operating market for the small farmer. ing people. I think of this woman I met in Niger. She They don’t have the roads or other economic infra- was standing on the top of a hill, talking about the structure. The FtMA helps these farmers find com- successes she’d had recently with her small farm, mercial buyers for surplus crops and also shows thanks to some help we’d given her community. I them how to improve yields so they can have more remember her saying, “Now I feed myself, my family to sell. Since 2015, it’s helped about 150,000 farm- and my village.” It’s just so inspiring to talk to some- ers. In the next three years we expect that to grow one like that, who is so determined to help not just to 1.5 million, generating $500 million of new herself but others. market value by 2022. Another person that comes to mind is Abiy We’re also helping develop and encourage South- Ahmed Ali, who won the Nobel Peace Prize this South cooperation by working with three Centers year. I knew him before I came to WFP but have of Excellence—one in Brasilia, one in Beijing and worked with him even more closely since. It’s great a new one that I visited earlier this year when it to see his hard work, on behalf of Ethiopia and launched in Abidjan, Côte D’Ivoire. These centers Africa, get the recognition it deserves. The world’s help make it easier to share expertise in areas such biggest problem is brokenness, so when someone is a as nutrition, school feeding or agriculture, and robert moran succeeds at repairing that brokenness, at helping Brunswick Partner based companies like DSM get involved to help build that in Washington, DC, and other people love their neighbor as themselves, it technical expertise and encourage innovation. leads Brunswick Insight. really is inspiring. u

36 brunswick social value review - no. 1 - 2020 CORPORATE STAKEHOLDERS REGULATORS

hen the eu strengthened regulations on personal data, the implications reverber- Wated way beyond Europe. Now the EU is intro- ducing a strong suite of more stringent regulations to support the Paris Climate goals. The expectation is EU SETS that these will become the global gold standard. Voluntary, industry-led initiatives to integrate environmental, social and governance consider- THE PACE ations into investment and ownership decisions have been around for a long time—as any large investor or fund manager can tell you. Interest in these issues however has been growing dramatically in recent years and attracting the attention of regulators. Existing voluntary initiatives include the Prin- ciples for Responsible Investment (PRI), a global, independent not-for-profit investor group. Founded in 2006, PRI proposes six aspirational principles and works with signatories to implement them. By 2018, membership included 2,250 organizations with an estimated $80 trillion assets under management. Investors such as Schroders and Aviva have long been actively engaged on these issues. Patrick Arber, Senior Analyst on Global Public Policy at Aviva, says ESG concerns “affect how we do business, how we manage risks, how we assess liabilities.” In 2018, the European Commission moved be- yond this voluntary orientation. Legislation was pro- posed: to require most EU-licensed asset managers to actively and comprehensively integrate ESG fac- tors into investment decisions; to legally define what is a “sustainable” economic activity; and to enhance disclosure and transparency requirements on cli- mate-related information in corporate reporting. the capacity of the public sector alone, a large-scale The EU is set to These proposals have been widely recognized as diversion of private capital toward lower carbon become the first the first comprehensive effort by governments and alternatives is essential. regulators to look at ESG on a systemic level—and The sheer scale of the challenge and the potential mover in stronger new regulatory requirements for asset managers will risks to financial stability led the G20 to focus first climate regulation, come into effect at the end of 2020. Investor relations on the need for greater disclosure of climate-related and the impact teams have already noted a sharp rise in the number metrics to help ensure a smoother transition toward will be global, say of ESG-related questions they receive. That trend a lower-carbon economy. The danger, as Mr. Car- Brunswick’s will only intensify as this milestone approaches. ney noted in 2015, is that “a wholesale reassessment What changed? In a word, Paris, and the engage- of prospects, especially if it were to occur suddenly, FIONA WRIGHT and ment of central bankers led by Bank of England could potentially destabilize markets, spark a pro- AYRTON THEVISSEN. Governor Mark Carney under the G20 umbrella. cyclical crystallization of losses and a persistent tight- In 2015, 195 countries signed up to the Paris Cli- ening of financial conditions.” mate Agreement and the goal of limiting the increase This is the so-called “stranded asset” risk. Accord- in global average temperature to less than 2°C above ing to Martin Spolc, Head of the Sustainable Finance pre-industrial levels. Massive new investments are and Fintech unit for the EC’s Directorate General for needed to achieve this—the Financial Stability Financial Services, one of the EC’s main policy objec- Board estimates global investment of $1 trillion per tives is to “ensure that the financial sector takes risks year is required, while the European Commission stemming from these challenges into account.” believes that at least an additional €180 billion per The most concrete outcome of G20 engage-

ILLUSTRATION: MELINDA BECK MELINDA ILLUSTRATION: year is needed in Europe. As this is clearly beyond ment so far is the 2017 report of the Task Force on

brunswick social value review - no. 1 - 2020 37 CORPORATE STAKEHOLDERS REGULATORS

Climate-Related Financial Disclosures (TCFD), rec- The most complex of the EC’s first proposals calls ommending that all companies should report com- for a “taxonomy” to systematically identify sustain- parable information across a range of key metrics able economic activity. That remains the focus of including water, energy and land use, greenhouse gas intense ongoing negotiations and technical work. emissions and waste management. They should also However a further round of legislation is expected provide detailed information on how climate-related from the new Commission in 2020, particularly in risks are identified, assessed and managed, includ- light of the so-called “Green wave” in the 2019 Euro- ing testing the resilience of their corporate strategies pean Parliament elections. This is expected to include under different climate-related scenarios. changes to both the EU Nonfinancial and Financial Like the PRI, TCFD also invites companies to “We cannot Reporting Directives; much of the broader financial endorse their recommendations. Financial insti- services regulatory framework; new accounting rules tutions that have signed up manage a combined solve this to better reflect stranded-asset risk; and additional US$100 trillion in assets—or 120 percent of global as long as support for sustainable infrastructure projects. They GDP. In the last two years, various central banks have there are are all aimed at tackling what Mr. Spolc describes as also become signatories, including Singapore, Japan, “the mismatch between the short-term perspective Morocco and Hong Kong. companies of an investment analyst and a long-term sustainabil- Although TCFD recommendations were pro- that would ity narrative.” posed as a voluntary framework, making them not act.” Ultimately, this agenda is not about punishing mandatory has become the obvious next step. As the polluting industries, but creating effective tools and PATRICK ARBER, TCFD itself warned in its June 2019 status report, Senior Analyst, incentives to support opportunities to reduce envi- given the urgent need for action, it is still the case that Global Public Policy, ronmental footprints. As Mr. Spolc acknowledges, Aviva “not enough companies are disclosing information “There is no point in creating this elaborate frame- about their climate-related risks and opportunities.” work if nobody uses it.” Early movers like the PRI have been strong sup- The EC is very aware of the need for a global porters of the TCFD; PRI staff have also served approach in this area, given that Europe accounts for as TCFD members and in March 2019, the group only 11 percent of global GHG emissions. An Inter- announced steps to fully integrate TCFD recom- national Platform on Sustainable Finance, or IPSF, mendations into their requirements for signatories. was launched in October 2019 to work on meeting Most financial intermediaries are fully on board the Paris climate goals and strengthening interna- with this push for more and better information on tional cooperation to that end, possibly including the companies they invest in. “Investors need more some alignment of initiatives and approaches among granularity and data,” says Elisabeth Ottawa, Deputy willing countries. Founding members include the Head of Public Policy at fund manager Schroders. EU, Argentina, Canada, Chile, China, India, Kenya “We now receive products from investees, but what and Morocco. we need is the data to conduct our own assessment.” The IPSF will work alongside other international This data will also help investors engage with groups including the Central Banks’ and Supervi- companies on the resilience of their strategies and sors’ Network for Greening the Financial System and their capital expenditures. Active investors like Sch- the Coalition of Finance and Economy Ministers for roders have been reluctant to divest from carbon- Climate Action, which has over 20 ministers cur- intensive sectors due to the belief that doing so rently participating. would drive these companies into the arms of “less Assuming the results that emerge from the ongo- responsible investors.” ing EU work are seen as reasonable, the expectation Ms. Ottowa says Schroders welcomes the require- is that they will set the standard that rolls out inter- ments for asset managers to integrate ESG fac- nationally, as happened with General Data Protection tors into decision-making. “We would make these Regulation (GDPR) on the issue of personal data. changes anyway as there is strong market demand for And the global priority of the climate issue is far more ESG coming from institutional investors and poten- universal and pressing than even regulation of per- tial new client groups like millennials,” she says. sonal data, affecting the entire planet. So far, almost Mr. Arber echoes this, noting that Aviva has been every other jurisdiction in the world has committed actively calling on policy makers to act, describing fiona wright is a to act. Once international companies work through Partner with Brunswick. the voluntary framework as insufficient “due to the ayrton thevissen is how to adapt to the requirements of these new regu- nature of the risk we face. We cannot solve this as an Associate. Both are lations, they will have established the foundation for long as there are companies that would not act.” based in Brussels. application across their entire operations. u

38 brunswick social value review - no. 1 - 2020 BUSINESS ACTION INTRODUCTION Business Action IN THIS SECTION, we provide an up-close look at four companies from around the world and across sectors taking action on societal issues.

SIME DARBY PLANTATION, the world’s largest producer of Certified Sustainable Palm Oil, based in Malaysia, has set out to improve the traceability of palm oil supply.

AFRICELL, the leading regional telecoms provider in West Africa, stepped up to help stem the dreadful rise of the Ebola epidemic.

BRAMBLES, an Australian-based global logistics business, is using data analytics to help customers to meet their sus- tainability ambitions.

TAKEDA, a Japanese pharmaceutical company, has leapt up the rankings in the Access to Medicine Index through a forceful campaign to reach those without healthcare.

brunswick social value review - no. 1 - 2020 39 BUSINESS ACTION SIME DARBY PLANTATION

“THIS IS A PALM OIL FREE CAFÉ,” announces a sign in the window of a San Francisco coffee shop—but it could be a hipster café anywhere in the world, as people heed calls from environmen- tal campaigners for a boycott of palm oil. Hollywood celebrities and insta-influencers have been jostling to lead the conspicuous non-consumption of palm oil, with lifestyle media helpfully publishing lists of palm-oil free products. The public attention around palm oil is the result of relentless and imaginative campaigning by activ- ist groups such as Greenpeace and others, who have successfully linked, in the minds of consumers, palm oil production with the destruction of habitats for the endangered orangutan. The campaigns have targeted brands containing palm oil—including Colgate, Doritos, Head & Shoulders, Johnson’s Baby Lotion, Kit Kat, M&Ms and Oreos. Their message to consumers is clear: These products are destroying rainforests and killing orangutans. As demand for palm oil has increased, so defores- tation has accelerated: Some estimates say that about 36 football fields’ worth of trees are lost every min- ute due to deforestation. Aside from the devastating impact on biodiversity, environmentalists are con- cerned that this is contributing to climate change: Deforestation represents up to 20 percent of all CO2 emissions, more than the entire transport sector. Despite years of pledges from the palm oil industry, rainforest destruction continues around the world. Unsurprisingly, concern about these environmen- tal impacts has affected the entire palm oil industry. As well as boycotts in major consumer markets, the European Parliament is driving through regulation, and US presidential hopefuls are talking tough on Drawing the Line on palm oil. It’s taking its toll: The palm oil commodity Increased demand for palm oil has seen price has plummeted and share prices have fallen for deforestation accelerate: the major palm oil companies. one estimate concludes An interesting time, then, to take the reins of one 36 football fields’ worth of trees are lost of the world’s biggest palm oil companies. In July every minute. Palm oil 2019, Helmy Othman Basha became Group Manag- plantations are the ing Director of Sime Darby Plantation, which pro- habitat for orangutans, an endangered species. duces around 2.5 million tons a year, and is the largest For many, these DEFORESTATION humanlike great apes HELMY OTHMAN BASHA, Managing producer of Certified Sustainable Palm Oil. As such a big player, Sime Darby was feeling the effects of the have come to symbolize Director of palm oil producer Sime the issue of deforesta- pressure on palm oil. “My first reaction was this just tion—and inspire the Darby Plantation, talks to Brunswick’s isn’t fair!” confides Mr. Basha. “After all, we’ve been need for action. LUCY PARKER about transparency as the recognized as leaders in sustainability for many years.

front-line of transforming the industry. IMAGES ENES/GETTY CAROL,RITA NORA PHOTOGRAPHS: We’re not the ones doing the deforestation.”

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Sime Darby Plantation was a founder member of deforestation, and investors who want assurance that the Roundtable for Sustainable Palm Oil (RSPO), their financing is not associated with deforestation. and 30 years ago it was the first company to intro- “We’re inviting people to use Crosscheck,” says duce a “zero burning policy.” The company has a Basha, “and to alert us if they identify a problem on long track record of implementing sustainable prac- the ground, so we can take action.” tice. “But I realized that it wasn’t enough for us to Conservation groups welcomed the initiative. concentrate on the sustainability of our own prac- Conservation International described it as a “major tices alone,” he says. “We are a leading player in the step forward” and a “first of its kind for the industry.” Palm trees Palm fruit Crude palm oil Refined palm oil industry, and deforestation is an industry problem. At the end of 2019, Dr. Simon Lord, Sime Darby’s That makes it our problem. So, I want us to play our Chief Sustainability Officer, was named on Eco-Busi- part in finding a solution.” ness’ “A-List” of the most influential sustainability use of the information that Crosscheck can pro- Palm oil is in everything industry players, it presents the possibility of future Soon after taking the reins, Basha announced a leaders in Asia Pacific—testimony to his achieve- vide,” Basha says. Ideally, consumers will be able to from soap to chocolate. growth without further land clearance. Above is the path from new company ambition: draw the line on deforesta- Other ments in a long career in the field. Under his leader- use the tool to ensure their purchases aren’t contrib- palm tree to the refined Sime Darby’s ambition to create a deforestation- tion and raise the bar for the industry. “We have to ship, the company has established initiatives across uting to deforestation. palm oil that winds up in free supply chain for palm oil is an example of a create a deforestation-free supply chain; it’s the only oils use the responsible business agenda, from sustainable A new spirit of collaboration is starting to shake the products we use company turning to confront the most critical issue every day. way forward,” he says. “We have to make deforesta- up to agriculture to human rights and exploitation. Two up the industry. In late 2019, a coalition of 10 major it faces. Instead of relying on its own historic creden- tion an unviable way to participate in our industry.” years of painstaking work from his team—mapping palm oil producers and buyers announced a joint tials in sustainability, Sime Darby Plantation is set- Of course, creating a deforestation-free sup- sources of supply, supply relationships and landscape project to support and fund the development of a ting out to raise the bar for the industry. ply chain will not be an easy task. “Like all the big risk—made the launch of Crosscheck possible. new, publicly available radar-based forest moni- “This industry has been critical to providing players, we have a really complex supply chain, But Crosscheck is just a first step: The point of toring system known as Radar Alerts for Detecting economic prosperity and livelihoods for our coun- complicated by a large number of players,” he traceability is to eliminate bad practice in the sup- Deforestation (RADD). Alongside Sime Darby and try and for the region over many years. And we’re explains. “We have dozens of refineries, sourcing ply chain. Over time, NGOs have become frustrated some of its industry peers, the coalition includes all proud of that—and are beneficiaries of that,” from hundreds of mills, supplied from hundreds at the industry’s lack of urgency. There has been a the likes of Nestlé, PepsiCo and Unilever. Prelimi- Helmy Basha says. “But we will undermine the long- of thousands of plantations, and hundreds of thou- tendency to engage problem suppliers in long and nary results indicate that the new RADD system can term prospects of the industry if, as a sector, we do sands of small holdings. It means that the biggest drawn-out discussions that don’t result in change detect tropical deforestation several weeks earlier not operate in a different way and with a different challenge in tackling deforestation in the industry and seem only to provide cover for continued defor- than optical-based satellite systems—so it’s possible urgency to conserve the forests that remain. We’re is traceability.” estation. But in a clear sign of determination to to respond more quickly than ever before. working to higher standards today than we did in the The logic was simple: to achieve a deforestation- “draw the line,” Sime Darby has begun swiftly sus- So does Basha think that Sime Darby’s actions to past, and standards and expectations will continue free supply chain, traceability is the front line. Sime pending mills that are found to be violating the com- “draw the line” on deforestation could allay the con- Sime Darby created to evolve from here.” times Crosscheck, a cutting- Darby had already been working on it. For the past more land to pany’s commitments on deforestation. cerns of consumers in Europe and the US, and bring edge online tool which “We know this is a journey,” Basha says. “We know two years, the sustainability team had been amass- 9 Cutting out offending suppliers sends a strong sig- an end to the palm oil boycotts? “Boycotts aren’t the allows users to check up there will be mishaps along the way—but we will produce on Sime Darby ing data on the supply-chain, which could be used nal, but Basha insists that it’s not enough. “Just sus- answer. Oil palm is a very efficient crop—it’s fast- Plantation’s mills and handle them and keep pushing for greater transpar- to paint a comprehensive picture right down to the the same yield pending suppliers does not improve their practice, growing and incredibly productive,” explains Basha. refineries, taking an ency to drive deforestation out of our supply chain mill level. “There was an opportunity here to build and often has the unintended consequence of driv- To get the same yield from other oil crops takes up important step forward in and our industry.” u as palm oil. supply-chain transpar- a powerful resource,” Basha recalls. “It could help us ing poor practice elsewhere in the industry’s supply to nine times more land. “Boycotting palm oil could ency. Below, a screenshot lucy parker is a Partner and Strategic Advisor, and shine a light into areas that have not been easily vis- chain,” he says. To deal with this risk, Sime Darby is be really counter-productive, leading to more habi- of Crosscheck in use. leads Brunswick’s global Business and Society practice. ible before.” introducing a new policy: As long as a non-compli- tat loss, more species loss, not to mention the impact At their AGM in 2019, Sime Darby launched ant supplier stops forest clearance immediately, Sime on the livelihoods for smallholder farmers.” World “Crosscheck,” an open-access online tool that allows Darby will work with them to help improve stan- Wildlife Fund in Malaysia agrees: “Boycotting palm anyone to trace Sime Darby’s supply to the mill level. dards in their operations. oil is neither an answer nor a solution. In fact, it can An important feature is that it locates each mill in its “We have to keep in mind our ultimate goal,” he only make things worse,” they say. In their view, the surrounding landscape, with overlays that identify says. “We want to create a larger base of sustainable key is that when cultivated properly and planted in risk areas of intact forest and the habitats of endan- oil palm companies, and so drive deforestation out the right places, production of palm oil would not gered species. In addition, users can click through to of palm oil production.” negatively impact the environment. satellite imagery that monitors changes in the forest. Crosscheck has been designed as a platform that That’s why getting more oil from less land is the Crosscheck also provides new information on the can incorporate more data over time. “Think of this next frontier of Sime Darby’s fight against deforesta- ownership of each mill, creating the opportunity as Crosscheck 1.0,” says Basha. “We want to under- tion. The company has invested in an extensive R&D for improved traceability and accountability across stand how to build on the functionality, to make the program dedicated to increasing yield. It has com- the extensive supply chain. The tool is specifically tool as effective as possible.” To do this, Sime Darby pleted the mapping of the palm oil genome, which designed for anyone who is concerned about pro- is in dialogue with NGOs, with palm oil custom- is enabling the use of gene editing to produce new tecting forests, and the role of the palm oil industry ers, as well as the industry’s investors and bankers. high-yield oil palm seeds. Breakthroughs like this in deforestation—that includes corporate buyers “We know we don’t have all the answers. We want to have the potential to make a direct contribution to

who want to ensure their brands are not linked to learn from others and collaborate to make the best IMAGES CAROL,SLPU9945 SAVANY,NOP16/GETTY NORA TATTONG ISSARAWAT PHOTOGRAPHS: tackling deforestation. For Sime Darby and other

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he story of the ebola crisis in Sierra Leone has many characters. • Viewers of western news bulle- tins in the dreadful years between 2014 and 2016 will remember doc- Ttors in “hazmat” suits ghosting through hospital wards, or they may recall a handful of interna- tional aid workers accidentally flying the virus home with them. Sierra Leone’s government and military, as well as foreign governments, NGOs and charities, all played fundamental roles in the campaign. To this group belonged some of the country’s best known brands. • In normal times, these companies would have been concerned with business as usual—the daily pressures of marketing and sales, opera- tions and personnel. But as Sierra Leone faced

disaster, some companies set new priorities and offered to help. • Africell was among them. • When Sierra Africa’s celebrated telecoms revolution is well Leone was known. In a scramble for coverage in the early in the throes years of this millennium, companies built grids that would give the majority of Africa its of the deadly Lifefirst connections. Africans embraced the new lineEbola outbreak, opportunities that created: faster payments, AFRICELL cheaper insurance, easier contact with family mobilized a and friends. Studies show that the expansion comprehensive of mobile networks in Africa uncorked a wave response. of economic progress. On average, every 10 Brunswick’s percent increase in mobile-phone penetration in developing African countries has added 1 SAM WILLIAMS

percent to GDP growth per-person-per-year. PRESS ASSOCIATED PHOTOGRAPH: talks to the CEO.

44 brunswick social value review - no. 1 - 2020 BUSINESS ACTION AFRICELL

Telecoms markets in much of Africa are domi- Then, in March of 2014, a crop of Ebola cases explained in blunt and graphic detail what staff must government to construct a dynamic picture of how nated by multinationals operating in dozens of appeared in and around Kenema, the country’s do to protect themselves: report symptoms immedi- the disease was proliferating.” countries—leviathans whose economies of scale second biggest city. By June, the outbreak had ately; never touch a victim; whatever you do, do not Although the ranks of foreign specialists were are often betrayed by inefficiency. In Sierra Leone, exploded. The government hospital in Kenema attend funerals. “It was the swelling, the on-the-ground response was still domi- by contrast, the mobile market is led by a company struggled to cope with the flood of patients and the Staff were quizzed to ensure the information sunk nated by Sierra Leoneans. They filled most of the called Africell, a comparatively small and specialized virus branched quickly into neighboring districts. in. The company created a unique SMS system. For doctors and riskiest front-line roles: ambulance drivers, nurses, unit operating in only four countries. In a regional Panic flared. Still reeling from the ghastly trauma eight hours each day, every 15 minutes, employees nurses gravediggers. With equipment scarce, villagers industry line-up, Africell’s profile is unique. of war, many saw Ebola as less a pathogen than a would receive an anti-Ebola tip by text message. who were sometimes hostile to outside help, and lethal pesti- In 2014—the year Ebola bared its fangs—Afric- curse—a macabre spirit condemning all in its path. “UNSUBSCRIBE” was not an option. This digital in the trenches, lence a daily hazard, these responders faced extraor- ell had a market share in Sierra Leone of 70 percent. It appeared to have neither cure nor defense and its liturgy, which might have felt Orwellian in ordinary dinary pressure. Maintaining morale was vital. In the nine years since its first tower was installed hideous symptoms inspired an elemental horror. times, meant that Africell staff were as conversant in but because “We had recently been working on our mobile on a hill above Freetown harbor, operations had The world sat up, alarmed by Ebola’s virulence and the axioms of hygiene as any medic. of radio broad- payment services. When Ebola hit, the potential spread across the country. Its orange and plum the possibility of an undiagnosed carrier boarding “Our people had a sound understanding of casting, people utility of these services was obvious. The people color scheme became a familiar presence, and its a flight at Freetown’s Lungi Airport. Sierra Leone Ebola,” Al-Gerjawi says. “Unlike other Sierra Leo- working at the front line of the crisis needed to be sponsorship of local initiatives projected a likeable seemed to be looking once again into an abyss. neans who hadn’t benefited from that training—and who might paid. Africell set up a platform for wages to be paid personality. Sierra Leoneans had come to appreciate “We didn’t wait for an emergency to be declared. who often, unwittingly, did things that might facili- previously cheaply and on time.” the affordable and dependable service. As soon as the first cases were reported in March, we tate its spread, such as handling victims or hiding have ignored Economic spasm necessitated the delivery of food Sierra Leone’s name means “Lion Mountains,” symptoms—we were in a good position to continue aid, and the agencies responsible faced the formi- named, some say, by early Portuguese navigators working safely.” government dable and chaotic task of monitoring exactly who skirting West Africa’s tropical shore who thought the As the humanitarian crisis worsened, President advice started received what. To make sure rations got to the cor- muscular hills looming over its beaches resembled a Ernest Bai Koroma announced the creation of a to listen.” rect people, Africell distributed SIM cards used for lion’s back. The name stuck. The sands are white, the National Ebola Response Committee (NERC), identification, smoothing the entire process. forests green, and the sea a lapis lazuli blue. Elephant, bringing various departments and international The combustion of a limited outbreak into a flam- hippo and leopard still stalk the jungle. agencies involved in the response under a single ing epidemic had no single cause, but it was exacer- That enduring beauty masks a turbulent his- command chaired by the President and operated by bated by a shortage of at least two resources: hospital tory. Sierra Leone was established in the 18th cen- the Defense Minister. Though no private companies beds and quarantine spaces. Beds were important tury as a refuge for slaves freed during the Ameri- were members, Africell had a de facto seat at the table. because only in hospitals could victims receive the can Revolution. Tension lurked between migrants, “We were the biggest mobile company in the highly specialized care they needed. Quarantines colonial officers and tribal chiefs. Conflict flashed country, and one of the biggest employers and tax- were important because, without them, doting fam- and fizzled. Eventually, in 1961, a delegation of payers, so we knew the government well,” Al-Gerjawi ily members would succumb to the virus themselves. Sierra Leoneans to London secured the country’s says. “The government and its international part- Homes would become mortuaries. independence. And although the new Republic of ners realized that our technology, network and on- NERC oversaw the construction of more hospi- Sierra Leone was at first a democracy, institutions the-ground knowledge could prove useful and they tals and quarantine spaces, a task as urgent in the were too weak to withstand a military coup in 1967. invited us into the decision-making group.” hinterlands as it was in the capital. Government This opened the door to a quarter century of further Africell began by providing phone connections workers, supported by foreign specialists—includ- coups, corruption and authoritarianism. Nyangei Island, the Turtle knew we had to start preparing,” says Shadi Al-Ger- to incoming agencies. Lungi Airport was thronged SHADI AL-GERJAWI ing a major deployment of British troops—set about The grim conclusion of this unstable era was Islands, Sierra Leone. The jawi, CEO of Africell in Sierra Leone. A long-time by foreign doctors, soldiers and bureaucrats who CEO of Africell in erecting the new sites. Freetown’s density meant that picturesque land, now a Sierra Leone Sierra Leone’s civil war. In 1991, Sierra Leone dis- tourist mecca, has had a Freetown resident, Al-Gerjawi has led the business needed access to Sierra Leone’s mobile network. Ebola erupted there with volcanic force. But the city solved into darkness—over 50,000 people were turbulent history. since it began in Sierra Leone in 2005. “As news of They bore medicines, strategies and spreadsheets, also benefited from the best pre-existing hospitals. killed. Civil society was left in shattered ruins and the the outbreak spread, everyone felt hopeless. As far as but without the communication link, they would In some more remote areas, adequate care facilities economy shrunk to a husk. Observers commented they could see, the price of infection was ultimate: be hamstrung. were sometimes entirely absent. on the chilling insanity of the fighting as if the coun- If you caught the virus, you died.” “The immediate priority was to get these people Al-Gerjawi remembers how they tackled that: try itself was possessed by demons—a Hobbesian As the first cases were reported in and around connected. We activated hundreds of SIM cards, “Many of the new sites were built away from towns, “war of all against all.” Kenema, Al-Gerjawi gathered his leadership team with pre-connected handsets that operated at a frac- where mobile coverage was weaker. We shuffled our The war ended in 2002 and reconstruction for a meeting. tion of the cost of the bulky satellite phones they network to address this. On several occasions, we began. Supported by the international commu- “We decided early on that information was key. brought with them.” actually took masts from areas of strong coverage nity, elections produced a democratic government. The best catalyst for Ebola would be ignorance,” he Where Sierra Leoneans had had a confusing menu and planted them directly by the new premises— Businesses began investing. Its mineral bounty, recollects. “If people didn’t understand what the dis- of numbers to call in an emergency, Africell set up which were sometimes hundreds of miles away. fertile land, deep harbors and blissful beaches give ease was and how to avoid it then it would spread an emergency phone line that patched all Ebola- Isolated patients could then communicate with Sierra Leone an obvious appeal. Between 2002 and like fire.” related calls to NERC operators. “The best thing loved ones without risking face-to-face contact. 2014 the nation’s GDP grew from $1.25 billion His team ensured information on risks and safety about the emergency line was that, as well as creating This was wonderful.” to over $5 billion. Africell’s growth was part of was understood by staff. Experts from the Ministry a single point of contact, it generated data. We ana- As Shadi Al-Gerjawi and his team had predicted PHOTOGRAPH: TOMMY E TRENCHARD / ALAMY STOCK PHOTO ALAMY STOCK / TRENCHARD E TOMMY PHOTOGRAPH: the resurgence. of Health were brought in. Grave-faced physicians AFRICELL OF COURTESY PHOTOGRAPH: lyzed incoming reports and the findings allowed the in March 2014, information played a key role in the

46 brunswick social value review - no. 1 - 2020 brunswick social value review - no. 1 - 2020 47 BUSINESS ACTION AFRICELL battle against Ebola. But achieving victory was com- the popular “Join Hands to Drive Ebola Out” pro- plicated by two factors. The first was that the instruc- gram with Joe Bangura, an Africell executive. At reli- tions of health authorities often clashed with tradi- able intervals, listeners could tune in and learn what tional custom. Kinship is the organizing principle they needed to about the situation. As the months of Sierra Leone’s tribal communities, but behavior passed and listener numbers grew, the cacophony required to counter the spread of the disease seemed elsewhere subsided. to defy this. For many Sierra Leoneans, not feeding a “Of course, it was the doctors and nurses who sick mother or keeping a dying child at arm’s length were in the trenches,” Al-Gerjawi says. “But because were unthinkable. Yet that was the advice of the gov- of radio broadcasting, people who might previously ernment—plus the WHO, Red Cross, Médecins San have ignored government advice started to listen, Frontières, and other organizations working to stem comforted by the fact it came from a trustworthy the epidemic. source. The radio contributed to a sense of national The second challenge was the emotionally For eight unity—that we really were all in this together, work- charged, often irrational criticism faced by the ing toward a common goal.” government. Certainly there were areas where hours each By the time it was declared clear in March 2016, government could have been better prepared, but day, every the Ebola virus had killed almost 4,000 Sierra Leo- Ebola hit Sierra Leone like a lightning bolt. Trag- neans and infected another 11,000. Those lucky edy was unavoidable. enough to survive had experienced hell. Scarcely any Public discourse became a storm of accusation families or communities were unaffected. In addi- and recrimination. Sierra Leone’s airwaves boiled. tion to Sierra Leone, many lives were lost in neigh- Callers to radio shows skewered the government, the boring Guinea and Liberia, as well as in Nigeria and UN, the Red Cross, foreign soldiers, and anyone else Mali. At its peak, the WHO warned of a possible visibly associated with the disease. Conspiracy theo- pandemic, enveloping the whole world. rists frightened listeners with outlandish claims. It’s three years on and today, Sierra Leone pres- Strategists in Freetown could see that the angry minutes, ents a startlingly different picture. The economy chorus was inhibiting efforts to convey consistent15 is growing. International investment is brisk. Tour- employees information about good Ebola avoidance practices. ists are arriving daily with surfboards and hiking But at the same time, the fevered debate was also to would boots. A new democratic government, elected in a certain extent caused by a vacuum of informa- receive an 2018, focuses on relatively benign matters such as tion. What was needed was an authoritative source anti-Ebola interest rates and infrastructure. Freetown’s strobe- capable of winning the trust of ordinary Sierra Leo- lit bars and beachfront crab shacks are busy all day neans. Radio was the answer. tip by text and all night. “Even though NERC and its subsidiary agen- message. Shadi Al-Gerjawi dismisses the notion that the cies were working incredibly hard, the war of words Ebola crisis was vanquished by heroes. was a struggle,” Shadi Al-Gerjawi explains. “We “No,” he says. “The notion of heroism in that brainstormed how we could potentially help public situation is unhelpful. When people took risks, they interest announcements cut through. We decided caught the virus. And if they did that, they often to launch a new, nationwide radio-station effort either died or passed it on. What was needed was dedicated specifically to Ebola issues, and to make it discipline. We told colleagues to ‘help yourself before available to the government and its partner agencies you help others.’ People were deliberately encour- who were trying to make themselves heard.” aged to not be heroes. It worked. The national network of commu- “We just got on with it. We believe our efforts nity radio stations was mobilized and coordinated, helped the overall response, and that is great. But we beginning in 2014. Previously, a multitude of local haven’t tried to show off. Sierra Leoneans remem- outfits displaying little interest in correcting false- ber the Ebola outbreak, but they don’t like to think hoods had jousted for the public’s attention. But about it too much. People are focused on the future. now, Sierra Leoneans had a single verifiable source When they judge Africell, they judge what we do for broadcasting Ebola news impartially. them now, in 2019—not what we might have done The Africell brand lent familiarity. Popular DJs in the past. helped messages resonate in plain language. Spit- “More than anything else, people care about cheap flecked homilies were replaced by evidence-backed rates and fast internet. That suits us just fine.”u updates. The government and the international sam williams is an Associate with Brunswick, based in agencies all had designated broadcast slots, including Abu Dhabi.

48 brunswick social value review - no. 1 - 2020 PHOTOGRAPH: LUIS ENRIQUE ASCUI/BLOOMBERG VIA GETTY IMAGES I goods for the likes of Unilever, forgoods thelikes of Walmart andP&G. It’s acontinually refined system that today moves and containers. itspallets thanselling ing rather customers andtheworld. money.of Re-use offered for savings Brambles, its world represented resources awaste notonly of but or two crates after around atrip the of that disposal ply chain. Founded in1875, Brambles saw on early sup- the global kegs the invisibleform backbone of to focuson early sustainability. avery and retail supply chain, anditssuccess isattributable wooden for themanufacturing pallets est supplier of brunswick value social review Decades ago,Decades rent asystem- of Bramblesdevised Its crates, 330 million pallets, containers and The The Australia-based company istheworld’s larg- profitability.evidence is to theBrambles contrary. their usage is perceived as a threat to and growth resources natural consumption of by maximizing nside many boardrooms, thedrive to reduce Sustainability Pioneer

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PHIL DREWand CHIPCHASE sat Brambles asa BICKERTON to sustainability CEO GRAHAM Brunswick’s BUSINESS down with talk about Brambles JORDAN model. BRAMBLES

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Waste World. and more sustainable. It’s aninitiative Zero called largest companies become smarter, more circular advanced world’s dataanalytics, to some help of more than66,000supply chains, of ity along with mote sustainability. its customers—efficiencies that by definition pro- implemented and supply chain efficiencies for itself industry.tics In thatrole ithasseen, developed and - logis to theglobal sorts systemcentral nervous of andotherlets containers, Brambles evolved into a talk aboutthecircular economy. they meanwhen people iswhat model Brambles other containers areusable “pool.” Essentially, the them back into circulation. It and its pallets calls collectsBrambles itsassets, repairs them andputs Once a customer the containers, is done with Now- on Brambles is drawing itsunique visibil theworld’sThrough themanagement of pal- networks globally. systems logistics and hub for sustainable reinvented a as itself From there thecompany renting them. and began andcontainers pallets waste of discarded thecostly recognized trip. Brambles longago awaitspallets theirnext of Brambles’ A stack

49 BUSINESS ACTION BRAMBLES

Brambles CEO Graham Chipchase sat down with why that matters in today’s world. That led us to Brunswick’s Phil Drew and Jordan Bickerton to talk think differently about Brambles as more than a pal- about Brambles as a circular-economy model. let-renting business, but the invisible backbone of global supply chains, connecting people to life’s Who are your customers and what challenges do essentials every day. they face? And that mindset shift led us to think about what Our customers range from some of the world’s our business is to some of the biggest challenges fac- largest consumer goods brands to small-scale ing our customers and society. Our business model manufacturers and retailers. They all aim to move has always eliminated waste throughout the supply their products through the supply chain as safely, chain. It protects our forests and reduces landfill. But efficiently and quickly as possible. And they have to with a step-change in focus from investors, consum- ensure that the right high-quality products arrive ers, and civil society groups, we realized that we had in the right location at the right time, while also a powerful opportunity to work differently with our reducing additional costs like secondary packaging customers and with industry bodies to drive more or warehousing. change, more broadly, and more rapidly. We also know our customers are very focused on That’s because our position at the heart of global sustainability. Many of them have set bold and chal- supply chains has given us a unique view of the pres- lenging public goals to reduce waste in all its forms, sures the whole industry faces, and how we can make from packaging to empty transport miles to ineffi- the most difference in addressing these. cient processes. “It’s been It became clear to us that our customers—who popular with represent some of the world’s biggest businesses— How did Brambles come to model sustainability? are being asked to meet growing and changing pat- Over the past few years, the idea of a circular econ- financial com- terns of consumer demand, and at the same time to omy has quite rightly gone mainstream. It aims to munities too. shrink the impact of their operations—in the con- design out waste rather than seeing it as an inevitable We’ve had text of climate change, plastic pollution and the need by-product like it is in today’s linear “take-make-dis- more incom- to protect the planet’s resources. pose” model. At Brambles, we were one of the pioneers of that ing calls from What is the Zero Waste World initiative? approach. We entered the pooling business in Aus- investors who Zero Waste World is a new working collaboration tralia in 1958, when we acquired the Common- didn’t know for Brambles to partner with our customers to help wealth Handling Equipment Pool from the Austra- them build smarter and more sustainable supply lian government. Back then the idea of corporate our name chains. We launched in April this year. We went out sustainability was fairly unsophisticated, but manu- before, but and asked our people and our customers where we facturers and retailers were certainly keen to improve who are now could use our logistics platform to make a differ- efficiency and reduce costs. ence that would be commercially and socially valu- Today we’ve scaled to become one of the world’s clear that we able—how did they see us stepping up over the lon- most sustainable logistics businesses, with 330 mil- are built for ger term? lion shared and reusable pallets, containers and kegs. the way the It became clear there is an appetite across the By providing our products as a service, we’ve helped whole industry to work together to address the sig- our customers save 2 million tons of CO2 and 1.3 world wants nificant shared sustainability challenges, like reduc- million tons of waste over the past year alone. We to move.” ing waste in its broadest sense, increasing efficiency typically reduce waste by 66 percent when you com- and improving processes. pare us to alternative logistics systems. And we realized that we had an important foun- At the same time, we’ve helped customers to lower dation for that kind of collaboration in what we had their overall supply chain costs and to enhance their been doing in Europe with transport. Empty run- operational efficiency by replacing traditional one- ning of freight transport and poor weight loading way or single-use pallets and packaging. costs Europe around €160 billion annually. And in the US, trucks drive around 50 billion miles without Have commercial and social pressures spurred cargo. It’s an increasingly problematic source of cost Brambles toward social purpose? and emissions for businesses. Sustainability has always been at the heart of this It happens because trucks are often empty as company. Our circular model is core to who we are GRAHAM CHIPCHASE they return to the depot or distribution center hav-

and how we operate. But we saw a need to articulate Brambles CEO ing dropped off their cargo. To tackle that, we use GETTY VIA IMAGES ATLEY/BLOOMBERG JACK PHOTOGRAPH:

50 brunswick social value review - no. 1 - 2020 advanced data analysis to identify common trans- example. But through Zero Waste World collabora- port flows, and then use sharing to almost elimi- tions, we’ve identified an overlooked challenge: the nate inefficient partial loads and wasted miles. Take packaging in the supply chain that doesn’t ever make Danone Waters. Their supply trains between the it into the hands of ordinary shoppers. UK and France were returning empty. By filling So much of this is one-way or single-use, and this space we generated a significant new revenue at Brambles we have the capability to replace that stream for Danone—all while reducing unneces- with more sustainable and reusable alternatives. To sary carbon emissions give you an example: We are working with a multi- So far we’ve helped companies save 62.7 million national consumer goods manufacturer on a joint kilometers of empty truck journeys, avoiding more initiative to help them eliminate 6 kilotons of waste than 53,000 tons of CO2 emissions and saving mil- In the US, corrugate and 22 million meters of plastic wrap, lions of pounds for our customers along the way. while reducing CO2 emissions by 80 percent and Zero Waste World builds on that experience. By trucks drive improving efficiency by 5 percent. using our network visibility and the power of our around It’s a great area of focus for us, and we’re looking logistics platform, we’re now setting out to help our forward to partnering with more customers to scale customers find new ways to crack three big issues: up our impact together. How can they eliminate waste, eradicate empty transport miles, and cut out process inefficiency? What can other companies learn from Brambles’ The aim is to create value for them, for society, and circular economy experience? of course for Brambles too. One of the things that’s clear is the need to continu- 50 ally evolve a company’s sustainability focus. It’s easy billion What has Zero Waste World achieved so far, to set targets each year around incremental reduc- where has it been harder than you expected, and miles tions in water use or CO2 emissions, but that will how do you hope to see it develop in the future? without cargo. not deliver the change that is needed. We’ve been delighted with the progress we’ve made Many companies are now moving to a restorative, with Zero Waste World over the last year. We had net-positive contribution. That’s very promising, official launches in North America and Europe and and shows how businesses can help to drive serious generated a lot of fantastic discussions within the environmental change. industries we support. That’s all part of a mindset shift from inward- to The response from our existing customers has outward-looking, to find shared challenges where been really positive, with many of our biggest part- companies can collaborate to create commercial and ners wanting to work together to identify improve- social value at same time. In the case of Zero Waste ment opportunities within their supply chains. World, on things like reducing empty transport Our Transport Collaboration offering has also miles, that’s even opened up possibilities for fierce now grown across Europe and into North America, competitors to collaborate. and we’ve been able to facilitate some great partner- I think the other crucial thing in this experience ships between customer businesses that have sig- is choosing partners carefully. Changing an existing nificant mutual benefit. It’s also allowed us to have business to join the circular economy is going to be a different discussions with our customers at the most challenge, but looking for suppliers who provide cir- senior levels, to extend the focus from being purely cular services is an easy way to make a quick impact. a customer and supplier relationship to one that We also need to think more broadly about part- encompasses a shared goal around reducing waste. nerships. When you’re dealing with an issue like And it’s been popular with financial communities waste or transport, and trying to move from a lin- too. We’ve had more incoming calls from investors ear to a circular model, that necessarily leads you to who didn’t know our name before, but who are now think more in terms of ecosystems and networks. clear that we are built for the way the world wants So we’ve found sometimes partnering with to move, and that we’re well-positioned to help with companies in our own or adjacent industries gives the societal trends disrupting our customers and us significantly more ability to find solutions to reshaping our sector. major shared challenges that no single company One of the most exciting developments has been could solve. u on supply chain packaging. We know that com- phil drew, Partner, and jordan bickerton, Director, panies are trying to reduce consumer packaging, are members of the firm’s Business & Society practice,

PHOTOGRAPH: JACK ATLEY/BLOOMBERG VIA GETTY VIA IMAGES ATLEY/BLOOMBERG JACK PHOTOGRAPH: as they come under pressure on marine plastic, for and based in London.

brunswick social value review - no. 1 - 2020 51 BUSINESS ACTION TAKEDA

early 30 percent of people have no medicines once available only in rich countries are access to modern medicine, a problem the distributed in the most remote regions of the globe, pharmaceutical industry has been grappling saving millions of lives each year,” said a June 2019 Nwith over the last decade. New York Times article applauding the progress. Since 2008, the independent nonprofit Access to In the 2018 Access to Medicine Index, Tokyo- Medicine Foundation has been measuring pharma- based Takeda Pharmaceutical stood out from the ceutical companies’ progress in reaching patients pack with a significant rise in the rankings, jumping in low- and middle-income countries—home to from No. 15 last time round to the No. 5 position. more than eight out of every 10 people alive today. “The significant shift came when Takeda’s Access The biennial rankings capture a competitive spirit to Medicines program was embedded into the busi- across the sector, helping to spur action. “Powerful ness strategy and endorsed by our Executive Board,” says Dr. Susanne Weissbaecker, Global Head of Take- da’s Access to Medicines program. “It’s all about how you turn good intentions and good ideas into the difference you make for patients on the ground.” Dr. Weissbaecker is the former Head of Health- WHERE care Industries for the World Economic Forum and

Takeda stood out on the Access to Medicine MEDICINEIndex by jumping from No. 15 in 2016 to the No. 5 slot in 2018. To get the story behind that, Brunswick’s BEN FRY and WILL CARNWATH interview Takeda’s DR. SUSANNE WEISSBAECKER.

a physician trained in Germany and the US. She joined Takeda originally to manage patient pro- NEEDEDgrams in Europe and Canada. Her earlier experi- ence working on access issues in emerging markets allowed her to see firsthand the impact that a big company can make. That work became a passion and, as the Global Head of Takeda’s Access to Medi- cines program, she saw the opportunity for driving lasting change for patients. The program’s strategy seeks to ensure patients in underserved communities gain access to quality care and treatment. This means going beyond simply pro- viding medicines to focus on sustainably strengthen- ing health systems at every stage of the patient jour- ney, from awareness and diagnosis to treatment and aftercare. Patients not only receive medicines, but also the care, support and advice that they need. From 2016 to 2018, Takeda’s Access to Medicines program established initiatives in 52 countries and Patient Yana Vermigova, 25, in a Takeda facility at territories, screening more than a million people for the National Cancer Institute, Kiev, Ukraine. cancer, diabetes and hypertension.

brunswick social value review - no. 1 - 2020 53 BUSINESS ACTION TAKEDA “Our approach to Access to Medicines was built “This was a big step change for us as an organi- ACCESS from the ground up,” Weissbaecker says. “We knew zation. As Head of Access to Medicines and a mem- from the outset that our programs had to be co-cre- ber of the Leadership Team in Growth & Emerging IN ACTION ated with local partners if they were to be sustain- Markets, I am now part of all of the key decision able. Internally, we were able to deeply embed Access making for the business processes. This not only BLUEPRINT FOR to Medicines within the business and be part of the gives Access to Medicines a voice, but ensures input INNOVATIVE ACCESS is Takeda’s strategic decision-making process.” into strategic decisions.” guiding framework In 2017, the company brought together its exist- Takeda established a KPI specifically on enhanc- for specific access ing Patient Assistance Programs (PAPs). PAPs ing market access, combining it with Access to Medi- barriers. Launched in ensure that underserved patients gain access to cines activities. “Access to Medicines is not a nice-to- a trial in Meru County, cutting-edge, innovative medication they would have charitable activity—it is critical to us. For our Kenya, it aims to strengthen healthcare otherwise be unable to afford. They work by shar- colleagues it has become central to their approach, it systems in the area, ing the cost of the treatment between Takeda, the is not an add-on to their job, but an integral part of in partnership with local healthcare system, NGOs and patients them- it,” says Weissbaecker. Amref Health Africa selves—they are means-based, specific to the indi- A more traditional strategy would attempt a and the International vidual case and, most importantly, sustainable over blanket approach to delivering support—but that Cancer Institute (ICI), the long term. approach doesn’t reflect the complexity and specific- plus government and other organizations Counterintuitively, they show that building a ity of the challenge at the patient and clinic level. at local, national and system in which the patient makes this kind of con- “Launching any initiative brings with it chal- regional levels. tribution to treatment is not only more sustainable lenges, but making sure it is integrated into IN Q1 2019, OVER (as many of Takeda’s treatments are lifelong), but the local healthcare ecosystem and aligned to also “stickier”—patients are more committed, and From the field the unique set of issues faced by a community is Meru County’s Oncology Centre & Palliative Care Unit at make a difference to patients’ lives and enables us to more likely to stay on their treatment regimen for perhaps the biggest that we face. What works in one the Teaching & Referral Hospital—a key partner in ensure that our programs are designed to tackle the to the board- Takeda’s Blueprint for Innovative Access in Kenya (photo the long term. room, Access market would not necessarily work in another.” supplied by Takeda’s local partner, ICI). specific barriers to access faced by communities or The coordination of the PAPs brought to light a Which is why Takeda developed a tool called Blue- health systems,” she says. 500 COMMUNITY HEALTH challenge. “In order for them to work they needed to Medicines is print for Innovative Access, a framework that, while is equally important to be meeting with the key As she looks to the future, Weissbaecker believes VOLUNTEERS to be part of a broader strategy to address the many integrated into informed centrally, ensures that initiatives are cre- international stakeholders to build partnerships that it will take collective action by the industry were trained to identify early warning signs additional access barriers in the healthcare ecosys- Takeda’s deci- ated through partnerships at the regional and local and understanding of the issues. It is therefore so working hand-in-hand with front-line healthcare of non-communicable tem,” says Weissbaecker. “We were also very con- level with stakeholders who understand the local important for me to have a team focused on Access workers to drive sustainable improvement in the conditions such as scious that there was no one-size-fits-all solution— sion-making. healthcare environment and are best placed to drive to Medicines, and for the whole organization to be most challenging locations and in regard to the most diabetes or cancer. not only is each patient different, but so is the system DR. WEISSBAECKER, maximum impact. united around it.” challenging illnesses. NEARLY Global Head of Takeda’s they are a part of. We therefore needed to create Access to Medicines The jump in ranking in the most recent Access In the long term, programs such as this work only “With each change that we are able to make, and robust on-the-ground delivery mechanisms that are program. to Medicine Foundation Index, says Weissbaecker, if their impact is measured objectively and the data is each success, comes the next need and challenge. I coordinated and consistent.” “created a sense of pride throughout the organiza- used to inform future efforts. Measurements include believe that this will never go away. But if everyone 1,40 0 The solution was for Access to Medicines to tion. Our colleagues see the good that we are doing not just the quantity of medication provided, but works together then we can make a difference. WOMEN address further barriers to allow patients to access and how it is being recognized in the outside world. the number of people treated and the strength of the “The government has to take the lead in building were screened for the treatment they need. A key advantage that helped It renews their sense of purpose and helps us to con- system that enables their delivery. sustainable healthcare ecosystems and moving breast cancer and 880 for cervical cancer. address this was that Access to Medicines is inte- tinue to focus our efforts.” Takeda is working with Duke University to toward universal health coverage, but every More than 70 women grated into the activities of Takeda’s Local Operating That pride helps attract new talent in a world develop an independent impact measurement single actor, including corporates, must step in to began treatment Companies, or LOCs, and supported by the execu- where job seekers are placing ever increasing impor- framework that will provide up-to-date impact met- drive change. as a result. tive team. To help shape the LOC Access to Medicines tance on purpose and the value that a company rics to support live adaptation of programs to react “The system is too complex to allow for any one MORE THAN plans, a series of academies have taken place with the delivers to society. to social developments on the ground in real time. individual or organization to make a change by country teams responsible for delivering Access to “Our Access to Medicines Academies create Their ambition is to share this framework with the themselves. If you change policy, then that doesn’t Medicines activities, to build sustainable roadmaps opportunities for further discussion of our initia- industry to foster deeper collaboration and ensure necessarily reflect in the quality of the delivery sys- which look at strengthening the healthcare system tives and help shape our thinking and strategy. that resources are being effectively deployed on an tem, so you need to change all of it—all while con- 200MEN across the entire patient journey. As of the end of Having people solely focused on delivering Access industry basis. sidering the voice and needs of the patient. were screened for December 2019, around 1,200 patients have had to Medicines is vital, but it requires the support of “One of the most rewarding parts of my job is “So, for me, everyone can contribute, and indeed prostate cancer—21 their lives positively impacted by Takeda’s PAPs. everyone if we are to create a sustainable approach when I get to meet the people that our programs has to. It should be orchestrated by the government; of them began receiv- Under Weissbaecker’s leadership, Access to internally,” she says. have supported. Having the ability to talk to physi- we should be guided by them so that together we can ing treatment. Medicines has become a core pillar within the “We need to be on the ground, experienc- cians, patients, NGOs and health ministries about all make a collective change for the better.” u All screenings Growth & Emerging Markets Business Unit, ing firsthand the challenges we are seeking to the reality of the barriers these patients face and the were in accessible will carnwath is a Partner and Head of Brunswick’s locations like district driving overall strategy, rather than merely sup- solve, and building trust within communities. impact of our initiatives inspires and motivates me. Singapore office.ben fry, a Director, is also based hospitals and

porting access to treatment. I often wish I could be in two places at once as it TAKEDA OF COURTESY PHOTOGRAPHS: It helps us as an organization to understand how we in Singapore. FREE FOR PATIENTS.

54 brunswick social value review - no. 1 - 2020 brunswick social value review - no. 1 - 2020 55 SYSTEMS THINKING CIRCULAR ECONOMY

spending 71 days alone at sea with nothing more than the bare essentials made me understand something for the first time: the meaning of the word finite. My boat was my entire world and what was in it were the only things I had for my survival. I had to manage what I had down to the very last item. Stepping off the boat at the finish line, it hit me that all of us are living in a world dependent on finite resources.• Once I had made that connection, I couldn’t put down the thought. I began asking questions; speak- ing to scientists, economists, academics, business leaders from many different industries all over the world to better understand the way our economy uses resources. One thing that I learned very fast was that the issue isn’t just about our dependence on fossil fuels. It’s also materials like tin, indium, copper, zinc and silver, which are also ultimately finite. And although no one knows exactly how much of each we have under the ground, it’s predicted that some will last us less than a generation. • As I learned more, I began to LOOKING AT EVERYTHING DIFFERENTLY Dame Ellen MacArthur adapt my own behavior. I started to buy less, use less, do less, but that alone never sat In 2005, Ellen right with me. Surely this wasn’t the answer. Even if everyone on the planet started using MacArthur became the fewer resources, that would still just be a way of buying ourselves more time, making fastest solo the materials we have stretch a little further. I realized the system itself is fundamentally sailor to cir- cumnavigate flawed and that we needed to rethink and reshape our entire economic model. We need the globe. to look at the whole thing differently. • In natural systems, materials flow in cycles. The Five years nutrients from one species become food for another, organisms live and die, and eventu- later, she set up the Ellen ally they are returned to the soil and the cycle starts again. But, as humans, we have cre- MacArthur ated a different system. Our system is linear, extractive and wasteful. We take materials Foundation to accelerate from the planet, make products from them, and throw them away. • What if we created a the transition system that was regenerative and restorative by design—one that reuses resources, rather to a circular economy. than using them up? What if the model were not linear, but circular? • From that four- year journey, continually asking questions about how our economy can work in the long term, the Foundation was launched. Our mission is to accelerate the transition to the circular economy. Since we began in 2010, the concept has generated huge momentum. Hundreds of companies are now working to incorporate it; analysts and researchers are

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applying it to design innovative solutions; gov- circular economy. There were 50 to 100 references,” In her 2005 race to ernments are waking up to the opportunity. And Mr. Morlet recalls. “Now there are 120 million.” become the fastest sailor to circle the globe, Ellen the urgency to redesign our economic model to MacArthur needed to one that is fit for the future is becoming clearer to Let’s start with a basic question: What is the survive with only what she brought on board. circular economy? everyone. This made her reflect on That’s why we’re truly excited about the oppor- The circular economy is best defined against the lin- the finite nature of tunity ahead of us. A circular economy model can ear economy. We take materials out of the ground, resources, which set her off on another journey. be applied to finding new solutions to so many of make products that we use for increasingly short In 2010, she launched the global challenges we face, from plastic waste to amounts of time and then they’re landfilled. We the Foundation that climate change to biodiversity loss. At the Foun- take, make and waste at a phenomenal pace because today is mobilizing action across the world to create dation, we’re changing gear because perhaps the everything is designed to be disposable—even high a circular economy where greatest challenge of all is adoption at scale. We value, durable goods. Things aren’t repairable and nothing is wasted. aim to spread this idea quickly and across the they’re not made to last very long. We’re seeing a whole economy. tremendous flow of waste through the system. A circular economy takes a different view. Instead of everything being designed for redundancy and dis- posability, a circular economy designs things to be used for longer and kept in the system so we retain the energy, the materials. After use we can disassem- BUILDING a ble and repair products, remanufacture components and recycle materials. It’s a shift in thinking from an economy that extracts value to one that creates it. It’s Circular Economy restorative and regenerative by design. Crucially, the circular economy doesn’t aim to reduce the negative ometimes it’s a hobby that can lead to ANDREW MORLET, effects of the linear economy; it’s a fundamental, sys- published in 2016 with the World Economic Forum, material flows. No mechanism existed to do that, so a major career change. In Andrew Morlet’s temic shift to a new model. showed that if we continue on this trajectory by The THREE PRINCIPLES we created one. That was Project Mainstream. of a circular economy: case, it was yachting. Aged 18, as a competi- Ellen MacArthur 2050 there could be more plastic than fish in the To be quite honest, in the first year we didn’t know Stive yachtsman, he once sailed from Western Foundation CEO, So we’re talking about more than recycling? ocean. It generated huge media coverage and raised how to approach it. It was frustrating because every- Australia to Cowes. A more conventional career fol- talks to Recycling is part of it, but the circular economy is a awareness of the problem. body was trying to drive to a solution very quickly lowed in clinical epidemiology and HIV research in Brunswick’s much bigger concept. Recycling today is a process and promoting pilots and initiatives. We knew none the 1980s, and then 30 years as a management con- CAROLINE DANIEL where we try to collect waste. We try to separate out How did you arrive at a systems-wide approach? of those ideas had any hope of scaling. We kept sultant at Anderson Consulting and McKinsey. about rethinking some materials. And we’re trying to recycle things We were talking to the CEOs of some of the world’s resisting it. They were the worst professional meet- As a yachtsman, it was impossible for him to be that were never designed to be recycled. They’re biggest consumer goods companies. They said, we’re ings I’d ever been in. I was sure we would never get to Design out waste unaware of Ellen MacArthur, who in 2005 broke the the global eco- mixed up with other waste; different types of materi- the largest producers on the planet, with 1 to 2 per- the next one. But we did get to the next one; every- world record for the fastest solo circumnavigation of nomic system. als fused together. The yields we get from recycling cent of the volume of plastic on the market, but we body was there. the globe. Eight years later, Andrew had a chance to today are incredibly low. So it’s part of the circular can’t fix it. We need all the actors across the value talk to her from his hotel room in Delaware, where economy, but the least valuable part. The real value chain working together. That meant we had to look What was your role as a foundation in helping he was on client business. The focus was not on lies in moving upstream in the process to design at polymer manufacturers, packaging manufacturers, to bring people around the idea? yachting, but her idea of the circular economy. “She products from the start to be used many times and brands, retailers, cities, the collecting, sorting, recy- We built a team of ex-consultants who were deeply was looking for somebody to help engage businesses then eventually recycled, or composted so they go cling infrastructure: the whole system from end to Keep materials and analytic, committed, unstructured problem solv- in what she was doing and take the idea large. I could back to the soil; it’s planned for. In fact, in a circular end. The only way to address this challenge is to get products in use ers. What was unique was we weren’t engaged in a just see the potential. economy the very concept of waste is eliminated. collaboration across that system to agree on a com- project. We had our mission and the luxury of being “It was a lightbulb moment,” he recalls. He quit his mon approach. What we’re looking to achieve is busi- able to spend time on a problem in an open-ended job “pretty much the next day” to become CEO of the Why did you decide to use plastics to bring the ness-led global transformation of industrial systems way to find solutions that were comparable to the not-for-profit that bears her name, whose mission is: problem to life? —and that can only really be achieved in this way. scale of the challenge. We resisted saying we’ll come “to accelerate the transition to a circular economy.” In 2013 we looked at plastics as an interesting use back with a report in eight weeks and we’ll have an

The Foundation has spent the last decade popular- case. There were high volumes everywhere, but no How did you get started on this? Regenerate natural answer. We kept everybody in the room until we izing the concept of the circular economy. It focused real data. Our research showed 78 million tons of Because no single company could address it, we got systems came up with something that made sense. first on quantifying the business opportunity and plastic packaging is produced annually and only 45 companies across the value chain, with cities and applying the idea to fashion, plastics and food. It now 14 percent is collected for recycling—even after governments, to explore how we create a system solu- Given the essential need for systems change, employs 150 people, has forged partnerships with 40 years of effort. Only 2 percent goes back into tion that could scale globally. You had multinationals what can any individual company do? over 500 companies and gained real momentum. “I the value chain on a like-for-like basis. Almost a designing products in Cincinnati and selling them The very first thing is the recognition that the circu-

did a Google search when I started on the topic of the third escapes into the environment. Our report, FOUNDATION MACARTHUR ELLEN OF COURTESY PHOTOGRAPHS: GETTY VIA IMAGES MOCHET/AFP MARCEL PHOTOGRAPH: in Delhi—so you need a global perspective on these lar economy approach is not about incrementally

58 brunswick social value review - no. 1 - 2020 brunswick social value review - no. 1 - 2020 59 SYSTEMS THINKING CIRCULAR ECONOMY RETHINKING TEXTILES RETHINKING PLASTICS

GROWTH OF CLOTHING SALES GROWTH IN GLOBAL PLASTICS World GDP 100 350 311 mt billion AND DECLINE IN CLOTHING PRODUCTION 1950–2014 Index 100 Clothing Sales (2014) units LIFESPANS2 SINCE 2000 In an oft-repeated line to be worth over $650 in 2000 Number of times an item is worn 300 1 (2015) Increase from the 1967 film, “The billion. Yet while plastics The fashion industry production,3 while the 200 Phase out substances clothing PLASTICS Graduate,” a young are, in theory, one of is an illustrative model averageRadically lifespan of an of concern and utilization 250 college student hears the easiest materials to 190 for the shortcomings article ofimprove clothing has microfiber release career advice from a recycle, the variations 180 of the linear economy. fallen significantly.recycling middle-aged business- in its makeup and use, Textiles and clothing are Fashion and apparel 200 170 man: “I have one word coupled with laissez 2x a fundamental part of are also a leading indus- 20x 160 for you, Ben: plastics.” faire attitudes toward everyday life. try for greenhouse gas 150 150 4 From a profit perspec- waste of all types, has Make eectiveGlobally, use the of $1.3 tril- emissions. 50 tive, Ben might have created an overwhelm- 140 lion clothing industry In 2017, The Ellen Millions of Metric Tons resources and move to done well to heed the ing problem: Plastics in billion renewableemploys inputs more than 300 MacArthur AnaerobicFoundation 100 130 advice. Since the mid- the environment have units million people along its published digestinga report out &- ’60s, the industry has skyrocketed from 15 120 (2000) entire value chain, mak- lining howcomposting the fashion 15 mt 50 grown enormously, and metric tons in 1950 to 110 ing it an important part industry could deliver (1964) Renewably Other is estimated in 2020 311 metric tons in 2014. 100 of the world economy. better economic, soci- sourced material 0 2000 2005 2010 2015 feedstockIn the last 15 years, the etal and environmentalstreams industry has doubled outcomes. 1950 1960 1970 1980 1990 2000 2014

FASHION TODAY: PLASTICS TODAY GLOBAL MATERIAL 2% 1% 12% 2% After a short first-use The Ellen MacArthur Closed-loop Cascaded recycling losses during collection and processing FLOWS IN 2015 Recycled cycle, 95 percent of Foundation realized 8% Cascaded PLASTIC PACKAGING MATERIAL feedstock recycling plastic packaging that the problem Recycling 4% Process FLOWS ARE LARGELY LINEAR Less than 1 percent from other Losses of material used to industries material value, or $80 required more than produce clothing is used billion to $120 billion a remedial plan to annually, is lost to deal with waste; what 14% Collected to make new clothing. 2% Recycling Along with under- the economy. Only 14 was needed was a Closed-Loop utilization of clothes, percent is collected fresh approach to the Recycling 97% 53 million USE and only 2 percent system of product this represents a loss of 73% more than $500 billion a virgin feedstock metric tons becomes packaging design, manufacture 14% Incineration year. In 2015, emissions Plastic 63% Annual fibre Landfilled or again. and distribution. Cotton 26% production incinerated 98% virgin 78,000,000 mt from textiles produc- feedstock (metric tons) 40% Landfill tion totalled 1.2 billion Other 11% for clothing tons of CO2, more than 32% Leakage those of all international flights and maritime 12% 0.5 million tons ANNUAL PRODUCTION shipping combined. Losses in microfibre leakage production

THE NEW PLASTICS ECONOMY A NEW SYSTEM WHERE PLASTIC Create an e ective after-use AMBITIONS FOR A NEW TEXTILES NEVER BECOMES WASTE ECONOMY 1 plastics economy Other In 2016, the Ellen commitments. “Even Material “The time has come Phase out substances Recycling 2 • Streams MacArthur Foundation with today’s designs, 1 Increase 3 to transition to a of concern and micro- launched its New Plas- technologies and sys- Phase out substances clothing textile system that fiber release; tics Economy initiative, tems, these ambitions Radically of concern and utilization delivers better Reuse looking to rally busi- can already be at least improve • Transform the way microfiber release economic, societal nesses and govern- partially realized,” the recycling clothes are designed, and environmental sold and used to break AD and/or ments to apply the Foundation published in outcomes,” The Ellen free of their increasingly Composting principles of a circular a report launching the MacArthur Founda- disposable nature; Design & Use economy to plastic use initiative. 4 tion wrote in 2017. Production and production. Their argument is • Radically improve Energy Make eective use of Renewably sourced The graphic at left that such steps deliver In its drive to “make recycling by trans- Recovery resources and move to fashion circular,” virgin feedstock outlines the three core benefits both to the Anaerobic forming clothing renewable inputs the Foundation has Leakage ambitions of that shift. environment and the digesting & design, collection and outlined FOUR AMBI- Decouple plastics Each of the ambi- economy, as much of composting reprocessing; from fossil feedstocks TIONS for businesses 3 Drastically reduce the leakage of tions requires sig- today’s waste repre- • Make effective use of Renewably Other and governments to 2 plastics into natural systems and nificant changes and sents inefficiency. sourced material work toward: resources and move to other negative externalities. feedstock streams renewable inputs. INFOGRAPHICS:PETER HOEY INFOGRAPHICS:PETER

60 brunswick social value review - no. 1 - 2020 brunswick social value review - no. 1 - 2020 61 2% 1% 12% 2% Recycled Closed-loop Cascaded recycling losses during collection and processing feedstock recycling from other industries

97% 53 million USE virgin feedstock metric tons 73% Plastic 63% Annual fibre Landfilled or Cotton 26% production incinerated Other 11% for clothing

12% 0.5 million tons Losses in microfibre leakage production neath companies that partner with us. with neath companies that partner We recently You’re right. iswhy That we are building dataunder how do you hold them toaccount toact on it? With somany companies signing on tothe idea, years. injustbecome eight a$2billion startup andhasnow goods markets foring secondary luxury olderre-purposing clothing. RealReal The iscreat- creating better-designedfashion startups clothing or to refillableand subscribe concentrates.There are or cleaning products, where you one get container for soaps ple, services subscription digital offering the disruptors of “disposability” approach: for exam - and small. In fact, companies small are becoming organization, or scaleof companiesany large type circular The economyCertainly: works equallyfor role?a small companies,And whatabout they can play healthy but alsocircular. value chain to develop products thatare notonly It andinnovation design along isalsousingfood the to adopt farmers instruments help such techniques. biodiversity, financial and has pioneered the use of practices,tural which build soil healthandincrease predict to itneeds when repaired. be andthey’ve built systemperiods aninformation to equipment that can stay piece of long in use for very able andre-manufacturable. By design, it’s become a - or entire tothe engines efficiently truck be upgrad equipment for miningindustries. now They design they’re incentivized inanentirely different way. energy. It’s become anew company and Signify call now lastages andthefittings, and you pay for the that thelightbulbs own service. They a subscription You on atdesk height light canbuy 400lumens of applications andthey’re asaservice. now light selling foring from business-to-business lightbulbs selling At Philips, for example, shifted they their think- Are there big companies thatare doing thiswell? materials inuseandthesystem longer? thecircular economy,of keeping thoseproducts or do thatinadifferent way to theprinciples thataligns are need about what you How meeting? could you or services.ucts It requires ashiftinbusiness models. isre-thinking This impacts? theway to deliver prod- somethingor reducedo we lightweight thenegative How sustainability: understanding of the typical alinearproduct.reducing of theharm isnot This 62

Danone supports large scale,Danone supports regenerative- agricul Another isCaterpillar, which manufactures heavy As acompany, thatmeansthefirst thingis to think - people inways constructively “We to need consumers, that enable the system. participate CIRCULAR SYSTEMS design for design as part ofas part people.” them to Not as but as ECONOMY THINKING

ing toward circular economy nationalstrategies. Chile andNewwith Zealand, to name but two, work- now momentum beyond Europe’s borders as well, lands, Slovenia, France andseveral others. There’s around keeping material flowseconomy. inthe BlackRock hasdeveloped aninvestment product institutional investor hasrecognized thisisatopic. thattheworld’sit signals manager largest asset and recent because BlackRock isimportant partnership tives Our for companies to thisactivity? do more of in thisway. How do we provide investment incen- companiesstimulating andsupporting transitioning everything. Weof wantto re-orient thinkingtoward strators. We finance see asa propellant over the top We plastics, with asdemon fashion began andfood - Why are financialservices your next focus? and leakage will triple—which isscary. triple—which and leakage will we’re going to by double plastics thevolume 2040 of waste collection andre-use thatquadrupling, against we case for themostoptimistic model infrastructure, finite materials. Research shows on plastics even if on consumption thatand theimpact associated with hasmassiveThis implications. the material Imagine economylinear global to isset by quadruple 2050: To the challenge, give thescaleof you our anidea of How urgent isitthatchange needs tohappen? momentum andspread to Denmark, theNether roadmaps, Finland. with idea The gained starting European developing countries theirnational own adopted planin2015. anaction to led That several and theEUpicked upon theconcept in 2012and Plans since 2006. We were asked to provide input thecountry’s of China; Five-Year part been ithad references we found for circular economy were from When theFoundation we started in2010, theonly this? Isany country leading? Beyond business, how are governments helping nies thatcanprove help. they to more get attention. People reward will thecompa- the solution. transparency isonly going issue This of theproblem of they’re part andcanalsobe of part and public. Companies wantto show recognise they commitment. We thatover cantrack time: it’s open definitions that we havestandard of set built into this recyclable, be will compostable or reusable a against have made acommitment thatby 2025100percent recycled content packaging. intheir plastics They put on themarket they plastic andtheamountof of Commitment where companies declare the amount released theGlobal thatunderpins thefirst report brunswick value social review

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INFOGRAPHIC: PETER HOEY We’re community atthedesign asanew scale looking to scalethistransition? Who are you looking towork with now tohelp regenerative, bio-biased economic approach. in away thatcould create for amore thepossibility for directing futurea real opportunity innovation great potential for enabling thisshift. represents This revolution industrial and fourth technologies hold must become more society renewable,backbone of materials intheeconomy. of sorts materials The introduce them atscale. You canapply that to all don’t thetechnical exist to qualities needed with thataretics bio-sourced andbiodegradable. They renewable materials agenda. We urgently plas- need isthebio-material and themostcritical One of managing thatgrowth? How does innovation play into thechallenge of that address theseexistential challenges. global cular economy is a framework for systemic solutions can play abig role inreducing them. Ultimately, cir areas, to andthatshifting acircular economy model emissions greenhouse gas stemglobal from these manage land. Ouranalysis shows that45percent of like cars and buildings, and how we grow and food mentally reshape how anduseproducts we design out intheParis Agreement, to need funda- we will theworld isgoing to theclimate meet if set targets systems, persistent often toxins, with globally. And, the process we’re natural andpolluting devastating we’re else a dozen; everything through. burning In today we’re attempting to recycle only abouthalf brunswick value social review If you think of all materials in the periodic table, materials intheperiodic all you thinkof If Consumption Global Oil Share of Plastics’ (in metric tons) Production Plastics byweight) (in theocean to Fish Plastics Ratio of Budget Carbon Share of Plastics’ 1% 2014 311 311 6% 1:5 1:5 MT

15% -

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content ever.content most shared pieces of remains one of WEF’s with thisgraphic, and shared onmedia social the fish. The figure was outweigh theamount plastic will intheocean by 2050 theamount of ifnothingthat, changes, memorable figure was cussion today. Themost define the plastics dis thatstilland statistics projections with report Foundation shared a the Ellen MacArthur Economic Forum, At World the2016 BY 2050 IN THE OCEANS THAN FISH MORE PLASTIC ency is only is ency of transpar companies reward the People will prove they they prove “This issue “This attention. get more more get going to that can help.”

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specializing in media andtechnology. in media specializing cial TimesandaPartner inBrunswick’s office, London caroline daniel isaformer journalist withtheFinan - itto regenerative. be and transform challengeThe now direction isto pointitintheright omy aswe know itemerged over the past20years. before—the econ enabling theglobal - technology change done can be done and and has pacebeen of dented urgency. news good iswe The know thisscale We have to make unprece thisshiftanddo itwith - delivering new waywhole products of andservices. and business perspective model to one on based a thatwe’remodel locked into from acapital, process theeconomic happen—shifting ing thetransition scale—from understanding the concept to mak- agendas. challenge The isto move—at pace andat this; behind ments getting it’s on theG7andG20 how. We have more businesses leading andgovern- cular economy isn’t or abut; it’s anif anda awhen We have theworld’s largest companies saying thecir How do we sum upthechallenge from here? arenies who doing thiswell. ple. We to need those compa behind get people help - thesystem. of as part Not as consumers,- but aspeo ways thatenable them constructively to participate given. iswhy That we to for need in people design convenience, systems are they within act andpeople Everyone products seeks on based low price and language—and back get to people, calling people. consumers—thising people islineareconomic and I’m heartbroken. it. with Istruggle years old, completely unrepairable. Itook itto thetip for years.this stuff a printer, Ihad two and ahalf clue it—and I’ve to what do with researching been stand inmy I’ve kitchen packaging plastics no with sively challenged, thesystems because don’t work. I and re-use things. But like I’m else everybody mas- Personally, to Ido Ican. what uselessplastics Itry where do they fitin? You haven’t mentioned therole of consumers— match thechallenges thatwe face. thenature of potential to inawayto scaleourimpact thatstarts thinking into their daily work. We thinkthishasthe thetools to with applydesigners circular economy thebasicideasix years andengage 20million with the market. We them inthenext of wantto to get half in shapingtheworld around us, theproducts thathit ers. There are have who designers 160million arole - toneed design thecircular get idea into of theheads agenda for us. Everything we useisdesigned. We At abroader level, firstly we need to stop- call u 63 - SOCIAL BUSINESS AGENDA PURPOSE chorus objects to such a narrowing of corporate PURPOSE IN ACTION purpose, and believes that the creation of social value alongside financial value is an essential part of A 10-YEAR STUDY OF 50,000 BRANDS found the highest-performing a company’s raison d’être. brands to be purpose driven. Alan Jope, CEO of Unilever, has reported that In an article titled “Capitalism’s watershed “our 28 brands with purpose are growing 69 percent faster than the rest of our business, delivering 75 percent of our total turnover growth.” moment,” the Financial Times summarized the pre- While the link between profits and purpose may not be hard to prove, it vailing sentiment in late August this year, namely stands to reason that employees and customers—and increasingly even that corporate profits were being purchased with regulators and investors—treat purpose-driven companies more favor- increasingly unjustifiable and unsustainable costs to ably than purpose-lacking competitors.

the environment and modern societies—“business WHERE PURPOSE INSPIRES SUSTAINED GROWTH as usual just won’t cut it anymore.” Since Mr. Friedman’s article first came out, the APPLE “At Apple, we believe technology should lift humanity and enrich global average temperature has increased by roughly people’s lives.” 0.3°F per decade and the rate of warming has almost • Among the other ways that Apple’s purpose has been made real is in its doubled, according to NASA’s Earth Observatory. product—the idea of making their products accessible and easy-to-use for Over that same stretch, CEO compensation in the people who aren’t “tech savvy.” US grew by more than 940 percent while the average • Since 2001, Apple’s stock price has grown by 15,000 percent, making the company worth $1 trillion. worker’s wages increased by only 12 percent, accord- • Apple sells 18 percent of smartphones globally and earns 87 percent of ing to the Economic Policy Institute. A string of smartphone profits. corporate missteps and scandals reinforced a belief that businesses both cause and profit from societal LEGO “Our ultimate purpose is to inspire and develop children to think creatively, reason systematically and release their potential to shape problems, and aren’t incentivized (and therefore not their own future.” interested) in solving them—think of private data • In 2004, LEGO was in a crisis of identity and declining profits. That same being sold and shared; foods and medicines being year, Jorgen Vig Knudstorp became CEO. misleadingly marketed; bankers asking for bailouts • He told the FT that he broke down his 12-year tenure as CEO into five phases. while receiving bonuses. The first was “survive,” the second was rediscovering and refocusing on “pur- In recent years, BlackRock, State Street and Van- pose” (followed by “let growth loose”). guard—who have a combined $14.95 trillion in • The company posted increasing net profits every year over the following decade, and today Lego is the world’s biggest toy brand. assets under management—have pressed companies to articulate their social purpose. The idea has found DANONE “Bringing health through food to as many people as possible.” its way into curricula at leading business schools— one Harvard Business School course is called “Rei- • The company, which sells a range of diary and plant-based products, as well magining Capitalism: Business and Big Problems.” as water and baby food, has aligned its purpose with its products. • As consumers pay greater attention to what goes into their food, Danone’s Leading news outlets have dedicated newsletters and PITFALLS of PURPOSE long-term dividend in Europe nearly doubled between 2004 and 2014. journalists covering the intersection of business and society—the FT’s Moral Money; Bloomberg’s Good IKEA “To create a better everyday life for the many people. Our business n september 13th, 1970, about 100 spec- Businesses the doctrine of shareholder primacy that would Business—and consumers are even starting to pri- idea: To offer a wide range of well-designed, functional home furnishing tators in New York City watched roughly face reputational become the guiding theory of the American mar- oritize brands they believe have a purpose. products at prices so low that as many people as possible will be able to that number of competitors run laps ketplace. The beliefs outlined by Mr. Friedman, who The pressure is also coming from within com- afford them.” around Central Park on a surprisingly risks when would win the Nobel Prize six years later, informed panies themselves. A LinkedIn survey of 26,000 • As the company has opened stores around the world and sold its products online, its products continue to reflect the company’s purpose. warm Sunday. That same day, in one of the rushing to how US companies were governed and legislated, workers across 40 countries found that three in four • In 2001, the company’s revenue was €10.4 billion; it has increased every year Ocity’s leading newspapers, an economist published a demonstrate and until recently, how business leaders were incen- wanted to find work that delivers “a sense of pur- since, exceeding €38 billion in 2018. 3,000-word opinion piece that ran between articles social value. tivized and evaluated. For all of its academic and pose,” and employees at large companies have pub- on a Long Island yacht club and Prague’s art scene. Brunswick’s intellectual underpinnings, the core of Friedman’s licly protested their company’s stance on everything Both the op-ed and race, unmemorable as they argument was simple: “The social responsibility of from gun violence to political affiliations. a Corporation,” signaling that their companies— might have seemed, instead became globally signifi- JON MILLER and business is to increase its profits,” he wrote. And busi- Companies have responded by trying to dem- which collectively represent $7 trillion in annual cant in their respective fields. MEAGHAN RAMSEY ness should pursue that purpose “so long as it stays onstrate that they are aware of these problems—in revenue—would now work for “the benefit of all The runners were competing in the first New York examine how within the rules of the game.” 2018, 86 percent of Fortune 500 companies pub- stakeholders,” not just shareholders. That statement City Marathon, now the world’s largest event of that to avoid them. That Friedman’s article was controversial enough lished reports on the environmental and social from the US Business Roundtable stands as perhaps distance, which more than 52,000 people from 129 to merit being published reveals that even in 1970 impacts of their businesses, compared to 2011, when the most forceful and formal recognition that a new countries finished last year. there was debate about such a narrowing of corpo- just under 20 percent did—and that they can be part paradigm is upon us: Shareholder value, the sole Milton Friedman’s article in The New York Times, rate purpose. Today, that debate has escalated and of the solution. In September 2019, more than 180 corporate north star for generations, is now part of a

on the other hand, is credited with helping launch intensified, as an increasingly vocal and broad-based BONGIORNI FRANCESCO ILLUSTRATION: CEOs signed a new “Statement on the Purpose of much larger constellation.

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A PURPOSE STAMPEDE The Five PITFALLS OF PURPOSE: GETTING IT RIGHT Not This...... But This Companies are coming to terms with this new par- Real commercial benefits can flow from success- Simply “why” What the company does and why that matters adigm. Many are hurrying to create purpose state- 1. They sound meaningless. Purpose statements fully navigating these pitfalls. A compelling purpose A strap line A point of view about your role in the world ments—a practice so widespread that a Forbes arti- have been criticized for being hyperbolic, platitu- statement is a meaningful articulation of a compa- Just marketing or HR A dialogue with a wide range of stakeholders cle termed it “a purpose stampede.” They are eager to dinous, simplistic or simply, as one anonymous ny’s role in the world. It must capture not just why a position themselves as part of the solution, and are investor put it, “bullshit.” They tend to blend vague- company exists, but also what it does—its products Peripheral to the business Within the core business and aligned social investment keen to avoid being seen as part of the problem. ness with grandiosity, full of statements such as “to and services—and how it operates. Too abstract or grand Focus on making tangible positive impacts However, companies may be disappointed when empower every person,” “to unlock potential,” “to Arriving at a meaningful purpose statement How good you are A position on your contribution to society their shiny new purpose statements are greeted with enable progress” or “to live life to the fullest.” In short, requires working across the business, at all levels, About you About the issues that matter to the world skepticism by internal and external audiences. The they are bland and fail to provide any real direction. from the boardroom to the shop floor. It also calls for sudden enthusiasm to play a positive role in society 2. They lack differentiation. Usually the reason a a realistic assessment of the role the company plays the statement they have isn’t believed or is deemed can be greeted with a collective “you must be joking.” company exists is also why its sector exists. Min- in the big issues that are relevant to it. In our expe- insufficient. That means the most important step is “Purpose is not a mere tagline or marketing cam- ing companies, for example, talk about “human rience, articulating a company’s purpose requires a to ask tough questions to clarify what your company paign,” BlackRock’s Larry Fink wrote in a 2019 letter progress,” “a better future,” “improving lives,” or blend of qualitative and quantitative, top-down and stands for, and what you’re willing to do to demon- to fellow CEOs. “It is a company’s fundamental rea- “society’s changing needs.” Health companies tell bottom-up, outside-in and inside-out. strate it. son for being, what it does every day to create value us about “helping people lead longer, healthier, Defining a purpose statement is only the begin- Nearly 40 years after his victory, the fireman who for its stakeholders.” However, depending on how it is happier lives.” These are all noble aspirations, but ning. It must be embedded with internal audiences won the first New York City Marathon was asked how approached, a company’s purpose can fail to connect they feel generic and often dissonant with people’s in a way that gives them a sense of ownership and the race had changed. “For the good of New York to the core of the business. In our experience, it can experience of these companies. People want to even inspiration. External campaigns must con- City, for the good of running, and for the good of the miss the mark and fall into five common pitfalls: know what this company stands for. vince those audiences that the company has a sincere marathon,” he answered. It seems most every stake- ambition to have a positive impact on the world. In holder group is asking different versions of that same 3. They’re disconnected from corporate strategy. short, act like you mean it: If purpose isn’t properly question to businesses today: How have you changed? jon miller and A global survey of executives by EY found most are activated internally and externally, it will ring hollow. Businesses have an opportunity to deliver a similarly meaghan ramsey leaders believed a strong sense of purpose is Partners in Brunswick’s The challenge facing most businesses isn’t in the compelling answer—they’ll just need more than a important for a company’s success—and yet less Business & Society prac- poetry or brevity of their purpose statement, it’s that well-worded purpose statement to do it. u tice, and based in London. than half said their company had or was trying to develop a sense of purpose. Too often, people think of purpose as something peripheral to the core of the business—or even talk about it as a “higher EXPECTED TO LEAD purpose,” as if it were floating above the business business leaders are looking afresh at purpose, Fewer than half of the people we surveyed across itself. Purpose must be rooted in the activities of the A BRUNSWICK in part, because they sense a lack of trust. They are INSIGHT SURVEY the UK believed leaders were genuinely interested in REPUTATION business—its products and services, its processes right. The trust problem runs deep. Our research serving society. found that when businesses act on societal and OF MORE THAN and practice—or it will be seen as an insubstantial 8,000 PEOPLE ACROSS Who do you Themselves 89% WASHING environmental issues, people remain cynical about think leaders of EIGHT COUNTRIES marketing exercise. their motivations. We asked which of the following Investors & shareholders 84 FOUND THAT ROUGHLY the largest statements they agreed with more: 4. They’re disingenuous (purpose washing). The SEVEN OUT OF 10 businesses in Customers 73 your country Nation, a US weekly magazine, labeled the new • Businesses get involved in societal and environ- PEOPLE EXPECT Employees 56 BUSINESSES HAVE A CLEANLINESS GREEN WASHING: When a company mental issues mainly for publicity and to make ACTION ON ALL THREE serve well? wave of purpose statements as “empty promises Local communities PROBLEM. Their reputations are prone seeks recognition for being more envi- themselves look good. ASPECTS OF ESG. 50 to stain, their tactics decried as “dirty,” ronmentally friendly than it really is. and self-serving slogans.” Alan Jope, the CEO of • Businesses get involved in societal and environ- Society as a whole 47 and their ethical track record, in the IMPACT WASHING: The impact- Unilever, wrote earlier this year that “green washing, mental issues mainly because they want to make eyes of many, remains spotty. As more investing industry, where investors a positive difference. However, when asked if business has a role to play businesses communicate how they are purpose washing, cause washing, woke washing” on major societal issues, the answer—overwhelm- seek financial returns while addressing In the UK, 71 percent chose the first option—with a force for good in the world, they face were “beginning to infect our industry.” This sug- ingly—is yes. People expect businesses to act. societal issues, exceeds $500 billion. similar responses in the US, Italy, Germany, Brazil mounting accusations of “washing” “Impact washing” is when investors gests companies are deliberately overstating the case; and South Africa. Of the eight countries surveyed, their reputation. Below are five of the Should business leaders help address...? characterize benign investments as only businesses in China and UAE were trusted by a most common charges leveled: touting a purpose the company does not mean, and being socially conscious. cannot fulfill, in order to look good. majority of people. BIG ENVIRONMENTAL % SAID PURPOSE WASHING: When a com- PINK WASHING: The term origi- YES pany’s purpose sounds noble but rings CHALLENGES nated almost 30 years ago, when 5. They highlight dissonance. At the heart of any % AGREE BUSINESSES IN THE UK ARE 74 hollow or bears no relation to what the the nonprofit Breast Cancer Action critical reputational crisis is a dissonance between 29 HONEST AND TRUSTWORTHY business actually does. BIG ECONOMIC % SAID condemned companies claiming to what a company says and what it does. For example, YES WOKE WASHING: To “stay woke” is help those suffering with breast cancer jeremy ruch is a Direc- CHALLENGES talking about helping people live better lives while 69 essentially to remain socially aware. To (who wore pink ribbons as a symbol) US Italy GermanyBrazil South AfricaChina UAE tor and alice chilcott accuse a brand of “woke washing” is to when in fact those businesses were your products make them less healthy will ulti- is an Executive with BIG SOCIETAL % SAID Agree 31% 21 25 40 27 67 62 YES charge it with burnishing its reputa- profiting off the disease. Pink washing mately result in a threat to your license to operate. A Brunswick Insight, the CHALLENGES 67 tion—or sales—by injecting itself into a now encompasses companies pledg- purpose statement must recognize the real impacts Disagree 33 36 26 32 42 6 15 firm’s opinion research, cultural controversy in which the brand ing support for the LGBT+ community measurement and analyt- Businesses that meet these expectations are the lacks the credibility or authenticity to in transparent attempts to gain the a company has on the world, or it risks leading to It’s not only that people don’t trust faceless busi- ics arm. Both are based ones that stand to rebuild trust. However, doing so will

engage. community’s favor or business. reputational damage. BONGIORNI FRANCESCO ILLUSTRATION: nesses—they don’t trust the faces leading them. in London. require actions, not only words.

66 brunswick social value review - no. 1 - 2020 brunswick social value review - no. 1 - 2020 67 SOCIAL BUSINESS AGENDA B CORP

apitalism or socialism; for-profit or That difficult experience highlighted something nonprofit; free market versus state-run… the founders already knew: The business world Always, the argument around balanc- was too heavily skewed toward shareholder prof- ing economic prosperity and fairness is its, while ignoring other stakeholders—employees, framed so: an either-or choice. communities, customers. In the last 14 years, however, the Wanting to do more for the good of society, the Cfoundation of a third way has been adopted by two partnered with financier Andrew Kassoy and businesses of all sizes, including multinationals: set out to create a new category of business, one that the “benefit corporation.” Under legal corporate could legally frame a business’s commitment to a structure in 37 jurisdictions in the US and dozens stakeholder approach, while providing a standard of others around the world, a benefit corporation by which to measure that commitment. is defined as a for-profit, capitalist model that has B Lab emerged out of that effort. social purpose and service to multiple stakehold- ers, not just shareholders, as its mission—not sim- ply suggested as a good idea, but actually required under the terms of its charter. While most benefit corporations are small enter- prises, the rise of ESG reporting in recent years has given the concept new relevance and the ranks of certified benefit corporations, or B Corps, have swelled. Lately, even some large multinationals have begun to turn themselves into benefit corporations, ALT-

CAPITALISMwith Danone North America joining the ranks in Historically, the burden of ensuring all members From the founding 2018. Danone CEO Emmanuel Faber has publicly of society were treated fairly has fallen on govern- of B LAB in 2006, committed to converting the entire $51.2 billion ments and nonprofits; the function of business was global conglomerate to B Corp status by 2030. relegated to the task of creating value solely through the “benefit The idea behind the benefit corporation was born goods and profits. But increasingly, that thinking is corporation” has out of frustration after two US entrepreneurs, Jay being challenged. inspired a growing Coen Gilbert and Bart Houlahan, sold their success- “The consensus is that the role of business needs movement. Is it ful basketball shoe company, AND1, in 2005. The to be looked at long and hard,” says B Lab UK Exec- a niche, or the company’s progressive attitude in its treatment of utive Director Chris Turner, in an interview with employees and its relationship with the surround- the Brunswick Social Value Review. “A different future of business? ing community were key elements of the founders’ model needs to be on the table. Our role is to dem- Brunswick’s vision and AND1 was wildly successful, rising in 10 onstrate the alternatives.” CARLTON years to a market position just behind Nike, the No. WILKINSON 1 basketball shoe company in the US. GATHERING MOMENTUM reports. Within months of the sale, however, the proud Founded in 2006, B Lab is a nonprofit that helps founders watched as the new owners restructured craft legislation for benefit corporations in juris- to favor investors, steering away from the company’s dictions all over the world. The legal framework other existing stakeholder agreements and its long- allows a for-profit company to state an ongoing

term strategy in favor of short-term gains. commitment to providing social value beyond BONGIORNI FRANCESCO ILLUSTRATION:

68 brunswick social value review - no. 1 - 2020 SOCIAL BUSINESS AGENDA B CORP making products and profits, and sets up a system and for the long term. Let’s work together to make stuff is being rolled out now in our work with other Bratter says. “It adds integrity to the process. Doing for reporting results. B Lab follows up by certifying real change happen.” big multinationals.” it this way, for us, also creates ownership of the idea companies in compliance with a set of standards Deanna Bratter, the Senior Director of Public and authenticity across the many units globally.” shared by all benefit corporations. THE PROCESS Benefit and Sustainable Development for Danone In some ways, certification for Danone is an B Lab certified the practices of 82 companies in To be certified as a B Corp, businesses complete a North America, was instrumental in guiding the acknowledgment of values the global Danone 2007. In 2010, Maryland became the first state in the 200-question B Impact Assessment (BIA), designed company to its public benefit corporation legal sta- group has publicly espoused at least since the 1970s. US to allow companies to register as benefit corpo- to “measure and manage your company’s positive tus and subsequent B Corp certification. Ms. Bratter In a speech in Marseilles in 1972, then-CEO Antoine rations. Delaware, the seat of corporate law in the impact on your workers, community, customers came to Danone as part of the company’s merger Riboud took a strong stand, committing the grow- US, passed benefit corporation legislation in 2013. and environment” over the previous 12 months. with WhiteWave Foods, where she had been Direc- ing company to ideals of corporate social responsi- Today, the list of certified B Corps numbers over The assessment itself may suggest changes to opera- tor of Sustainability, and she quickly found herself bility. In that sense, the most important thing the 3,100 in 71 countries. tions and can take many months to complete. handling the certification process. The integration B Corp process offers is a formalization, validating In the early days, B Lab and ESG concerns in gen- As part of the process, companies also must of those two businesses offered a window for the the company’s practices and giving it a way to verify eral met considerable resistance. However public commit to meeting the legal requirement of a ben- new company to align itself with B Corp standards, them on an ongoing basis, Ms. Bratter says. frustration around issues such as the climate crisis efit corporation or similar structure in their juris- she says. “Times are rapidly changing,” she says. “We know and wealth inequality have helped turn the tide. diction. This step is critical as it sends a message to “I definitely wouldn’t say it was ‘easier,’” Ms. that a significant number of consumers and indeed Researchers in a 2016 Harvard Business Review B Lab shareholders that directors and officers are legally Bratter says. “It required a significant effort by our customers are looking to the corporations article noted that “evidence suggests that key ele- certified the obligated to consider the interests of all stakehold- more than 150 individuals across the organization, “A different behind the brands they love to see if those busi- ments of the industry environment—ranging from practices of ers. Shareholders’ power isn’t diminished but redi- alignment from our leadership team, working with nesses share their values, and they’re looking for a CSR initiatives and sustainability trademark appli- rected to serve the redefined goals of the company. global counterparts. But going through an inte- model sense of trust.” cations to layoffs and growing income inequal- Most of the companies that have been certified gration creates a lot of potential unsettlement, so needs to be ity—provide fertile soil for the growth of alternative as a B Corp have been small to mid-sized opera- to have this goal to rally around and to bring light on the THE CHALLENGE organizational forms.” tions, with brands that appeal to what might be to the corporate value and mission through this For B Lab’s new model to gain acceptance, however, In August, the influential CEO group Business termed the “free-spirit” consumer: outdoor certification—it was definitely a unique oppor- table. Our it has to overcome some deep-seated cynicism. One Roundtable released a statement that, for the first apparel retailer Patagonia, fashionable eyeglasses tunity to leverage a time of change, to leverage role is to dem- anonymous banker told the Financial Times last time in at least 30 years, broadened the focus of a companies brand Warby Parker, natural body care brand Dr. the moment.” onstrate the year that efforts by a prominent industry initiative corporation: “While each of our individual com- 82 Bronner’s Soaps, hydroponic produce supplier As part of its environmental commitments, to reduce carbon-producing investment amounted in 2007. panies serves its own corporate purpose, we share Archi’s Acres. But with the demand for ESG report- Danone NA plans to be net zero carbon emissions alternatives.” to “bullshit.” Multiple studies have found that, as Today, the list CHRIS TURNER a fundamental commitment to all of our stakehold- ing only growing and multinationals jumping on by 2050, Ms. Bratter says. “We have a whole variety Executive Director, a group, shares of companies with ESG practices ers,” its statement reads, emphasizing the word “all.” of certified board, this market niche could well be poised to of tactics and topics, from reducing carbon emis- B Lab UK outperform those without—yet, in casual conversa- Since 1997, the group has publicly held the oppos- B Corps turn mainstream. sions in our transportation and our manufacturing, tions, many executives will confess they regard ESG ing view that a corporation exists “principally to numbers over “What we’re working toward is an inevitability,” to fostering what we call carbon positive solutions. statements as “an inside joke.” serve shareholders.” says Chris Turner, Executive Director of B Lab UK. That includes this big program on regenerative agri- But clearly some are taking the idea of positive “There is an awakening that has taken place in “We need to organize our system in a different way culture and soil health.” social impact very seriously. Mr. Turner notes the terms of citizens at large, realizing the role business to ensure that business is providing a benefit for all The B Corp process has also helped highlight presence of cynicism, but sees the Business Round- plays and realizing ultimately that they can hold 3,100in 71 of us, rather than just shareholders. other work Danone NA must pursue, she says, par- table announcement as a critical inflection point businesses accountable,” Mr. Turner says. “It is a movement—a movement of leaders. One ticularly in the company’s supply chain, “one of the in a larger trend, and an important measure of the Noting that growing market pressure, some com- countries. of the things I enjoy most about my job is that I get pillars” of B Corp certification, she says. “We have growing vitality of the B Corp idea­. panies have made superficial efforts to brand them- to talk to lots of really inspiring business leaders— many, many suppliers throughout our value chain. “I don’t think we should underestimate that,” selves as responsible citizens without much in the true leaders who are thinking long term. Learning And we have a really unique opportunity to both Mr. Turner says. “On a continuum of change, the way of substantive changes—a practice criticized as from them along the way is a great part of my job.” educate them on what a B Corp is—why we think acknowledgment of the challenge and the acknowl- “greenwashing.” The flood of positive-impact mar- it’s so valuable and important to our business—and edgment of the need to change is a crucial step. But keting threatens to drown out the work of truly mis- MULTINATIONALS also that there are ways they can improve their prac- obviously that now entails a lot of hard work. There sion-driven companies. And that is precisely where Currently the world’s largest B Corp, Danone North tices, which will in turn help us improve our prac- are difficult choices ahead.” B Lab’s efforts shine brightest. America adopted the organizational structure and tices,” Ms. Bratter says. The final importance of the Business Round- B Lab and a group of B Corp certified companies became certified in 2018. The company’s efforts Danone NA is the seventh Danone subsidiary table announcement can only be measured in the took out a full-page ad in The New York Times with were instrumental in the effort to scale B Lab’s pro- to become a B Corp—the first was Happy Family changes that those businesses actually put into an open letter calling on the Business Roundtable cedures to accommodate and meaningfully mea- Organics, makers of premium organic foods for effect, Mr. Turner says. CEOs to back up their new stance with real reform. sure the work of multinationals. children and mothers. Globally, Danone Group “That is my message to business leaders: Leader- Citing the positive impact of its certified companies, “It’s a huge, huge frontier,” Mr. Turner says. “Cer- intends to continue this process one unit at a time ship of a business now doesn’t look like just recog- the letter points to continued resistance from inves- tification can be a multi-year process, and there until the entire company is a B Corp. nizing this,” Mr. Turner says. “Everyone recognizes tors, and says, “stakeholder governance builds trust are many of them now in that process. We’ve made “Part of the B Corp certification requirements is it. Leadership now looks like acting on it.” u and builds value. More importantly, it ensures that leaps and bounds in the last couple of years as we’ve that you have to certify both your highest entity, but carlton wilkinson is a Director and Managing Editor the purpose of capitalism is to work for everyone been working with Danone particularly. All of that also any that can be certified independently,” Ms. of the Brunswick Review. He is based in New York.

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no business story in 2019 made a bigger splash than the August 19 statement of the US Business Roundtable. That group of blue-chip CEOs, after decades of explicitly pursuing the exclusive interests of shareholders, now declared that their companies should seek to serve all stakeholders—employees, customers, society at large. The statement made front-page news around the world. • In the media stampede to cover the story, the clear winner was Fortune magazine. Within seconds of the statement’s release, Fortune posted a prepared-in-advance inter- view with JPMorgan’s Jamie Dimon and other mar- quee signers of the statement. In concert with that story, Fortune also posted its annual Change the World list, honoring companies that are advancing social causes in the course of doing business. • For Fortune, the Roundtable statement was the culmi- nation of a five-year push, particularly by President A LIST to CHANGE the WORLD and CEO Alan Murray, to broaden the beneficiaries of corporate success. In 2015, Murray and his team Fortune CEO ALAN had launched Fortune’s Change the World list. For MURRAY, a hard- a magazine famous for its financial-metrics rank- nosed journalist, ings, a list honoring companies that helped improve tells Brunswick’s the world represented a radical departure. In 2016, Murray hosted a gathering of 100 CEOs at the Vati- KEVIN HELLIKER can, for purposes of devising ways for companies to that the executive address inequality, climate change and other soci- quest for social etal problems. Last year, in the months preceding value is a genuine the release of the Roundtable statement, Murray movement. consulted with leaders of the organization on what their statement would say. • While acknowledging that not all executives agree with the statement, and that statements themselves change nothing in the absence of action, Murray is confident that a sig- nificant shift in corporate purpose is under way. His perspective is informed by a long run as The Wall Street Journal’s Washington bureau chief, followed by a stint as President of Pew Research. PHOTOGRAPH: WESLEY MANN WESLEY PHOTOGRAPH: L72 74 water, on health, on climate change, on employee cantheprivatewhat sector do to climate? help each toproblem. address aparticular For instance, ture, inworking groups, inthatwe CEOsgo had off at the Vatican. one, This though,- wasunique instruc in other places as well. now, So we decided to do one got here, year, Imade itevery doing andwe it started three yearsInitially itwasevery andinChina. When I the Fortune Global Forumcalled for almost20years. talking to CEOs. Isaid, “We canmake thathappen.” Franco thatthePope known itbe let wasinterested in wasthe who Vatican representative to theUN. Msgr. contact here inNew York, Monsignor Franco, Hilary then-Time with CEOJoestarted Ripp. He a had We were inaconversation the with Vatican that at theVatican. How did thatcome about? That sameyear, you organized aCEO gathering system political away isturning “The from us.” and suddenly thebusiness community issaying, happens, andTrump Sanders happen, andBernie World listlaunched in2015, and ayear later, Brexit addressingimpact problems. social Change The the to measure companies thatwere having apositive Advisors. He uscomeamethodology helped upwith company heco-founded Impact FSG-Social called Porter (Harvard Business School Professor) anda impact.social Michael working we So with started Powerful Women list. ourlistslooked at But none of there. By how admired were. they We have theMost they’re growing. By employees whether like working has liststhatmeasure companies by size. By how fast the Changedecided to the start World list. Fortune andI (Fortune Editor inChief) Leaf place? Cliff So problems? How are we makingtheworld abetter from CEOs, are what we doing to address core social Before ourlistexisted, more Iwashearing andmore Change theWorld list? How did Fortune come upwiththeidea for the and JohnsonAlex &Johnson). Gorsky (CEOof Motors), General (CEO of Barra Mary Jamie Dimon, talkedpublic IBM), Ihad to GinniRometty (CEOof ready to make thestatement. Before thethingwent reachedThen they out towere they mewhen getting research on it. them some. itwith discussed Ihad So reached out to were they mewhen doing their aboutayear spent this, They studying andthey the works? that aRoundtable statement of thissortwas in How long before itsrelease were you aware

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on thecover. Dimon andAlex Gorsky Ginni Rometty, Jamie Roundtable, andfeatured with the Business timed the World issue was Fortune's 2019Change Francisco. ForumGlobal inSan of Google,atFortune’s Larry Page, co-founder Alan Murray to talks PLATFORMS RANKINGS

in January, we hosted a dinner at Davos to talk way, itwould valuable be to us.” this better. you cankeepAnd if thisgoing insome and capitalism. We have all to figure out how to do business of moment inthehistory an important said,CEOs all isreally important.“This We are at a cool event. In we didafterward, thesurveys the theCEOsindividually. totime each greet of It was byenough therecommendations thathetook the there for afew minutes. But hewasimpressed readhad therecommendations. Pope. next The morning, thePope, we with met who andtaken mendations translated to the thatnight can do. We finished on a Friday our andhad recom- the private things sector cameupwith training. They came to were they mewhen planningthestatement. Roundtable was thinking about, which iswhy they meeting. It put uson themapfor theBusiness what that. of Cook waspart that. Then thenext year we were inCalifornia. Tim in New York thenext June. Jamie of Dimonwaspart new effort. CEO Initiative The its first had meeting force CEO)stood upandsaidhewould sponsor this core business. At thatdinner,- Marc (Sales Benioff their to addressing problems major social of aspart tive, for aforum are basically CEOswho committed theFortunelaunched we CEOInitia what called - about how to keep themomentum going. There we be onbe it. And thatputs pressure on usto make sure attention.It got alotof companies wantto A lotof list been received? After five years, how hasthe Change the World brunswick value social review That was in December of 2016. wasinDecemberThat of next The month, told initially ushewasjust goingThey to stay So theCEOInitiativeSo the grew out of Vatican

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PHOTOGRAPH: MIKEW MCGREGOR/CONTOUR BY GETTY IMAGES that has to attract large numbers of talented people. large numbersthat hasto of attract And that’s powerful, for any particularly company a sense thatthey’re doingintheworld. things good employer. want their employer They to give them cluba social or into achurch, put into they their have thatgenerationsago we might stuff put into to theMoose Club, Elk Club, Club. Rotary All the churches. later. married get They don’t They belong we didabig study. millennial don’t They to belong and Idid. When IwasatthePew Research Center, differently abouttheir employers thantheway you You’ve employees got just agenerationof think who I don’t thinkso. itisemployee of pressure.A big part movement fade? friendlier tobusiness, value willthe social If environment thepolitical becomes Fortune 100CEOs. lot of In private, notfor quotation, I’ve heard thatfrom a there thatbusiness could loseitslicense to operate. it.Politics of GinniRometty says isclearly part in democracies. in among executives islosing favor thatcapitalism You inyour Roundtable talk fear articleabout toneeded take thosejobs? jobs.create alotof But who’s going to have theskills is going to eliminate jobs. think They AI isgoing to cerned about. Imean, theseexecutives don’t think AI most feel responsibleissue that they for and con- always workforce development. It seems to the be to topics, address various themostpopular one is the economy. of and more parts in tothe good people participate workforce development programs, to allow more programs, to need enormous cometraining upwith over decades. the next couple an feel of they So is going to displacenology more and more people realize there’s problem, aninequality andthattech- isworker training. industry Companies tion with Yes. Probably theissue thathasgotten- themosttrac not alladdressing climatechange, for instance? show you seek adiversity of initiatives—they’re The 52 companies on thelist thisyear seem to have theresources to scale. have great little companies, alot of don’t but they lems, which iswhy ittends to big be companies. You results measurable see on addressing prob social - announcement or intentions. hasgood We wantto fornot looking somebody who’s just made abig we put abig emphasis on results. measurable We’re brunswick value social review At ourconferences, we when have breakouts

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career, I’d never CEOswho around been abunch of leadership.tion about moral Up to thatpoint inmy upguardrails,setting orders. lessgiving top,the very motivating, inspiring, of inaposition atthetop,ing thepeople theperson at particularly result, power out pushed to hasbeen theedges, leav- orders to come back down, you’re going to lose. As a wait for itto filter up to the and top distilled and get vertically,els it travels horizontally instantly. you If down. Nobody successful works thatway any more. egy, to what do andthen itgoes back tells everybody to thetop. guy The at thetop- comesthestrat upwith these employees. collect information. They It goes up hierarchies. asinformation described You have all operate. Companies to used what be Alan Greenspan howaround nature big companies isthechanging of

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75 PLATFORMS RANKINGS talked about moral leadership. Now I am—all the creating all that heat on the left. It’s only going to be time, all the time. It’s not because suddenly they’re worse in the next election if you have Elizabeth War- more moral. It’s because the way you run a company ren and Donald Trump. is much more about motivation, inspiration, value setting, and less about giving orders. I suppose it’s too soon to say whether the For all those reasons, even if the political environ- Roundtable statement is warming voters toward ment magically changed, this impulse would still be capitalism? very, very strong. I’m not sure what kind of results you could point to really show a positive effect. Overall, I think this What is the CEO response to the oft-heard argu- is really closely related to the short-term, long-term ment that businesses are doing good without issue. I spent more than a year of my life in the Time stopping the things they do that are bad? Inc. C-suite watching all the stupid things that we That’s a criticism from the left, and I think the CEOs did that hurt workers and hurt society but helped are focused on criticism from the right. Just because get a few more dollars into the quarterly report to the they still live in a shareholder world. If you have an street. What would be helpful would be if we started activist in your stock who wants to break up the “Up to that to see some real movement on fewer companies whole company, the last thing you want to do is say point in my reporting quarterly results, less attention to the quar- shareholders aren’t important. terly numbers, more attention to the long term. career, I’d We talked about worker development. You’d like The CEO’s biggest concern remains the Milton never been to see a rise in the aggregate number of dollars spent Friedman loyalist? around a on training and workforce development programs It’s a little unfair to put it all on Milton Friedman by companies. I don’t think there’s any evidence that loyalists. The attention to shareholders didn’t just bunch of it’s grown. If you saw a number like that start to grow, come out of Milton Friedman. It came out of the CEOs who I think that would tell you something. corporate raiders of the ’80s and the ’90s. And those people became corporate raiders because you had a talked about In the five years you’ve produced the Changing bunch of really sleepy corporations that did a lot of moral leader- the World list, has it helped change the world? really stupid things—and were getting eaten up by ship. Now I By definition, the list honors a minority of businesses. the Japanese. But there are more and more businesses that are The shareholder movement grew out of clubby, am—all thinking this way. I can’t give you metrics. But I think family-friendly companies that grew up out of the time, all the number of companies that are really consciously World War II, that were starting to just die. And the time.” focusing on how they have a more positive impact on being CEO was like a tenured position, until the cor- society as part of their core strategy has grown. porate raiders came in and started shaking that up. I mean, all the big private equity firms now have Today, I don’t think a return to the complacency social impact operations. I just spoke with a top guy of the ’60s and ’70s is possible given the pace of tech- at Carlyle, and he was talking about how they’re nological change. There isn’t a lot of complacency looking for ESG measurements for their entire port- among CEOs who fear being disrupted by some folio. That’s a pretty big deal. Private equity. Not Ripple or Alibaba or Amazon. public traded. They want to have a way of measur- ing social impact across their portfolio. It goes well Did criticism of the Roundtable statement cause beyond the public markets. any regret among signers? You’ve now had in the last three or four years a I don’t think there are regrets. I think they were sur- number of really solid studies showing that compa- prised that it was as big a deal as it became. Many nies that pay attention to ESG metrics perform better. had thought of it as no big deal. They said, “Look, There was one recently that showed the flipside— this new statement is just a reflection of how I was that companies that did poorly on ESG metrics were running the company anyway.” That was kind of the good candidates for bankruptcy. Of course, you can Jamie Dimon attitude. I already do this. So why not argue over cause. It may be that they do good for the say I do it? world because they’re doing good in general. But the But most just felt they had no choice but to push notion that companies that do well by society are bet- the issue forward. For these guys 2016 was a scary ter companies is getting more strongly ingrained. u year. Because you had Donald Trump abandoning kevin helliker is a Pulitzer Prize winning journalist them on the right, and Bernie Sanders, a socialist, and Editor in Chief of the Brunswick Review.

76 brunswick social value review - no. 1 - 2020 BRIEFING INEQUALITY

BRIEFING: The Gender Pay Gap

he difference between the average This persistent men and women is highest in Japan, the US and UK. gross earnings of men and women The average across the OECD is 13.5 percent. remains a persistent problem. In a number problem dogs the of countries, public disclosure of this pay business world Does the gender pay gap differ between jobs gap has become mandatory for medium and limits its and sectors? and large companies. potential. Media, retail and construction have the biggest gen- T Here’s what you der pay gaps in the US, and the gap is smallest for How big is the gender pay gap? need to know. biotech pharmaceuticals and defense. Job review The gender difference in pay varies quite dramati- site Glassdoor analyzed hundreds of thousands cally between countries. Data from the Organiza- of salary reports, including information posted tion for Economic Cooperation and Development anonymously on its site by employees, and found

ILLUSTRATION: DAVID PLUNKERT DAVID ILLUSTRATION: shows the gap between the average gross earnings of that certain professions have much higher pay gaps:

brunswick social value review - no. 1 - 2020 77 BRIEFING INEQUALITY

Male pilots and chefs earn considerably more than responsibilities in the home, including unpaid care their female counterparts (a 26.8 percent and 24.6 for children and ailing or aging loved ones. In the UK, percent difference); the gap among C-suite execu- for example, the gender pay gap increases after child- tives is also large (24 percent). birth, and by the time their first child is 20, women’s hourly wages are about a third below men’s. How is this possible—aren’t there laws against discrimination? Does this mean the gender pay gap is the result Many countries have passed laws to ensure men and of women’s choices? women receive “equal pay for equal work.” How- It’s not that simple. Part of the problem is senior roles ever, equal work is often not an option for many are strongly associated with an “always on” culture women, due to lack of educational or employ- of long hours and constant availability, and so can- ment opportunities or other structural or societal not be done flexibly or part-time. Many argue that barriers. As a result, disparities in earnings have this isn’t inherent in the nature of senior roles, but remained, even despite the introduction of equal 24percent is rather a product of the culture of the workplace, pay laws. Recognizing this, a number of countries which developed to suit the gendered norms. One have passed laws requiring employers to publish The average effect of this culture is that women are less likely to data on the gender pay gap in their organizations. pay gap advance to positions of seniority, which have histori- between cally been held by men—famously, there are more Which country pioneered pay gap laws? men named John among CEOs of the FTSE 100 and The UK became the first country to require gender male and S&P 1500 than there are women. This persistent lack pay gap reporting in April 2017 with changes to The female C-suite of advancement helps to perpetuate the pay gap, as Equality Act. It obliges employers with 250 or more executives. fewer women ascend to higher-paid positions. employees to publish gender-pay-gap data. This has had the indirect effect of forcing many non- Could self-confidence contribute to the gender UK companies to confront gender disparities, since pay gap? many global companies have offices and opera- It’s often suggested there’s a “salary confidence gap” tions in the UK. Recently France and Germany have between men and women when negotiating pay. An passed similar laws, and a live debate is under way in analysis of real-world job applications by Glassdoor several other countries about following suit. suggests that men do apply for more higher-paying jobs than women: Men apply to jobs that pay 18.3 What causes the gender pay gap? percent more on average than jobs women apply Many factors. Undoubtedly, a major one is that for. However, this is largely because women often women continue to bear the brunt of caregiving look for different kinds of jobs than men; the “salary confidence gap” drops to 0.7 percent when compar- REGIONAL DIFFERENCES ing job applications from equally qualified men and women seeking similar jobs. Recent studies have also

The difference in average pay between men and women is greatest in Japan, the shown that women who fail to promote themselves EU as a whole, and the US, but it remains a problem in much of the world. do so out of a fear of backlash from colleagues, who respond to women differently than they do men. On

this evidence, self-confidence is not a major factor.

Will reporting the gender pay gap really help reduce gender disparities?

Mandatory reporting only began in 2018 and it’s too soon to see any direct impact. However, it has led to

increased scrutiny from the media, employees, trade unions and investors. This greater transparency has

raised the stakes for companies. Many companies will see this as an opportunity to show leadership,

in order to compete for the best talent. Taking action on the gender pay gap can send a signal that a com- I UK US EU OED pany is progressively minded, inclusive and com- D A mitted to equal opportunities. u

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