Big businesses must adapt or disappear – Capitalism 2.0 will not be kind to the laggards!

Global Business Coalition Meeting With Secretary-General Ban Ki-MoonA summit hosted by Sir Richard Branson and Jamie Oliver calls for a radical rethink of traditional business models.

A gathering of sustainability leaders hosted by Sir Richard Branson and Jamie Oliver has been warned that big businesses will be swept aside by emerging social enterprises unless they start changing their business models and contribute more to society.

Boudewijn Poelmann, who founded the hugely successful Dutch Postcode Lottery, which now operates in Sweden and the UK, said that many major businesses would disappear over the next 20 years, to be replaced by emerging social enterprises, unless they took off their blinkers and responded to the environmental and social challenges the world is facing.

“Small companies that are passionate about creating change will take over if big companies do not adapt,” he said. “We already see that with energy, with so many small companies producing sustainable clean energy. The big companies are already starting to feel they are losing out.”

Poelmann also criticised many large businesses for being arrogant and gave the example of the former chief executive of electrical giant Philips who ordered him to abort plans by the lottery three years ago to give away millions of LED (low-intensity) lightbulbs.

“The Philips CEO demanded I stop giving away the LED lightbulbs, but I refused, and the next morning the head of the company’s lighting division called to ask how they could co-operate,” says Poelmann.

“Philips feared they would be left looking awkward that they were continuing to sell old-style lamps when they had the technology in their laboratory to create LED lights but did not want to produce them because the margins were lower.”

Ben Cohen, co-founder of Ben & Jerry’s Ice Cream told the Screw Business as Usual meeting that the Occupy movement was a warning to business that it needs to stop manipulating governments for its own purposes.

“The current evolution in our society, the Occupy movement, is protesting over the control that corporations have over our society because corporations use their power to create laws that advantage them over the 99%,” he said.

“Corporations have always been political animals. They take political stands and spend money influencing governments, but do it covertly and in their narrow self interest.

“The Occupy evolution is where consumers are calling corporations out and making it common knowledge that corporations are manipulating at the expense of society as a whole.

“This is an opportunity for forward-thinking corporations to take a stance on the side of the 99%, which are their customers, and build this incredible customer loyalty based on shared values.

“But what many companies have been doing is to use PR and advertising and marketing – essentially paying money to agencies to come up with a made-up story to make customers feel good about their product or brand.”

John Bird, who created the homeless magazine Big Issue and the social investment fund Big Issue Invest, said that power had increasingly shifted into the hands of consumers and that they should now vote with their wallets.

He gave the example of people giving “Tesco a kick in the nuts” by moving their custom to other stores. He added: “Business only exists because of the power we give them, and every time we buy something we vote. The more we can emphasise the collective power of us, the more we can frighten business into change.

“Fear is great – Lenin said that the monopoly capitalist will sell you the rope by which you hang them.”

Branson and Oliver warned that progress towards more sustainable businesses was being hampered by a lack of political leadership.

Branson said the situation is particularly dire in the US with a majority of people still in denial about global warming: “If we had a meeting like this in the US, 60% would be doubters about whether global warming exists. So there is no real sense of urgency and it is not being treated in the way it should be.”

Oliver, who is celebrating the 10th anniversary of his Fifteen restaurant social enterprise, said that while businesses should be future-proofing their operations, it was up to governments to meet challenges such as water scarcity “which will affect everyone in this room within the next 30 years and start wars and create massive movements of refugees”.

But he said that politicians often lacked the courage to create change. He criticised the UK government for rowing back on previous commitments to healthy school meals, which he has relentlessly campaigned for.

“I have not seen enough creative people in government and that really upsets me – even if they are talented, they are too transient,” he said.

“If you are measured on numbers alone, how do you make the change? If the lowest common denominator is always price, then we will always be fighting against the tide. Governments have to be brave enough to think long term – something radical has to happen there.

“The minister for education has changed six times in seven and a half years. If that happened in your business, what bill of health would your company be in?”

Oliver applauded sustainability professionals who are creating change in their organisations. He said it was important business leaders gave permission for passionate people to act.

“I have learnt that people in your role are so important, to be a provocateur and a renegade. This movement has got to be relationship based.”

Jochen Zeitz, the CEO of the sport and lifestyle division of luxury goods company PPR, whose brands include Gucci and Stella McCartney, also called on politicians to change the regulatory frameworks, but he admitted they are too scared to act.

“How long would the tobacco companies have gone on insisting that smoking was OK,” he said. “Some industries need a push from behind. The tobacco industry would not have changed unless the regulatory environment had changed.”

Zeitz, who is also chief sustainability officer for the PPR group, also called on other companies to embed change at the heart of their organisations: “We do not need a CSR department or PR people to talk a nice game,” he said. “We need to engrain systemic change into what we are doing. Business and their PR departments are geared up not to talk about anything, but the time has come to be more collaborative, to find solutions.

“Many industry leaders say consumers are not ready for this, but this is just a lame excuse for inaction.”

Companies need to learn from entrepreneurs such as Branson and Oliver by relating to consumers about their sustainability initiatives in a fun and dynamic way, said Zeitz, who is behind Puma becoming the first company in the world to create an environmental profit and loss account.

He said Puma had done all the hard and complex work of understanding the monetary cost of its impacts on the environment but now “needs to translate it into something tangible for the consumer”.

“How can we get the consumer excited and for this to become like the Fairtrade label,” he asked. “In 10 years, every product could have the true cost associated with it, and that is when we can put market forces to work, finding solutions that no longer work against nature but with it.”

He gave the example of a can of tomatoes, which sells for $1.50 in the US. Its true cost would rise to $1.70 if the full environmental costs of producing it were taken into account.

Zeitz said Puma was now challenging itself by developing a social profit and loss account, by looking at issues, such as whether all the workers in its supply chain were being paid a living wage.

Chris West, the director of the Shell Foundation, said it was vital that the sustainability efforts of companies were directed at supporting change in the developing world. He criticised those businesses that were still hooked on charitable donations rather than leveraging their core skills to tackle poverty.

“Corporate philanthropy for the purpose of reputation and PR does not create impacts but risks and liabilities,” he warned. “Companies need to use their skills, brand and convening power and networks and use this for creating good.”

West said it was a misconception that companies should produce only the very cheapest products for impoverished communities because they were often poorly made and did not last.

“Poorer consumers are just like their counterparts in the developed world,” he said. “They will pay for services they value. If a product is durable and works well, people will pay for it.”

His biggest complaint about corporates as well as NGOs and foundations is their short term focus and aversion to taking risks. “This is not a quick, linear or smooth journey. This is tough and needs persistence and flexibility,” he said. “It is only by trying high risk projects that we are able to get high returns. Most foundations squander their resources with lower risk projects with a short-term focus.

“With high risk comes failure, and the development sector does not like to talk about failures, yet most of us as individuals learn more when we get things wrong. We have got to move beyond glossy magazines with happy, smiling, poor people.”

“I hope more foundations act like venture capitalists. We need to change the way we all work to support social enterprises as they are the future of delivering this change.”

This article was originally published on the Guardian website
These ideas have been explored in great detail in a White Paper in partnership with TSSS and Earthshine Solutions“A Journey in Search of Capitalism 2.0: Blueprints for a Sustainable Economy”.  

Click here to download the paper.
Jo Confino is an executive editor of the Guardian and chairman and editorial director of Guardian Sustainable Business. He also advises Guardian News & Media and Guardian Media Group on their sustainability strategies

One Response