By Jonathan Glennie
Guardian
July 13, 2011
When I did a masters in sustainable development over 10 years ago we learned the buzzwords of the late 1990s: corporate social responsibility (CSR) and the triple bottom line. We were part of a generation working on the "business case" for the greening of business and government. Fundamentally, we argued that acting in the interests of nature or society is not a chore or a cost; but actually works in favour of business because it saves money or creates new opportunities to make money.
The business case is an attractive idea with plenty going for it. When a business based in a skyscraper turns off its lights it saves money and reduces carbon emmissions. Ten years later the efforts being made by businesses to become more ethical are quite substantial. So clearly our work has paid off.
But we need to be realistic about how far this technique will take us. For all the myriad of CSR advisers helping businesses do better (or sometimes just helping them look like they are doing better - you know who you are), the real reason change happens in the long term is because of what is happening outside business, in the world of civil society and governmental regulation.
The irony at the heart of the greenies' "business case" for sustainable development, is that business people can see precisely what brings them most profit. Sat in front of their profit and loss tables day in, day out, it seems highly likely that if there is a business case for something they will know about it. And the sad reality is that very often it is not in a business's financial interests to act ethically. And no amount of persuasion will change that.
The point, then, is not so much to persuade businesses that it is in their interests to act ethically and sustainably - they will work that out for themselves - but to make sure that it is.
Which means two things in practice: raising the benefits of acting ethically and sustainably, and raising the costs of not doing so. There are two principle ways, in a democratic capitalist society, of ensuring that the right incentives are in place for a business to act ethically: via the consumer and via the regulator (indirectly influenced by the citizen).
The role of the private sector in development has been back on the blog this week, and I am a firm believer in the vital role it plays, whether that be the provision of social services or the building of infrastructure. The profit motive has a place in incentivising decent outcomes in certain circumstances, and the state sector can fail as spectacularly in providing goods and services to poor people as the private sector. But I remain unconvinced that an appeal to the good will of businesses will persuade many more of them to engage in development issues.
While I try to avoid reducing human actors to simply incentive-driven automatons, when humans get into big organisations it can be hard to apply moral values, and the incentives of the business context tend to hold sway. Especially when the boardroom is often far from a particular initiative that may be many thousands of miles away.
Everything we have learned from the years of ideological dismantling of the state in poor countries under neoliberalism, now thankfully reversing, is that nothing functions without strong and competent regulatory authorities.
At a talk last week I asked Loretta Minghella, director of Christian Aid, given her experience working in the financial sector and Christian Aid's campaign on tax reform, how deep the structural changes had to be in the City of London to really respond to problems of poverty and inequality.
A bank-bashing response would certainly have been a crowd-pleaser, but her answer was more measured, and actually more radical. The big problem, as she sees it, is a lack of global level regulation to match our now thoroughly globalised financial system.
Such an international regulatory system is very far from being a reality, but if it is needed to guide, enable and sometimes restrict the activities of the financial sector, it is equally needed in other international sectors, from the extractive industries to manufacturing to agricultural trade.
Attempts at getting companies to sign up to voluntary measures (such as the UN Global Compact) are fine, but they are regarded as quaint by the majority of business people. For every CEO who has a damascene conversion and transforms or builds their business along ethical lines (think Anita Roddick of the Body Shop) there are thousands who don't. Lip service is paid, the odd children's playground is built, the business of business goes on.
The point is to change incentives, and voluntary measures don't do that. Only legal sanction or consumer action is strong enough, and consumer action is too erratic to rely upon.
In a globalised world, national level laws are clearly inadequate. People say international law is impossible, but they say that about everything worth doing. It is not only possible, it is vital, and is the major project of the 21st century. Without it, the global public cannot expect a private sector that works for people, not just for profit.
