Getting Down to Business in Rio
14th June 2012
Where’s the voice of business when you need it? For governments in the West, this has been a common refrain of the financial and economic firefighting over the past four years.
Where relations between chief executives and political leaders haven’t soured completely, as in the United States, there has been a distinct absence of business from the critical debates about how a new and more legitimate form of capitalism can be created out of the ashes of the credit crisis.
It is one thing for leaders of embattled financial institutions to keep their heads below the parapet as they focus on reinventing broken business models and avoiding the question of bonuses defining the entirety of their shareholder dialogue. It is quite another for corporate leaders to remain on the sidelines when their balance sheets are strong, growth markets hold still-great potential for their products, and youth unemployment and widening inequality in their home markets threaten profound social instability.
Entering the public arena is never without risks for chief executives and other business leaders. But three factors are making such a decision less a matter of choice than necessity.
First, social expectations of business are undergoing a transformation — driven on the one hand by the political economy of austerity and on the other by technological innovation. From above, through increased government scrutiny and regulation driven by fractious politics and diminished public resources. From below, by the emergence of social media narratives about corporate practices and products far more powerful than any advertising campaign can deliver. From their own employees, by the demands of creating a rewarding professional environment that goes beyond providing a paycheck.
Second, we are entering an era of competitive sovereignty, replacing two decades of consensus around the universal benefits of globalization — however uneven and unequal its path. Vertical integration of public and private interests, among Western and growth markets alike, is increasingly considered more promising for national prosperity than the benefits of interdependence. For business, this is decidedly mixed prospect: On the one hand, offering the prospect of greater state support in the struggle for new markets; on the other, the threat of greater barriers to their goods by governments looking to protect “national champions.” In this fragmenting landscape of capital and global markets, if business doesn’t make the case for a rules-based system that enables market solutions to flourish amid openness and competition, who will?
Third, the social compact that has underpinned the value creation of the market economies of the past 30 years throughout much of the world is under real, and dangerous, strain. The Arab Awakening has in large measure been about the breakdown of that compact between the rich and the rest, young and old, educated and uneducated. For China’s growth miracle to endure, it is critical that the allocation of state capital continue to be decided on public interest grounds, rather than for the personal gain of strategically placed individuals. And in the crisis economies of the West, dramatically widening income inequality is combining with soaring long-term unemployment among youths to create a permanent underclass for which business is in danger of becoming seen as the enemy.
At the Rio+20 Corporate Sustainability Forum, convened by the U.N. Global Compact and set to begin on Friday, more than a thousand chief executives and investors will meet with global leaders from civil society, academia, cities and government. The four-day event will comprise over 100 sessions focused on six themes central to the Rio+20 agenda: Energy & Climate, Water & Ecosystems, Agriculture & Food, Social Development, Urbanization & Cities, and Economics & Finance.
Rather than dwell on the inevitable inefficiencies and absurdities of such conferences, business leaders should focus on Rio’s convening power to re-enter the global debate, and help fill a dangerous vacuum of populism and protectionism from which they ultimately stand to lose the most.
Waiting for governments to get it right is neither a solution, nor a sufficient excuse, if business is to meet the wave of rising expectations.
Businesses don’t need governments to tell them whether or where to treat their workers properly, invest in their communities, or contribute to the broader social fabric from which they source both their customers and their employees. They can — and should — do these things by themselves.
This is the true sustainability challenge for business. No shelter is strong enough to protect business from the consequences of a breakdown in the social compact required to make liberal capitalism sustainable, and wider development a boon to all. For global businesses, it’s time to enter the arena — and Rio’s the place to do it.