Companies proactive on sustainability have competitive edge

Trends in global capital, labour, and consumer markets are pushing companies to take greater responsibility for safeguarding the needs of future generations, says Dutch sustainability author and former minister Pieter Winsemius.

Corporate sustainability has come a long way in recent decades, morphing from a mere adherence to regulations set down by governments in the 1970s to the integration of environmental and social responsibility principles into core business practices by many companies today. 

But to achieve sustainable development - that is, ensuring that the needs of future generations are not compromised by the present - companies must take an even more proactive approach in their practices, said Dutch professor, author, and former minister Pieter Winsemius at a conference on Tuesday. 

In a keynote address to 200 business and government leaders at Singapore’s Grand Hyatt Hotel, Winsemius shared that in recent decades, business attitudes towards sustainability have evolved through four stages; reactive, functional, integrated and proactive.

In the first ‘reactive’ stage, companies merely abide by government regulations on environmental performance; as they progress to the ‘functional’ stage, they start to explore ways to implement compulsory sustainability measures as efficiently as possible.

The third ‘integrated’ stage sees companies recognising that there are business opportunities in addressing environmental and social challenges, and they begin to integrate sustainability concerns into their operations.

In the final ‘proactive’ approach, businesses take responsibility for meeting the needs of future generations, and adopt long-term thinking to anticipate and fulfil these needs.

In the 1980s, most companies were transitioning from a functional approach to an integrated one. Today, most companies are in the integrated stage, and a slow shift is taking place towards a more proactive view of sustainability, observed Winsemius.

This change is driven partly by government regulation, but consumer markets and capital flows are increasingly taking a central role in pushing for sustainable development, said the professor, who is the son of the late Dr Albert Winsemius, economic advisor to Singapore from the 1960s to 1980s.

The latter has been widely credited as a key architect of  Singapore’s successful economic development through policies such as inviting multinationals to invest in Singapore, focusing on high-skilled industries, and increasing wages.

A physicist by training,  Winsemius was professor of sustainable development management at the Tilburg University in the Netherlands. A former partner of global consultancy McKinsey, he has also served as Minister of Housing, Spatial Planning and the Environment in the 1980s, and again from 2006 to 2007.

 As an example, Winsemius cited how investors are scrutinising the pay of top executives - to ensure if they are fair and equitable - before deciding to invest in companies and such practices force companies to be more socially responsible.

Another factor is an increasing awareness of the impact that a business - especially an unsustainable one - has on its neighbours, said Winsemius. For example, in Holland, pig farms - which are commonly associated with pollution and odour from waste - face difficulties in obtaining permits due to objections from neighbours, he said.

In an earlier panel discussion, Ngiam Tong Dow, former Permanent Secretary in the Prime Minister’s Office, and finance, trade, communications and national development ministries, told the audience that Singapore faced similar business dilemmas in its early years of independence.

For example, during Singapore’s early drive to attract foreign investment, oil giant Exxon had expressed an interest in setting up a refinery on Pulau Blakang Mati, a southern offshore island, said Ngiam, who had worked with Dr Albert Winsemius decades ago.

But recognising the adverse impact that the refinery would have on surrounding areas, Albert Winsemius personally convinced Exxon’s chairman to opt for a more remote district - Jurong - in the island’s west instead. Pulau Blakang Mati was instead developed into a tourism and recreation island, known today as Sentosa. 

Thanks to Albert Winsemius’ foresight, “today, Sentosa is a jewel”, said Ngiam.

In addition to pressure from investors and neighbours, companies are also subject to a changing labour market, said Winsemius, adding that employees are increasingly concerned about how their companies operate. 

“People want to be proud of the companies they work for, and it’s difficult to do so if issues like child labour, environmental violations and corruption are present,” he said.

In order to attract highly motivated labour, companies would have to ensure that they operate responsibly, he noted.

We are not fully there yet, and it will take many years to do so, but it will be a better world when business-people take responsibility for the environment.

Professor Pieter Winsemius, Dutch author, professor, and former minister

Lastly, environmentally and socially conscious consumers as well as the inter-connected and anonymous nature of activism today are pushing companies towards greater accountability, said Winsemius.

He cited a high-profile campaign against oil giant Shell in the 1990s as an example of how consumer markets can hold corporations accountable. Shell had decided to dump the Brent Spar, an disused oil platform in the Atlantic Ocean, which drew flak from UK environmental group Greenpeace.

The group’s campaign sparked a backlash against Shell, which saw sales dip by as much as 50 per cent in Germany. The company eventually withdrew its decision and agreed to dismantle and recycle the platform on land.

Winsemius added that such campaigns are even easier to launch in the digital age, and “it takes just one activist to create a whole different world”.

Global movements like Occupy or groups like Anonymous do not have a particular leader whom companies can engage with, which adds an element of uncertainty to how consumer markets typically operate.

Winsemius said these movements should not always be considered negative; instead, companies that respond quickly to these trends will gain the competitive edge in the new global economy.

He also cited Paul Polman, chief executive of consumer goods firm Unilever, as saying that if companies wanted to stay in business, they would have to start fulfilling their responsibilities to stakeholders.

Unilever has been identified as among the world’s most sustainable companies by several rankings and indexes worldwide. The company’s efforts at responsible business are guided by its Sustainable Living Plan, a comprehensive strategy that aims to reduce the company’s environmental and social impact across its supply chain.

Not only would embracing principles such as accountability, responsibility, and transparency make a company less likely to be the target of consumer backlashes, it would also inspire employees to “go the extra mile” for the company, said Winsemius. 

He added that big corporations are more likely to lead on proactive sustainability, while “smaller ones will follow in their wake”.

The time is coming when a proactive approach by companies to sustainability is becoming the norm, he reflected. 

“We are not fully there yet, and it will take many years to do so, but it will be a better world when business-people take responsibility for the environment,” he said. 

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