Why only profit with purpose can feed the world

Philanthropy and profit are not only compatible, they are critical for the survival of the agribusiness sector, says Olam chief executive Sunny Verghese in this interview with Eco-Business.

A third of global agriculture depends upon them, and their economic value has been estimated at around 300 billion dollars annually, but bees don’t usually figure in conversations about global business.

For some companies, however, they are an essential piece of the business matrix.

“Olam will on average buy two-and-a half-to three billion bees every year.” says Sunny Verghese, the company’s chief executive. It’s an extraordinary number, but for one of the world’s largest agricultural companies such extraordinary measures are necessary. As the world’s second largest producer of almonds, Olam needs the insects to pollinate its crops, but Mother Nature alone can no longer guarantee that there will be enough bees to do the job.

“Because of climate change there are different diseases impacting bee populations, and we need to be mindful of that, because if the bees are not there we cannot produce a crop.”

Climate concerns play a considerable role in Verghese’s thinking even beyond bees. A tireless evangelist for the UN’s Sustainable Development Goals (SDGs) and a member of the Business and Sustainable Development Commission (BSDC), Verghese has put the sustainability agenda at the heart of Olam’s corporate philosophy, and says it’s time for all CEOs to join him in re-framing business orthodoxy.

“Traditional capitalists believe the business of business is business and everything else is taken care of by other institutions in society,” says Verghese. “I passionately believe you can be both purpose-driven and create long term value for the shareholders; they’re not in conflict, they are aligned.”

Olam’s own performance, he says, proves the point. Philanthropy and profit in combination have not only generated close to 80 million dollars’ worth of business, but his employees are considerably more motivated, satisfied and productive because they too respond to the sustainability message.

It’s a philosophy that most CEOs might typically balk at. In a corporate universe dominated by quarterly reports and the demands of short term shareholders, prioritising long term goals over immediate financial performance is seen as a path to conflict. But for Verghese the very definition of fiduciary duty is the delivery of long term value for the company, rather than a short term boost to the CEOs own reputation.

We have to massively step up innovation and technology for producing more with less. There’s a lot of work and research that needs to be done but the money is not forthcoming.

“CEOs of today on an average spend 3-4 years focusing on maximising glory on their watch,” he says. “They are not acting like stewards of the business.”

Triple bottom line

But if Verghese’s ideas are not mainstream, they’re also far from new.

The sustainability-in-business movement began to emerge as long ago as the 1970s, when it was already becoming apparent that the planet was paying a price for economic development.

By 1983 the United Nations was concerned enough to launch a formal investigation into environmental degradation, and the “World Commission on Environment and Development” was formed under the leadership of retired Norway Prime Minister Gro Harlem Brundtland. It was her report, “Our Common Future,” that first coined the term “sustainable development”, and explicitly stated that development goals should be linked to environmental considerations.

But the idea was slow to take hold, and it took another decade before the emergence of a viable mechanism to incorporate sustainability concerns into corporate practice.

In 1997 the theory of the “Triple Bottom Line,” created by a sustainability consultant called John Elkington, proposed a framework that allowed corporations to account for people and planet alongside profit, and in 2000 the UN’s Millenium Summit cemented sustainability within an agenda of explicit targets – the Millenium Development Goals (MDGs). 

In the present day, with the science of climate change now close to universally accepted and the evidence of environmental damage abundant the movement may finally be reaching critical mass. 

The MDGs have been replaced by the SDGs; major multinationals are increasingly re-aligning their business models; and the growth of groups like the World Business Council on Sustainable Development and the BCSD, seem to confirm that corporations themselves are increasingly aware of the vital need for a change in approach.

But have they left it too late?

Watch our video interview with Sunny Verghese on what the SDGs mean to him. Subscribe to Eco-Business TV for more videos.

The agriculture challenge

With the global population heading towards 9 billion, the World Bank says food production needs to increase by 50 per cent just to keep pace, but because of climate change crop yields could be cut by more than 25 per cent.

As the BSDC report “Better Business, Better World” highlights, Asia faces a triple challenge of growing populations, declining yields and chronic underinvestment in agriculture technology.

For agricultural companies like Olam, this means the sustainability issue is no longer simply a theoretical debate about management priorities but a practical issue about doing business.

With more than 40 per cent of arable land in China and India already degraded by climate change, local pollution and topsoil erosion, Sunny Verghese believes that the growing pressure on resources, allied with changes in dietary habits (i.e rocketing demand for meat proteins) mean that countries simply will not be able to feed their populations in 20 years.

“We are grossly unprepared at this point,” he says. “We have to massively step up innovation and technology for producing more with less. There’s a lot of work and research that needs to be done but the money is not forthcoming.”

The only viable way forward, he argues, is for more CEOs to join him in the sustainability pulpit, and for more governments to create conditions under which the challenges of the triple bottom line can be met.

With increasing numbers of events like Ecosperity taking place around the world, policymakers are recognising that it’s in the national interest to incentivise companies to pursue more sustainable practices not only because it’s the right thing to do, but because it’s opening up entirely new avenues for investment and economic development.

“It’s hugely important” he says, “because if you can bring investors in here, CEOs can see what practical solutions others are implementing and what inspirations they can draw and how they can exchange experiences; and because they are coming together they can form coalitions and alliances sectorally to make a difference.”

Above all, he says, it’s up to CEOs to provide the inspiration and leadership necessary to make a difference. If that’s forthcoming, perhaps one day companies like Olam will once again be able to rely on mother nature to provide the bees.

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