Trendspotting at the United Nations Global Compact 2010 Leaders’ Summit, and the implications for business schools

30 06 2010

Sitting in the United Nations Global Compact 2010 Leaders’ Summit, I am reminded of something I heard someone say at a conference many years ago. They were speaking of the movement for racial equality in the 1950s and 60s: “Those leading change often overestimate what they can achieve in the short term and underestimate what they will achieve in the long term.”

I think this summit is a story of slow but inevitable change.

In 1999, in the wake of riots in Seattle and Genoa, then UN Secretary-General Kofi Annan made a speech to the World Economic Forum in Davos “I propose that you, the business leaders, and we, the United Nations, initiate a global compact of shared values and principles, which will give a human face to the global market.”

The United Nations Global Compact was formally launched in July 2000, with just 44 companies from around the world. The Global Compact now, ten years on, has nearly 6000 corporate signatories from over 130 countries, and here in New York last week, 1300 business leaders met to review progress and consider the next ten years.

The UN Global Compact worked with Accenture to conduct a CEO survey for this summit. Among many startling findings were the following: 93% of CEOs now believe sustainability will be critical to the future success of their companies; 80% believe a tipping point where sustainability is embedded in the core business strategies of the majority of companies globally will occur within the next 15 years; 54% believe this tipping point will be reached within the next ten years.

As we know, history is littered with examples of slow movements for change that suddenly become rapid, disruptive and overwhelming – change occurs which is so comprehensive that we can hardly even conceive that it was different before. The idea that 80% of business leaders see such a tipping point on sustainability being reached within the next 15 years is therefore a compelling one.

So while there seemed to be something of an underswell of frustration among some business leaders on the floor at the lack of ambition and urgency from some business leaders on the platform, the real story here is that while the last ten years have seen a lot of greenwash, they have also seen some real innovation and change as many organisations have devoted considerable energy to experimenting with new approaches to see whether business really can act on the principles of sustainable development at the same time as being financially sound.

The platform was awash with CEOs, chairs and board members from some of the worlds leading companies: Bank of America, AREVA, Petrobras, ENI, China Minmetals Corp, Tata Sons, Hindustan Construction, Siemans, China National Offshore Oil Company, Munich Re, Infosys, SK, Allens Arthur Robinson, Schneider Electric and more.

We heard about what’s at stake: the state of human development and poverty around the world, ecosystem degradation and climate change, corruption, systematic human rights abuses and violent conflict.

We also heard about what’s at stake for business. Paul Polman, CEO of Unilever cited a recent study by AT Kearney which found that climate change and water scarcity could lead to a loss in earnings for the food industry of 47% by 2018. A number like this makes both management and investors take note he said, and when this is added to the fact that consumers now want products to be doing good for society and the planet as well as for them, and that retailers like Walmart and Carrefour only want to engage with suppliers that have a long term vision for sustainability, you start to get a clear picture of the only viable strategic path ahead. This is why Unilever has made decoupling commercial growth from material consumption a strategic priority, coming alive through commitments to sustainable sourcing and sustainable living – think for example of the company’s commitment that all tea (and it buys 12% of all black tea in the world) and all palm oil it buys will be from certified sustainable sources by 2015.

And as we heard from more and more business leaders on similar themes, the ghost of BP and its loss of more than half its market capitalisation since the beginning of the oil spill in the Gulf of Mexico never seemed far away.

Mayor of New York Bloomberg told us “the future is in our hands, this is not difficult stuff, it just requires some courageous decisions.” Lord Michael Hastings of KPMG reminded us of the story of Ron Wayne, the third founder of Apple, who sold his 10% share of the company in 1976 for US$800. “Don’t get caught out by not seeing the tipping point that’s right in front of you.”

Dennis Nally, Global Chairman of PricewaterhouseCoopers summed up the transition from the first decade of the compact to the second: “It’s taken a decade, but now a critical mass of business leaders have got the message. The next decade is about executing the change, and this presents business leaders with a time-sensitive opportunity for long term competitive advantage.”

And the implications for business schools…

The theme of ‘executing the change’ kept coming up throughout the summit. A representative from GE said at one point “Its not about working out what we’ve got to do, its about making this live in all places at all times across the organisation.”

This presents a clear role for organisations like Ashridge whose core expertise is in partnering for organisational learning and change. It also places a real spotlight on all business schools and institutions involved in developing the next generation of business leaders, a theme that has come up at these kinds of gatherings more and more in the second half of the last decade.

And so its no surprise that one of the key initiatives to have come out of the Global Compact over the past ten years has been the UN Principles for Responsible Management Education, presented to Secretary General Ban Ki Moon at the Leaders’ Summit in 2007 having been developed by a taskforce of 60 business schools globally (including Ashridge). In the space of three years, the Principles now have 300 signatories.

A whole day of this summit has been devoted to a side event for deans and directors of business schools on management education. As an input to this forum, the UN PRME secretariat invited Ashridge and EABIS to lead an analysis of CEO perspectives on the role of management education, drawing on data from the UN Global Compact-Accenture CEO Study.

Key findings include the following: 88% of CEOs believe it is important that business schools develop the mindsets and skills for future leaders to address sustainability, overall citing this as the second most important change that needs to accelerate for the tipping point to be reached, broadly equal in importance to the actions of customers, investors and government regulation.

One in four CEOs say that lack of skills and knowledge among senior and middle management is one of the top three barriers to them as a CEO implementing an integrated and strategic company-wide approach to sustainability, and 86% say their organisation should invest in enhanced training of managers to integrate sustainability into strategy and operations.

This isn’t just about companies in a minority of regions or sectors. These findings are remarkably consistent across different regions globally, across different industry sectors, different sizes of organisation, and across publicly traded, privately owned and state owned organisations.

What does this mean for business schools? Ashridge Chief Executive Kai Peters was quoted: “The clear message from these findings is that the debate about whether the sustainability agenda is a real issue is over. The question now is how should business schools address sustainability strategically… Business schools don’t just need a few specialist faculty. They need all of their faculty to understand sustainable development and see the implications for their own particular areas of expertise, whether that be leadership, strategy, finance, or marketing. As business schools, we need a much stronger emphasis on faculty development across the board.”

Many others contributed similar thoughts. Philippe de Woot of IAG Louvain School of Management spoke of the need for cultural change in business schools, rather than a piecemeal response. “This won’t happen with old professors” he said, “It will happen with a new generation of faculty and new, young deans.”

Rakesh Khurana, Marvin Bower Professor of Leadership Development at Harvard Business School, continued in a similar vein: “Business schools are very poor at adapting to changes in the broader external context. It’s almost as though they’re designed to resist change. They might add a course here or there, but they struggle to change their core model.” He cited three paradigms that are still core assumptions that now need to be revisited: principle agent theory, maximisation of shareholder value, and the notion that markets reflect the value of an organisation to society.

Rakesh also argued the opportunity for change comes when new deans are appointed. He cited several examples of schools across the US where recently appointed new young deans with different educational backgrounds and mindsets are working with entrepreneurs within their schools to lead significant change around the integration of the principles of sustainable development.

This trend towards sustainable development is probably the most urgent of several trends out there that are of material significance to business schools – one could also think of the rapid pace of ongoing technological change, the shift in economic centres of power, how to do more with less as austerity budgets are introduced in the wake of the banking crisis, Generation Y, and what we’re learning about what makes for effective approaches to real learning. With mounting evidence suggesting a potential tipping point on sustainability closer on the horizon, there is a clear strategic choice for business leaders and business school faculty alike: lead the change and seize the opportunity, or risk being overtaken by competitors and becoming increasingly irrelevant. We as a global society need them to choose the former.

As news of nation after nation getting ejected from the football world cup filtered through into the summit, I found myself thinking of the quote about change again, and reflecting that not only does the US now have its first black president, and that the African continent is hosting its first ever football world cup in post-Apartheid South Africa, but that soccer finally really does seem to have become a big deal in the US. Maybe some things really do change.

Ashridge is leading a major research inquiry ‘Leading Organisations of Tomorrow’ which is exploring innovation in leadership development through the experience of eight pioneering organisations that, having recognised the need to adapt to a changing context, have integrated a sustainability orientation into their leadership development strategies. Ashridge is inviting senior business leaders as well as professionals from the fields of leadership development and organisational change to come together to discuss these themes in London on 14 October 2010. You can find more information here.




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