Mark Moody-Stuart: New partnerships and new practices

On the long road from Rio de Janeiro in 1992 to Johannesburg last year, there has been a gradual acceptance that business has a role to play in development, and is not simply the cause of all the problems. By Mark Moody-Stuart. –

To a business person it is self-evident that it is impossible to have development without economic activity. This is not always so clear to everyone, however. One of the encouraging developments on the long road from the 1992 Earth Summit in Rio de Janeiro to the 2002 World Summit on Sustainable Development in Johannesburg has been the gradual acceptance that business has a role to play in development and is not simply the cause of all the problems.

This acceptance, cautious in many cases, is rightly conditional on economic development respecting the environment and being of benefit to society at large. That is, in the words of that difficult phrase, “sustainable development”.

With this recognition comes an increasing willingness on the part of civil society organizations to work with business to achieve results, rather than simply attacking real or perceived failures.

Equally, there is an increasing acknowledgement from business that we cannot simply keep our heads down and carry on doing our own thing in our own way.

We, too, have to be open to working with others in sometimes unconventional ways to achieve common aspirations.

So a lot was said in Johannesburg about partnerships. While there is no doubt that some people remain suspicious of the mechanics of this, and sceptical of what can be achieved, there is a growing acceptance that we will only achieve sustainable development if all sections of society work in partnership.

For corporations that work in many different countries, and particularly for those working in developing countries, two important trends are emerging which need business attention and support.

Coalitions to define standards

The first trend is the growth of flourishing partnerships between business, civil society organizations, labour groups, UN agencies and others to define what represents best practice for business.

The Global Mining Initiative is one such approach, but there are many others addressing sustainability in different sectors of industry – the Responsible Care programme in the chemicals industry, the Sustainable Forest Initiative, sustainable fisheries, and partnerships in agriculture and health or on biodiversity in mining or the energy industry.

These coalitions will define the standards by which the performance of international business will be judged.

Because they bring together groups representing different viewpoints, they lead to practical solutions which take the economic realities into account and yet address the environmental and social consequences of economic development.

The agreements that stem from these coalitions will inform national legislation and, where appropriate, international treaties.

Businesses that are not involved ignore them at their peril. Even if you are not a part of them, you will be affected by them.

By defining standards for responsible business, they provide an important framework that will facilitate the work of business in developing countries, allowing business growth and hence a contribution to development.

The Global Reporting Initiative (GRI) is an overarching initiative of the same kind, a partnership approach to defining common indicators for sustainability reporting.

The GRI was well recognized in speeches by many heads of government at Johannesburg, as well as in the agreement itself.

The GRI reporting guidelines are work in progress. It is up to us in business to work with the guidelines, to show where they provide a valuable common standard and an aid to benchmarking – and, perhaps, where they are not very practicable. Equally, they will be evaluated by information users – investors as well as civil society organizations – to see if they meet their needs.

It is only through open reporting, covering all aspects of our activities, that business will build the trust that is an essential ingredient of work in partnership. Without that trust, the task of growing our businesses is more difficult.

The need for sound local governance

At Johannesburg some NGOs, led by Friends of the Earth, pressed hard for some kind of “one size fits all” global convention to control international business.

Given the problems of defining “international business” – as well as the implications for national sovereignty and the fear that any such convention would be used as a weapon for trade protectionism – there was never much chance of this being taken up by governments.

On the other hand, governments themselves addressed the issue by acknowledging at the summit and in the agreement that sound local governance is essential to sustainable development. This is the second important trend. Where sound local governance does not exist, business needs to work in partnership with others to help create it.

But it can only be done in cooperation with others. Business has no mandate to try to create it on its own. Let me clarify what business understands by “sound governance”. It represents the societal institutions and structures through which all sectors of society – be they from the north or south of a country, young or old, rich or poor, indigenous people or of whatever ethnic group – feel that their views have been taken into account. They should also feel that, whatever outcomes these institutions deliver, they are fair.

Sound governance includes the usual list of property rights, rule of law, transparency and so on, but it also includes business and the equitable sharing of economic development in the interests of society.

Are the four financial streams from business (returns to shareholders, remuneration to employees, payments to suppliers and, lastly, taxes) perceived as fair, both within and between groups?

Without sound governance, they get out of kilter – be it in excessive management remuneration, low commodity prices, one group of suppliers being favoured, inadequate returns to shareholders, or governments misallocating or misappropriating tax proceeds.

This sound governance creates the environment in which businesses large and small, international or domestic, can flourish.

In their New Partnership for Africa’s Development (NEPAD), African governments set an example by acknowledging their responsibility for delivering such sound governance frameworks, including a process of peer review.

But they also called for assistance and partnerships to carry it out – development assistance from governments and the involvement of business of all sorts, national and international.

There was thus a very important recognition at the summit that international agreements and targets can only be delivered at the national and local level, and that we need sound governance, including sound governance of business, to achieve this.

This is perhaps the most important task we have to work on in each and every country in the coming years. We have to do it in partnership with others, and it is of fundamental importance if we are to be able to grow our businesses effectively and thus contribute to development.

Sir Mark Moody-Stuart
Sir Mark Moody-Stuart was recently appointed non-executive chairman of Anglo American plc. Before that, he spent his working life with the Royal Dutch/Shell group of companies, where he was appointed managing director in 1991 and was chairman of the committee of managing directors from 1998 to 2001.