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Towards sustainable business cultures: the role of law and norms

March 6, 2020

The deep social dissatisfaction with the current state of affairs

In the last year, a growing clamor is emerging from civil society throughout the world that demands in no ambiguous terms that large multinational corporations change their current ways of doing business to make sustainable development possible. That uproar comes mainly—but not only—from younger generations, who have been born in a world where increasingly worried references to dangerous climate change, natural catastrophes in the form of severe rainfalls and droughts, massive species extinctions and ocean pollution and fisheries depletion have become the norm in across both the mass and social media. Faced with grim scenarios about the future of the world they live in, they demand those with capacity to shape that future to be responsible and act with determination and at scale. 

 

And they also demand governments and legislatures to punish appropriately those that resist changing their ways, on the premise that no amount of ex-post compensation can remedy the damage done to, e.g., the atmosphere by large-scale burning of coal to produce energy. 

 

These social movements take place against the backdrop of an increasing distrust regarding the willingness and capacity of both governments and corporations to work for the common good of all. The distrust has many causes, among which the weakening of the social fabric across many countries [1], the difficulties faced by governments to address large, global challenges, the enormous power of technological companies to shape—even manipulate—the worldviews of citizens to their advantage and even the functioning of democracies, and the inability of most people to process, let alone understand, the velocity and complexity of change in modern societies. The combination of social demand for massive and rapid change and the generalized distrust towards those institutions that are in theory responsible for that change creates a potentially dangerous situation. 

 

Business world response

But the current rapidity of change also affects the global business landscape. Indeed, the average lifespan of corporations today is 20 years, the shortest ever since the beginning of capitalism. [2] The main driver of that change is a combination of technology and data, hence corporations that are created as, or convert fast to, tech and data-driven corporations, will survive and growth. More so, those corporations that are able to read accurately the signs of the times and respond to the current needs and expectations of citizens may achieve phenomenal growth in very few years.  And it is undeniable that sustainable development is one of the most powerful societal and cultural trends today. 

 

The two trends combined imply that customer-citizens can and do reward tech companies that are sustainable and punish the rest. Hence leading corporations have a real motivation to lead the way towards sustainability. Many of them have made in the last months impressive announcements about new strategies to bring about sustainability in record tempo. One recent example is the USA based “We are still in” coalition that formed to show the country support to the UN Climate Change Regime. [3]

 

They are betting on their power both to gain market share and to influence policy makers to pass laws and regulations that will give them advantage in the market. Hence the emerging term of “corporate driven sustainability”. Once a sufficiently large number of multinational corporations made similar announcements, the transition is made to look inevitable and those that do not embark on it are punished accordingly. The effect is these drive towards sustainability is considered to be good for business, for people and for the planet. Governments and law makers feel empowered to pass policies and laws that entrench that transition, and hence the sense of inevitability is reinforced, even if those that stand to lose the most may try and resist as much as possible or at least to delay the start of the transition. 

 

At the same time, it is also important to note that the same dynamic that applies in the corporate world does not necessarily apply in the same way or to the same extent to political parties within democracies, whereby the “product” that they offer and the public they target are much more complicated and hence changes in strategy are better accommodated by voters. 

 

Sustainable development as a cultural phenomenon

It is this the complexity of these interrelated phenomenon that points to the cultural nature of sustainable development, which includes but exceeds its economic, political or ideological dimensions. Indeed, sustainable development is not just about reducing the negative impacts of economy activities on nature, or about finding ways to grow the economy sustainable, but rather about the necessity of reimagining the nature of the relation between human beings, their societies they live in, the business they build and operate, and the environment within which it all takes place. Corporations, whether large or small, operate within this culture and need to contribute to it in a constructive way. This is why it is so critical to develop and implement sustainable cultures within organizations. A recent debate within the COP-25 in Madrid identified the key elements in that endeavour: 

 

  1. The leaders of the organization must develop and transmit to employees a powerful and attractive vision about how the organization embodies sustainable development.

  2. The corporation leaders must recognize, with humility and sincerity, the starting point, the key barriers and challenges as well as the weaknesses that exist to achieve the desire change. 

  3. The organization must develop the capacity to articulate an effective strategy that generates permanent change. The strategy must include the changes to structure, incentive systems, training programs, processes and procedures that are needed to transition successfully and quickly towards sustainability. In so doing, it is essential that the corporation recognizes that the existing realities were not conceived with the challenge of sustainability in mind and thus are most likely not fit for purpose.

  4. The strategy must be endorsed and shared by everyone at a deep level if it is to transform the organization from within. 

  5. Last but not least, the corporation must identify, adopt and utilize the measurement and compliance tools that will allow keeping track of progress made and remaining challenges. 

 

Over and above what corporations can do, the still dominant cultural mindset within capitalist societies—based on quarterly profit maximization—is under revision. The World Economic Forum has dedicated to this single issue its latest edition, choosing as its overarching theme “stakeholders for a cohesive and sustainable world”. [4] Humankind is entering a new era, which some call Anthropocene [5], and some call the second Copernican revolution. At the same time, the number of Hollywood movies that examine the old dream of conquering the space is growing fast, and point to the global state of fear and anxiety about the future of the planet. [6] Legal scholarship has picked on these themes [7] and is opening up a very refreshing space for exploration in the coming years which we hope will be filled in by many legal and non-legal scholars.

Notes: 

[1] Andy Kiersz, Business Insider Australia, October 19, 2018. https://www.businessinsider.com.au/world-economic-forum-signs-weakening-social-economy-us-2018-10?r=US&IR=T

[2] Michael Sheetz, “Technology killing off corporate America: Average life span of companies under 20 years”, 2017, https://www.cnbc.com/2017/08/24/technology-killing-off-corporations-average-lifespan-of-company-under-20-years.html 

[3] https://www.wearestillin.com/

[4] https://www.weforum.org/events/world-economic-forum-annual-meeting-2020/about

[5] Term coined by Paul Crutzen to refer to the era in which humanity, due to its impacts on the global environment, should be considered a major geological and geobiological factor on Earth

[6] Notably among them, “Ad Astra”, “Intersellar”, or “Gravity” 

[7] Just to provide one example, Anél du Plessis, Christa Rautenbach, “Legal perspectives on the role of culture in sustainable development”, PER vol.13 n.1 Potchefstroom Jan. 2010 

About the Author

Professor Javier de Cendra is Dean of IE Law School He is immediate past President of the Law Schools Global League, Vice-Chair of the Environment, Health and Safety Committee of the International Bar Association, legal expert at the Sustainability College Brugge, and member of the international advisory board of several universities, research centers and think tanks.

 

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