From The Chair

By-Line: Deleen Wilson

Issues which until now have been regarded as 'soft' for business - such as the environment, health, wellbeing, diversity and human rights - are now seen as being hard; hard to ignore, hard to manage and very hard to control if they go wrong.

Yet they are absolutely critical not just for society and the environment, but for running a successful business in the 21st Century. "Because if organisations get them right, they can be a source of competitive advantage," said David Grayson, author of the recently published and already highly acclaimed book, "Everybody's Business."

Talking at a GIBS Forum recently, Grayson discussed the four-part revolution - in Markets, Technology, Demographics and Development and Values - facing large and small companies all around the world and how, in practical terms, they can operationalise some of these issues.

In terms of the Marketing revolution, Grayson believes that "since the Berlin wall came down" we have seen three billion more consumers join the world market economy, a dramatic shift to a much more globally connected information based society, growth of direct foreign investment around the world, and a growing trend of mergers and acquisitions across national borders.

One third of all trade is conducted by multinationals. In 1970 there were approximately 7,000 multinational companies: the UN now estimates that figure at 60,000, with around 600,000 foreign affiliates between them. And according to Accenture, an average of 177 formal networking joint venture partnership arrangements were conducted by each multinational between 1997 - 2000.

In terms of market capitalisation, intangibles such as goodwill, knowledge and brand valuation are now an increasing part of stock market valuation. Indeed, Interbrand believes that by 2010 it could account for as much as 45%. Yet the very power of the brand and logo creates a huge pressure on business to manage itself responsibly in the eyes of society. The reality is that branding is such an important part of many businesses that what will differentiate will not actually be the brand per se, but what that brand stands for. According to Fortune magazine, in the 21st century branding will ultimately be the only unique differentiator between companies - brand equity is now a key asset. But the mighty do fall, and the investment that goes into building up those brands can be wiped out overnight if a company receives negative publicity.

The second Revolution is that of Technology. The obvious thing about this revolution is that it makes it possible for businesses to operate all around the world, in places that physically and technologically would not have been possible to have considered ten years ago. But this same technology brings about a different set of implications for business. Largely due to the power of email and the internet to capture huge amounts of information - not least of which details corporate behaviour - and the capacity for those who are concerned about business behaviour to find likeminded people with whom to organise and coordinate campaigns using some of this new technologies, 164 of the Fortune 500 companies have internet hate sites against them.

In the final days of the Polka uprising in the Philippines against President Astrada, there was around 74 million cell phone text messages reported by the main service provider - more than were sent in the whole of Western Europe during the same period. This was seen as a crucial factor in organising the campaign and street demonstrations that soon brought Astrada down.

This kind of popular technology has already been brought to bear in campaigns against company behaviour of which the public disapproved. An example was the campaign against Mitsubishi and their plans to build a desalination plant in the Gulf of Mexico, which was an important part of their development structure. Environmental campaigners complained that it was the last breeding ground of the Great Whale, however, and through various forms of technology they organised a popular campaign and drummed up over a million signatures on a petition which they sent to Mitsubishi, galvanised a series of institution investors in New York, and wrote to a crucial minister in the then Japanese coalition government who lobbied other Ministers to come out strongly against Mitsubishi's plan. Mitsubishi eventually had to withdraw, despite obtaining the necessary legal documents and being granted authorisation by the Mexican government.

Demographics and Development is the third revolution, and the challenge here is the sheer scale of so many people now living on this planet. Some of the statistics are frightening: almost half of the world's population is living on less than US$2 a day; around one third of people of working age are either unemployed or underemployed; two thirds of mankind may be living in water-stressed conditions by 2050; 40 million are living with HIV/AIDS, with forecasts of 100 million by 2005; and 250 million children under the age of 15 are working. It's not hard to understand why some of these Demographic and Development challenges have become business challenges.

Add to all of this the revolution of Values. As a result of more educated people and more people living in relatively free societies, there has developed a phenomenon of great challenging of authority and of far less respect and deference to authority than in previous generations. Hence, people have started questioning businesses and, with that a decline in automatic belief in what institutions say, comes a need for those institutions to establish a new form of trust.

"Shell, more than any business in the last few years, has really understood these underlying forces and has started systematically addressing them. The company talks about the shift from the "trust me" world of the mighty, responsible global business, to the "tell me" world of having to explain their actions and arguments, to the "show me" world, of having to prove the outcome of their projects in advance with evidence and hard data. Which is why many international companies are now starting to consider how they can measure their impact - positive and negative - on society and the environment, and then actually reporting on it in many different ways."

These revolutions can be summed up with a number of expectations:

• 
  
• value for money + values of the business
  
• reliability of the product + rely on the assurances of fair sourcing
  
• quality of goods and services + were they produced at the expense of the quality of life of those in the production chain
• responsible for getting it to us?
  
• Availability + without making it unavailable for future generations
  
• Identification with lifestyle and image + image consumers want to identify with
  

"It is clear that there is a significant minority, particularly of articulate, well-educated and, in many cases, high-spending consumers, who are now asking these questions of business," concludes Grayson.