Chris McCann, WhichPLM Expert and Director of Resilient.World, is a well-known figure in compliance and sustainability. Here, in a piece as witty as we’ve come to expect, he shares with us his latest thoughts on our responsibilities to the wider community.
“I sell bras, mate. We’re not a charity!”
I’d spent two days shepherding investors through our governance programmes, detailing the systems, processes, and policies we had in place to demonstrate we had a handle on human rights and sustainability challenges to our business. The investor audience (not a tree hugger amongst them!) voiced intelligent, articulate questions on how their investments would be protected. As with MIT, EIRS, the Levy School of Business and others, they understood that avoiding what the world saw as our responsibilities to the wider community (addressing climate change, resource depletion, environmental degradation, human rights etc.) had serious implications for our reputation and thereby for our share value.
They also understood the commercial implications of coming up against hard limits in a resource-constrained world.
Clearly, the buying manager I was talking to hadn’t read the memo. And so maybe I wasn’t so patient as I explained that, yes, last time I checked the name above the door wasn’t Oxfam, Greenpeace, or Save the Whale. And, no, I didn’t own a pair of sandals…
Our Luddite bra-vendor may ultimately find himself amongst a growing list of dead or endangered retail species. The etymology of the word ‘strategy’ is the Greek word ‘strategia’, or ‘generalship’, and includes within it the understanding of all those elements of a plan of action designed to achieve a long-term or overall aim. Does the recent string of failed and failing retail businesses we observe in the UK, USA and elsewhere attest to the redundancy of the short-termism viewpoint? Of strategies that have failed to take account of a changing reality? Of course, the collapse of BHS (and others here in the UK and elsewhere) owed more to the fact that consumers had lost trust and relevancy in its brand, rather than the fact that it hadn’t planted any new rainforests. But this is my point – business needs to keep an eye on what’s happening outside, on all threats and opportunities beyond the mechanics of bean counting or bean selling. They should be taking the long-term view, rather than peering at what is often only a 12-month horizon. True, whether we’re talking bras, beans, boots, or plastic cocktail sticks shipped from Shenzhen to Southampton.
I’ve observed, and had the privilege of working with, many excellent examples of companies who do get the fact that their business strategy must include real efforts to reach outside their own four walls if their operating model is to have a future. Two of those companies, to their everlasting credit, used their influence to effect change in the legislation of three countries, improving the lot of thousands of vulnerable workers. Others have reduced carbon footprints, redesigned products (‘cradle to cradle’), achieved almost zero waste, and changed behaviours in first, second and even third tier suppliers. Could it be that they understand business does not operate in a bubble, and that their future viability is intimately tied to increasingly fragile producer communities? Or that the slim margins and high-volumes inherent in fast-fashion or just-in-time models are particularly sensitive to changes in cost of inputs, in turn affected by the ‘bumpy plateau’ of oil production, oil price and resource depletion (water, soil, rare earth minerals etc.)?
The type of mind that doesn’t make the connection between rainforests and retail may also struggle to contemplate the implications of other external events. For example, could there a link between Brexit (a taboo issue for some, I know), sustainability and governance? Markus Kerber (MD of the German employers group BDI) says the following:
[quote]“Imposing trade barriers, imposing protectionist measures between our two countries- or between the two political centres, the European Union on the one hand and the UK on the other- would be a very, very foolish thing…”[/quote]
It’s a respectable viewpoint – ceteris paribus (‘all things being equal’), Brexit should not lead to protectionist measures. On the other hand, didn’t the UK originally join the Common Market precisely to avoid commercial hostilities and benefit from Adam Smith’s invisible hand? With a Brexit, things do not remain ‘equal’- the world changes, and some may well take the view that a more multi-polar world emerges, or at least they may play on that fact of change for commercial advantage. A report by the London School of Economics (LSE) and the Centre for Economic Performance (“The Consequences of Brexit for UK Trade and Living Standards”) makes the following observation:
[quote]“Leaving the EU (‘Brexit’) would lower trade between the UK and the EU because of higher tariff and non-tariff barriers to trade…Non-tariff barriers include a wide range of measures that raise the costs of trade such as…cross-country differences in regulations over things like product standards and safety…”[/quote]
While the UK was part of the EU ‘club’, one could agree with Herr Kerber. LSE makes the point, though, that outside the club, well, business is war. And in war one takes advantage of all opportunities, even if previously they appeared to be innocuous. Consider, for example, current and upcoming legislation regarding business and human rights. In March 2016, PWC issued a useful document titled ‘The 3 things you need to know about …the impact of new law banning the use of forced labour on global supply chains’ (not a pithy title, granted, but accurate). In summary, PWC note:
[quote]“A new US law signed in March bans import of goods produced by forced and slave labour…companies must expand sub-tier supply chain transparency to offset financial, operational, and strategic / reputational risks of non-compliance with US law and evolving legislation abroad…In Europe, EU rules requiring supply-chain transparency in all member states will take effect in 2017, with some member nations, such as France (and Switzerland) already considering legislation…”[/quote]
Could it be that commercial entities would take advantage of such inequities in legislation? Possibly, particularly if that legislation has teeth; regarding PWC’s observation on developments in French legislation, the Chair of the OECD Working Party on Responsible Business Conduct reports:
[quote]”Under the law French companies employing 5,000 employees or more domestically or 10,000 employees or more internationally would be responsible for developing and publishing due diligence plans for human rights, and environmental and social risks. Failure to do so could result in fines of up to 10 million euros.”[/quote]
LSE’s observation is that post-Brexit the world becomes a little more ‘tariffy’ and a little less ‘tradey’, and what were previously non-competitive issues suddenly become competitive indeed. For completeness, and while we’re on the subject of trade barriers (Brexit aside), UK exporters to the United States may wish to reflect on the fact that US culture is not averse to initiating legal proceedings, launching class action lawsuits, or at least requiring those with whom they trade to demonstrate effective due diligence so that they in turn avoid the prospect of punitive action. The changes in US legislation mentioned by PWC above may bring additional pressure where none existed before.
So, how should UK companies react to investor expectations, Brexit, and US/European legislative developments? Ironically, outside the EU it may be that UK companies adopt a more rigorous approach to compliance in order not to stand out from the crowd, demonstrating good governance and enabling continued access to markets. Comprehensive policies, effective systems, sound implementation supported by training and communicated through impactful reporting; UK companies would do well to develop and establish strategies that show they have a handle on human rights and sustainability issues, giving no opportunity for others to exploit the ‘chinks’ in their operation.
As to my trader friend who doesn’t understand the need for observing and reacting to the outside world, and who believes that he ‘just sells bras’, one might be tempted to observe:
“Sorry mate, you may be selling bras today but you’ll be flipping burgers tomorrow…”