How companies succeed by engaging with society

 In the prologue to his new book, Connect: How Companies Succeed By Engaging Radically With Society, John Browne, the former CEO of BP, remembers walking through the lobby of a hotel in Fort Worth, Texas in late May, 2010. A row of televisions, each tuned to a different network, was showing the same image of oil gushing from BP’s stricken Deepwater Horizon rig in the Gulf of Mexico. “For a second,” Browne writes, “I felt relieved no longer to be in charge. Quickly, though, these images and the scathing commentary made me angry. How had this happened? BP was going to be torn apart.”

When, at the beginning of October, Browne addressed a Prospect roundtable supported by theInstitute of Corporate Social Responsibility and Sustainability (ICRS), and held at the London HQ of the Chartered Management Institute, there was a similar sense of “There but for the grace of God go I.” A few days before the meeting it had emerged that German car giant Volkswagen had been cheating emissions tests in the United States.

During their research for the book, Browne and his co-authors, Robin Nuttall and Tommy Stadlen, surveyed company executives, 89 per cent of whom believed that “companies have a moral responsibility to address societal and environmental issues that go beyond legal requirements.” At the roundtable, Browne said that he and his colleagues had attempted to calculate the “risk [for a company] of having the wrong relationship with society”—of neglecting those aspects of their activity that go beyond narrowly legal requirements, in other words.

 “We estimated it was about 30 per cent.” As it happens, after the emissions scandal broke, VW’s stock price fell by the same amount. “That is not meant to be the perfect, single-point validation of the theory [put forward in the book],” he went on, “but it’s an interesting observation.”

In Connect, Browne identifies two competing paradigms for thinking about business, both of which he finds wanting: the first is shareholder value; the second is Corporate Social Responsibility (CSR). Shareholder value, he argues, rightly remains central to business thinking, but it is “fundamentally incomplete. 

It captures part of what should and does drive people, but not everything.” What about CSR? Browne told the meeting that “corporate social responsibility has become a sticking plaster [for many companies], less and less connected to the centre of business.” He recalled something that Howard Davies, the former chairman of the Financial Services Authority, had once said to him: “We carry out our business and, on Friday afternoon, we think about CSR for half an hour.”

Browne, therefore, is trying to steer a course between the narrow obsession with shareholder value, on the one hand, and the shortcomings of CSR, as conventionally understood, on the other. He told the meeting that his theory of “radical engagement” between business and society has four main principles.

1. “Businesses do well when they have a good understanding of the world around them and of their place in the world.” Businesses, and business executives, should be wary of hubris, Browne warned. “Businesses sometimes think they control the world,” he said. “They don’t. They are controlled by the world. Business is there as a servant.

2. “[Businesses] need to understand better how to communicate their total contribution to society.” Top executives, Browne observed, tend to be preoccupied with the rhythm of quarterly results, to the exclusion of other activities that make a social contribution. These, he argued, should be construed as being part of a company’s central “purpose”.

3. It follows from this that corporate social responsibility should be “part of the performance contract [of a business] and evaluated as such.”

4. “In an inter-connected world, it is important not to engage or communicate only when you have to.” Business engagement with society should be “radical,” not grudging and episodic.

Chairing the meeting, Jonathan Derbyshire, Managing Editor of Prospect, noted that the first chapter of Connect is entitled “The Nothing New”. Browne shows that there has been mistrust of and hostility towards businesses as long as there have been businesses. But isn’t it the case, Derbyshire asked, that anti-business feeling has been especially acute since the global financial crisis of 2008, and doesn’t that make the arguments in the book even more urgent today than they might have been before?

“You should always expect a percentage of the population to be hostile to business,” Browne said. “But it shouldn’t be too large a percentage. If gets too large, you have a real problem. Occasionally the needle gets close to the majority more often than is healthy. And certainly the global financial crisis did just that with banking, which raised the danger of cutting off the lubricant of commerce.”

Derbyshire then invited Claudine Blamey, Chair of the ICRS, to respond to Browne’s remarks about the limitations of CSR. Blamey insisted that large companies are, for the most part, rising to the challenge of social engagement that Browne identifies in the book. “But small organisations,” she said, “still haven’t quite got to grips with it.”

Blamey went on: “I agree that the term ‘CSR’ is probably dead or dying. But there is a lot of integration going on—[the notion of] ‘purpose’ is changing for lots of organisations, with shareholder value being seen as the outcome rather than the goal. You’re hearing words like ‘resilience’ rather than ‘sustainability’ or ‘responsibility.’ The really hard bit of all this is considering the whole value chain and integrating [CSR] into everything [a business does].”

Browne agreed that large companies are rethinking their approach to CSR and, as Blamey noted, in many cases changing the way they talk about it. Even more significantly, he went on, “in many cases, thinking about a business’s relationship with society is changing strategy, not just being incorporated into it.”

And it is only if strategy changes in this way that, as Browne puts it in the conclusion to Connect, “companies will be an enormous force for good in the future… The connected firms of the future will push the boundaries of human possibilities in their question to contribute. They will not fracture their bonds with society.”

-Prospect