Herman Mulder

THE PRACTICALITY OF PRINCIPLES
Adhering to Values, Principles or “Thinking big” without focused, practical application is meaningless; scaling-up without relevant critical mass is pointless; stakeholder engagement without the benefit of an interested constituency is a waste of effort; sustainable development without a manifest value-proposition is not sustainable itself.

INESCAPABLE WRITINGS ON THE WALL
Incorporating inescapable trends found in our world, in our society or in our business into our current practices makes perfect sense: it is essentially taking the Net Present Value (NPV) of the future, and acting now. Anyone who believes he or she has the wisdom of “the Future is Now”, and has the resources at hand, should immediately act upon it and, hence, create an “early mover advantage”. The premium related hereto has, if proven right, significant value: lower costs, reduced liabilities, early revenue-generation, improved competitive position, or being the preferred client, supplier, employer, investor or license-holder. Moreover, being seen as a leader of change and of innovation with respect to material issues, often serves as a “magnet” for further ideas from others, reinforcing the ability to fine-tune this future even better. This is true for government and business, whether operating in mature or in developing societies.

STRATEGIC RISK ASSESSMENT AT THE HEART
Visionaries, those who look beyond the “me, here, now” are rare in our fast-moving, turbulent, often myopic societies; societies with an increasing prevalence of “instant democracy” as people not just “vote” every four years with their red crayon, but also daily with their credit cards as consumers, or with their feet by migrating. Looking “behind the presented truth and through-the-cycle”, both key elements of proper risk- and opportunity-assessment, appears not so broad-based. The fundamental shifts in our world caused by globalization, information technology and the 24x7 presence of the media, make such assessment even more necessary and particularly challenging. Isn’t the 1st Law of Pace: “the need for reflection increases exponentially with the speed at which you are moving”? And even if such vision is well articulated, does it have sufficient rallying power to get the internal and even the external buy-in for it in order to have the consequences put into practice? Often it requires “severe pain” to see and realize the “gain”.

RETURN ON COOPERATION
Clearly, partners and supporters who see the same “writings on the wall”, the strategic frame of reference with its related opportunities and challenges, are highly desirable: “walking alone” can be quite lonely and disappointing. So, active engagement and cooperation with like-minded leaders are of the essence: it offers new learning opportunities, comfort, may validate your foresights, and assists in bringing the consequences into practice. Many forms of such alignment on perspectives and steps for collective action take place both in the public and private sectors, and also increasingly between them: in the form of public-private cooperation. Even traditional single-issue advocacy groups in society are starting to recognize the “return on reconciliation and cooperation” by engaging selectively in partnerships with trusted business. And “enlightened” business-leaders start to recognize that an engaged and critical society around them is a source of innovation and ongoing improvement.

GLOBALISATION AND FRAGMENTATION
Beyond realizing the targets of the Millennium Developments Goals, one of the most challenging issues is bringing a new (peaceful) order into what is becoming an increasingly multi-polar/-centric, even chaotic, world. Managing diversity, enhancing inclusiveness of new stakeholders (more countries, business) on fundamental issues such as proper governance, distribution of wealth, equal access to opportunity, environmental stewardship, respect for human rights, are major challenges. It should start with respect and a genuine will for cooperation, fueled by a sound sense of self-interest. No one, including business, can thrive in an ugly neighbourhood. Managing global issues (such as greenhouse gas emissions, security, migration caused by extreme poverty) cannot be resolved by individual nations only: broad-based cooperation is warranted in a globalizing, yet also fragmenting, world.

THE ROLE OF BUSINESS, ENTREPRENEURSHIP
The role of business is “to do the right business right”, within its core objective of making a sustainable profit, or rather by “earning” such profit from all its interestholders. This means that it is foremost driven by self-interest, while governments are operating in the public interest. This fundamental role of business does not mean it may act against the short- or long-term public interest. On the contrary, it even has a self-interest to contribute to society. This is not due to the notion of “Corporate Social Responsibility” (CSR), which is more related to liabilities and “burden-sharing” (so not really energizing the business sector), but rather that there is an opportunity to grow the business, respectively making it more profitable in a responsible and sustainable way. Leading international and national business practitioners have a particular role to play, by being the role models, incubators, partners for others (including SMEs), as they have the scale and the convening and influencing power. And indeed, through various national and international business associations operating standards are being raised.

THE LEVERAGING ROLE OF THE FINANCIAL SECTOR
There is a particular role for the financial sector: its direct footprint on sustainability issues may be limited; however its indirect influence, by way of policies, client- and transaction-acceptance criteria for investing, lending and advice is of significant importance. It enables its clients, investors to do their business. Although it may not be directly responsible for or complicit in all actions of its clients, it is definitely responsible for the selection of such clients.
During recent years, the financial sector has been stepping up its role on sustainable, responsible development; and its influence has been growing. Important initiatives include the Equator Principles by the banking sector, which introduced comprehensive environmental and social standards for project finance; the Global Compact’s “Who Cares Wins: Connecting Financial Markets to a Changing World”, which led to the “Principles for Responsible Investment” (PRI) in collaboration with UNEP FI; the Carbon Disclosure Project launched by institutional investors to obtain information from companies on greenhouse gas emissions. Stock exchanges and rating agencies are crucial in this context and are becoming increasingly active with SD indices and ratings.

BUSINESS VOLUNTARISM
Most of these business initiatives are on a voluntary, cooperative, multi-stakeholder basis. We may differentiate between across-business and more sector-oriented (or horizontal) cooperation, and supply-/product-/waste-chain (or vertical) cooperation. The clear advantage is that voluntary initiatives are “owned” by the business and can be brought into practice fairly quickly (within one year). Moreover, they exercise peer-pressure on others to join. The Equator Principles started with 12 banks, now there are 41 financial institutions. Also the number of Sustainability Reports is steadily increasing, enabling external stakeholders to understand better what the company stands for and exercise constructive pressure on direction and performance. Adequate, Global Reporting Initiative (GRI) G3-based disclosure is at the heart of “making markets work”. Most of these initiatives are, so far, OECD-business initiated, so reaching out to leading corporations and financial institutions in emerging countries is of paramount importance and currently actively pursued.

THE ROLE OF GOVERNMENT
The role of governments is one of a role model on sustainability in its own operations, its housekeeping and its “supply chain”. Even more important is government’s capacity to provide incentives (carrot) and regulatory intervention (the stick). In order to engage the private sector to a maximum extent in the social, economic and ecological agenda, the government’s role is to create clear, consistent, medium-term oriented frameworks in order to “make markets work”. This may take the form of ensuring that externalities are taken into account in evaluating environmental impacts or providing adequate incentives for higher risk but priority investments in renewable energy, energy efficiency and carbon emissions reduction. Indeed, business cannot operate in a vacuum, so it should be “framed”. For instance, the “cap & trade system” for greenhouse gas emissions is an effective way to manage down such undesired emissions (nb. the carbon emissions frameworks based on Kyoto should be extended well beyond 2012 to realize its full potential).

There is a lively debate on the effectiveness of, and the right balance between, “business voluntarism” (often based on multi-stakeholder consultation, adding credibility) and government regulations. It is clear that both have their limitations. In the “hierarchy of discipline”, self-discipline is the superior form, then comes market- and stakeholders-discipline, and only then regulatory intervention. The notion that the right voluntarism may eventually become embedded in “lean & keen” government regulations is not illogical, and may even serve the business sector to ensure a level playing field, but the temptation should be resisted “to fix something which ain’t broke”.

GLOBAL COMPASS AND LOCAL IMPACT
The Global Compact is unique among its peers in promoting broad-based international business engagement on sustainable development: it is principles-based, UN-sponsored but business-led, with strong local identity, based on voluntarism and multi-stakeholder involvement. It has, hence, significant convening power in its international, as well as local, network. Its local focus may make it particularly effective. But it needs to scale-up membership and activities, take leadership on local issues, and increase the direct impact of its ten principles.

Local Networks are at the core of Global Compact. The membership of these networks should be expanded and the density of cooperation among such networks should be increased. Local initiatives are of the essence!

This practical agenda may very well vary by country. However, some of the common issues to be addressed in any country are: (1) publishing insightful sustainability reports using the GRI/G3 guidelines (i.e. an upgrade of the Communication of Progress), (2) increasing cooperation with academia (on grooming future leaders and developing new economic & business models), (3) promoting carbon/energy-initiatives (e.g. becoming carbon neutral at a given date), (4) sharing knowledge with local subsidiaries of international corporations, (5) actively engaging the local financial sector (banks, funds, stock exchange, auditors) in the local network, (6) addressing supply-chain issues (to include SMEs), (7) establishing specific, local base-line operating standards (e.g. on human rights, corruption, social and environmental due diligence), (8) engaging with the local governments on creating sustainable livelihoods, on possible “lean & keen” enabling regulation, (9) seeking increased cooperation/alignment with other business associations, (10) developing the Global Compass, a web-based information and communication platform offering insight into the multiple standards, tools and experiences relating to sustainable development, thereby enabling new business practitioners to familiarize themselves with the challenges and the opportunities.

STEPPING-UP AND SCALING-UP BY BUSINESS LEADERSHIP
Both global and local convergence of sustainable development initiatives with other, similar business circles should be actively pursued: too much fragmentation of the right initiatives affects the ultimate effectiveness. The key to success for the Global Compact and, indeed to successful sustainable business, rests on the following question: If I am not doing the things which serve my own medium-term business interests, as well as the public interest, who will do this……? This is an issue of Leadership!

To bring principles into practice, be practical: “Think big. Start small and focused. Act quickly. And only then, replicate!”


Herman Mulder recently retired from ABN AMRO Bank after 27 years holding leading positions in relationship management (notably energy), structured finance and since 1998 as Senior Executive Vice President (SEVP), Head of Group Risk Management, Co-chair of the Group risk Committee. He created and coordinated the ABN AMRO initiatives in Sustainable Development (SD), in which the bank is seen as a sector leader. He was one of the initiators of the Equator Principles; for this initiative he was made a knight in the Order of Oranje-Nassau. He also served as the first chairman of the ABN AMRO Group Foundation. His retirement is offering him the opportunity to be very actively involved in SD issues, in many different capacities, including vice-chairman of the ABN AMRO Foundation India, and a member of the World Bank Extractive Industries’ Advisory Group. He is active in many civil society organizations, including as a special advisor to the Global Compact.