Over the past 15 years, corporate leaders, investors, and nongovernmental organizations (NGOs) have demonstrated that, with the use of innovative business models, profit can be aligned with social and environmental progress. A departure from the “band-aid” corporate social responsibility (CSR) approaches of the 1990s, these strategies involve fundamental changes to business practices, including alterations to core products and services.
This type of progress has, understandably, been most evident among companies for which the required changes are relatively “easy,” such as those from the pharmaceutical, water, and food sectors. By contrast, little progress has been made by sectors contributing substantially to poor health and climate change, including companies that profit from tobacco, coal, palm oil, and internal combustion engines–companies that, if transformed, have the potential to improve the well-being of people and the planet.
Unfortunately, these very sectors are frequently excluded from discussions of transformative strategies. Targeted by boycotts and divestment campaigns, companies with “dirty” legacies are often denied tools that could help them contribute to the public good. Further, academics who accept funding from these sectors are often excluded from major international conferences and scientific journals—even if their research adheres to the highest standards of independence. It is time these industries receive due attention from investors, academics, governments, and NGOs.
Investment and innovation from the private sector tends to exceed that of the public sector. As a result, industry-driven research is beginning to yield solutions to problems that were once considered intractable. Coal companies are transforming into sustainable energy corporations; waste businesses now trade in biogas and recycling; internal combustion engines are being eclipsed by electric vehicles; and combustible cigarettes are giving way to alternative nicotine delivery devices. We should not view this progress as tainted simply because it arrives from the private sector. After all, every source of funding brings its potential biases.
Academic research has for centuries been funded by private interests and also benefited the public good. In fact, government funding is a relatively recent phenomenon. Academics initially distrusted this funding structure, but over time leading universities demonstrated that, with the appropriate checks, the integrity of science can be protected. There is no reason why these same checks should not ensure the independence and rigor of industry-funded research. The challenges of modern society demand more collaboration between academics and private companies—not less.
To catalyze progress, governments must incentivize industry transformation. Generally, this means regulating to lower risk, stimulating private innovation through tax benefits, funding public sector research, and promoting competition that will address sustainable development goals (SDGs). Some governments are already leading the way. For example, the EU Accounting Directive for Non-Financial Information, approved in 2017, requires over 6,000 companies to disclose information about corporate impact on social and environmental challenges. The United States has yet to take similar action: earlier this year the US House Financial Services Committee rejected legislation calling for analogous reporting standards.
Encouragingly, some companies are voluntarily changing their practices, with the knowledge that investors will use this information to guide their decisions. Environmental, social, and governance (ESG) investing and shared value applications within business (as first described by Kramer and Porter) have been joined by an array of US and international efforts. At a recent meeting of 200 prominent chief executives, the Business Roundtable concluded that corporations must adjust their priorities to address the needs of their employees and the environment. Still, as the New York Times notes, “Until investors start measuring companies by their social impact instead of their quarterly returns, systemic change may prove elusive.”
Indeed, as corporate practices evolve, investors should factor non-financial information into their investment decisions. Companies that work to identify sustainable and healthy solutions should be advantaged over those that do not. Those that can be shown to not undermine environmental policy should be rewarded. Of course, in order to make such socially responsible choices, investors first need access to the relevant data. To this end, the Sustainability Accountability Standards Board provides guidance to 77 industries grouped into 11 sectors, each with defined metrics for proof of progress. These metrics represent a useful reference for investors and governments seeking meaningful and financially material information. Hopefully, additional tools in this vein will emerge in the coming years.
In an era where social media dominates and truth in science is frequently undermined (see Post-Truth by Lee McIntyre), NGOs committed to SDGs need to focus on how best to achieve these goals, rather than adhering to the simplistic view that “governments are good, industry is bad.” Many leading NGOs are now at the forefront of promoting the types of private-public engagement that could solve massive global challenges. They require support.
I represent a foundation committed to ending one of the world’s greatest health challenges: smoking. With over a billion smokers in the world, of which 8 million die each year, we must raise our ambition if we are to approach the many SDGs impacted by smoking. The Foundation is establishing the Smoke-Free IndexTM to highlight tobacco companies’ activities that either support or impede progress toward a smoke-free world. The Index aims to stimulate corporate action, leverage investor influence, and provide objective, transparent information for relevant stakeholders.
Moving forward, we need, as Bob Eccles urged, “actively involved anti-smoking investors” and academics committed to improving the efficacy and accessibility of cessation and harm reduction products. We also need governments who are not held hostage by traditional tobacco control interests, and NGOs that represent the needs of users desperately seeking healthier lives.
Many of the ideas represented here were inspired by panelists and participants who attended the Business Fights Poverty conference in Oxford, June 2019. I thank them and know that our passion for real change will continue.