powerpoint

1. ETUI
The social-ecological transition: the role of business and labour
Brussels, 23rd May 2014
“Corporation 2020”
Transforming Business for Tomorrow’s World
Pavan Sukhdev,
Founder & CEO, GIST Advisory
Author, “Corporation 2020”

2. NOT THE FUTURE WE WANT…

3. 74.9%
Is a ‘Green Economy’ Possible without
greening the Private Sector?
U.S. Gross Value Added
7.1%
5.5%
12.5%
Private Business
Households
Nonprofit institutions
serving households
Government
Total = GDP (US$14,526.5 billion)
(eg: USA)
2010 data. Source: U.S. Bureau of Economic
Analysis

4. Sustainable Development,
Green Economy, Corporation 2020…
Without a “Green Economy” we
cannot achieve the goals of
“Sustainable Development”
www.unep.org/greeneconomy
Without “Corporation 2020” we
cannot deliver a “Green Economy”
www.corp2020.com
@corp2020

5. “Corporation 1920”
 Four Defining Behaviours
 Pursuit of Size
 Active Lobbying
 Leverage without Limits
 Advertising without Ethics
….

6. “Corporation 1920”
 Four Defining Behaviours
 Pursuit of Size
 Active Lobbying
 Leverage without Limits
 Advertising without Ethics
…. Causing “Negative Externalities”

7. “Externalities”… Global Picture
 Negative externalities of top 3,000 companies
estimated at US$2.15 trillion per annum
Source: Trucost for UNPRI, 2010.

8. Global Picture:
Planetary Boundaries…

9. Top 3,000
Listed
Companies
Source: Trucost for
UNPRI, 2010.
Negative Corporate Externalities …..

10. ….. Are Pushing Planetary Boundaries
Water
Greenhouse
Abstraction
Gases
Greenhouse
Gases
Natural
Resources
Natural
Resources
Natural
Resources

11. “Corporation 1920”
 Four Defining Behaviours
 Pursuit of Size
 Active Lobbying
 Leverage without Limits
 Advertising without Ethics
….

12. Smoke and Mirrors in 1920…

13. Fifty Years On …
“You’ve come a long
way, baby”

14. Accountable Advertising : PUMA

15. Key Featre of “Corporation 2020”
Creating Positive Externalities, not Negative..
Type of
Capital
Category of
Stakeholder
Stakeholder Expectations
Financial
Capital
- Shareholders
- Government
- Creditors
- Sustainable Growth in Profits
- Sustainable Tax Payment
- Capital to Withstand Losses
Human
Capital
- Employees
- Youth
- Customers
- Society
- Sustainable Incomes (“careers”)
- Vocational Training
- Sustainable Service Quality
- No Health Damage
Natural
Capital
- Society
- Planet
- Carbon Neutrality
- Sustainable use of Resources &
No Biodiversity Losses
Evolution
of the
Corporation
From : “Corporation 2020”

16. Why “Stakeholder Reporting?”
Business today depends on, and/or has impacts on, ALL
dimensions of private & public wealth… but..
EXAMPLES Physical Capital Human Capital Social Capital Natural Capital
Private
Ownership
- Factories
- Buildings
- Securities
- Cash
- Health
- Education
- Job Skills
- Gardens
- Fields
- Forests
Community
Ownership *
(club goods)
- Community
Centres
- Community
Schools
- Traditional
knowledge
- Community
Norms and
Customs
- Community
Forests
- Grazing
Commons
Public
Ownership *
(public goods)
- Roads
- Bridges
- Public
databases
- Non-patent
knowledge
- Law & Order
- Taxation
- Social Equity
& Inclusion
- High Seas
fisheries
- National
Parks/
Forests
* Creating community wealth and public wealth creates “shared value”

17. Why “Stakeholder Reporting?”
Business today generally measures & reports only
shareholder wealth impacts: private physical capital
EXAMPLES Physical Capital Human Capital Social Capital Natural Capital
Private
Ownership
- Factories
- Buildings
- Securities
- Cash
- Health
- Education
- Job Skills
- Gardens
- Fields
- Forests
Community
Ownership
(club goods)
- Community
Centres
- Community
Schools
- Traditional
knowledge
- Community
Norms and
Customs
- Community
Forests
- Grazing
Commons
Public
Ownership
(public goods)
- Roads
- Bridges
- Public
databases
- Non-patent
knowledge
- Law & Order
- Taxation
- Social Equity
& Inclusion
- High Seas
fisheries
- National
Parks/
Forests

18. Why “Stakeholder Reporting?”
Business for a sustainable tomorrow – will measure &
report on ALL dimensions of its impacts …
EXAMPLES Physical Capital Human Capital Social Capital Natural Capital
Private
Ownership
- Factories
- Buildings
- Securities
- Cash
- Health
- Education
- Job Skills
- Gardens
- Fields
- Forests
Community
Ownership *
(club goods)
- Community
Centres
- Community
Schools
- Traditional
knowledge
- Community
Norms and
Customs
- Community
Forests
- Grazing
Commons
Public
Ownership *
(public goods)
- Roads
- Bridges
- Public
databases
- Non-patent
knowledge
- Law & Order
- Taxation
- Social Equity
& Inclusion
- High Seas
fisheries
- National
Parks/
Forests

19. How Stakeholder Reporting?
GIST 360 ™ Assessment Scope
Reported Value
Addition
Human Capital
Externalities
Social Capital
Externalities
Natural Capital
Externalities
Measuring “Value Addition” holistically, including all material Externalities

20. Positive Human Capital Externalities
Human Capital Factory for IT Talent: INFOSYS
Mysore Campus, Infosys
- World-class Training for 30,000 p.a.
- Attrition feeds trained IT talent to the world
- Positive externalities over US$ 1 billion p.a.

21. What is “Human Capital”?
• “Human Capital refers to the knowledge, skills, competences, and other
attributes embodied in individuals that are relevant to economic activity”
(OECD, 1998).
• Among the most important assets and a key determinant of country’s
overall economic performance
• Among the most important assets for any business and a key determinant
of business performance
• One of the “Six Capitals” in IIRC’s recent consultation draft of their
“Integrated Reporting” framework (<IR>, 2013)
• Neither national accounts nor business accounts reflect human capital
creation or loss, nor human capital externalities

22. Levels & Dimensions of Human Capital
Dimension/
Level Politics Economy Sociology Psychology
Increase skills
Individual
level
Increase earnings Increase equality
Increase self-esteem
Company /
Organisation
Comply with
norms and
regulations
Increase
competitiveness
Improve image /
brand value, &
secure social
licence to
operate
Improve
workplace
environment
Government
/ Economy
Complement
labour market
and employment
policies
Drive innovation;
Create incomes
from & share
costs of
education and
skills training
Value knowledge
& skills;
Implement life-long
learning
concept
Add dynamism to
government, &
permanence to
the economy
Level and Dimensions of Human Capital (Adapted from CEDEFOP, 2001)

23. Progress of Corporate Reporting on
Human Capital: the last 50 years
Stage 4 - From early/mid 1990s - Human
Capital as Benchmark of Human
Resources
Stage 3 - From early 1990s - Human
Capital within globally oriented
management frameworks
Stage 2 - From late 1970s - Human
Capital within internally oriented
management frameworks
Stage 1 - From early 1960s - Human
Capital within accounting frameworks

24. Approaches to Valuing Human Capital
Cost-based
Approach
Originates from
Engel's (1883) cost-of-
production method
Based on hisorical
cost of production of
human capital; via
depreciation of value
of total amount spent
on an individual
Income-based
Approach
Jorgenson &
Fraumeni (1989,
1992), Lev &
Schwartz (1971)
Based on discounted
values of future
stream of lifetime
earnings of an
individual
Educational
Stock-based
Approach
Le, Gibson and Oxley
(2006); Barro and Lee
(1993, 1996, 2001)
Based on actual and
opportunity costs of
formal education, on-the-
job training,
specific training, etc.

25. HCXTM Model: Results from Infosys Annual Report
2011-12

26. Positive Social Capital Externalities
A Business Model delivering Social Benefits: NATURA
1.4 million housewives earn 33% sales commission
- Economic security improves family & social status for women
- Training is used to sell other companies’ goods
- Greater proportion of household expenditure on health & education
- Increased labour market flexibility and efficiency
http://totallybeautyaddict.fr/mon-jolieapero-chez-natura-brasil/
Source: http://www.managementexchange.com/story/innovation-in-well-being

27. What is “Social Capital”?
• Social Capital can be defined (source: IIRC) as “the institutions and
relationships established within and between communities, groups of
stakeholders and other networks, and the ability to share information, to
enhance individual and collective well-being. Social and relationship capital
includes:
• Shared norms & common values and behaviours
• Key relationships and the trust and loyalty that an organization has
developed and strives to build and protect with customers, suppliers
and business partners
• An organization’s social licence to operate”
• Some business models, company policies and CSR activities are designed to
improve such institutions and relationships, and in doing so, will usually
generate positive externalities (eg: improvements in public health, societal job
creation, environmental conditions, etc.).

28. What will drive change?
Macro Issue Micro Driver Micro Solution
Excessive Demand
Culture of
Consumerism
Fuelled by
Marketing/ Advtg
Ethics &
Accountability in
Advertising
Public Capital Losses Externalized costs
Measure & Disclose
Externalities
Underpriced Supply Unlimited leverage
Limit
Leverage/capital
adequacy/etc.
Resource Depletion
Underpriced
resources
(Low royalties /
perverse subsidies)
Resource Taxes
replace corporate
taxes

29. What will define a “Corporation 2020”?
 Four Characteristics
 Goal Alignment with Society
 Positive Externalities
“Community”
 “Institute”

30. “Corporation 2020” views of
Labour and the Community
 Mondragon: “Risking capital to create labour, not
risking labour to create capital”
 Tata: “The community is not merely a stakeholder in
the business, it is its very purpose”

31. Corporation as “Community”: Natura
Alessandro Carlucci Pavan Sukhdev
CEO, Natura Author, “Corporacao 2020”

32. Thank You !
www.gistadvisory.com
www.corp2020.com