New rules that business must learn; Podium

From a speech given by KPMG's director of sustainable development to the Young Fabian conference on business ethics

I THOUGHT I'd start, as we're in the city today, sweltering in the City, with a fairly blood-curdling quote from, Jim Wilkinson, President of the World Bank. About a year or two ago, looking to the future of his own organisation and how that has to play a role in the local economy, he said: "We must recognise that we're living with a time-bomb, unless we take action now it could explode in our children's faces. If we do not act, in 30 years inequities will be greater." He was reflecting on the fact that the world is getting to be a more unsustainable place as years go by.

If you look at the key indicators - the environment, social welfare and so on - we see that the indicators show us moving in absolutely the wrong direction. Average incomes in 70 countries around the world are less than they were in real terms in 1980, and in 43 countries around the world they're less than they were in 1970. Today around the world more than 150 million children are malnourished, more than 750 million people lack basic health services, more than 1.25 billion people lack access to safe drinking water and sanitation, and nearly a billion adults cannot read or write.

As businesses, we have two choices: we go for business as usual, don't get involved and just watch the planet go to rack and ruin, or we make a response. This point can be made crudely: businesses need markets and if the world ends up going in the wrong direction then markets will collapse and business will not make any profits. Or you can have a slightly more enlightened, proactive approach and say business absolutely does have responsibilities and has to deal with its position in society in as positive a way as is possible.

We are actually beginning to see a more modern approach, certainly in the leading companies in this country. Businessmen are beginning to hear the `S' word and I don't mean socialism here, I mean stakeholder. You're hearing that word being used in speeches from business leaders in a positive way, not as a threat, not as a thing that has to be dealt with, but in a sense that stakeholder inclusion, partnership, actually can lend resilience and strength to an organisation if that organisation wants to work

Imagine a company that invested in its relationships, that loved its workers and loved its customers and so on, what a bright future for everyone that would make, and that realisation that strength can be built, commercial strength can be built through real stakeholder inclusion, is beginning now to be reflected in some of our leading companies, and indeed it's beginning to be reflected in debates around world trade and in the future of globalisation, obviously some people are sceptical about that but I think we have to try and pull every lever that we can.

This point was made by Bill Clinton, not someone necessarily always quoted in a business ethics seminar, but he made the point last year, having a meeting with Tony Blair alongside the G8 summit, and when they were talking about the future of globalisation, he said this: `we've agreed to new steps to dismantle unilateral and multilateral trade barriers on manufacturers services and agriculture while maintaining the high standards for labour and the environment. This is a method to give a voice to all the stakeholders, environmental and labour and other elements in civil society in a new paradigm that ought to be mirrored in trade associations around the world.' So we begin to see this rhetoric of social inclusion and environmental responsibility starting to be reflected by world leaders like Clinton and Blair, and not reflected in an apologetic way.

The future of the enterprise system actually does depend on us taking these wider standards and issues into account. Governance has been touched on by several people already, and what we're now seeing in governance debates, not just in this country but world-wide, is far greater emphasis on transparency. I don't mean just financial transparency but also social transparency and environmental transparency.

The direction of change in all countries will soon be towards more accountability of governance, even at the expense of managerial authority. We will no longer be able to pretend that we are just an island. If companies don't get on to their front foot in terms of transparency and accountability then they're likely to suffer and lose the trust of the shareholders and investors, not just other stakeholders.

So we now see changes in the rhetoric. At the geopolitical level, we're seeing moves on governments' front, including this country, but we're also seeing quite a serious response from business leaders too.