Triple TOP Liners: Benefit Corporations

The Triple Bottom Line (TBL) is a well recognised approach to incorporating social and environmental aspects within the formal decisions making routines of companies. It gives social, environmental and economic aspects of performance an equal status on the bottom line of a company in recognition of the fact that if society and the natural environment suffer adversely, then so do companies.

The problem with TBL is that economics still sits imperiously alone on the top line. Core business and economic values are not challenged with a TBL which means that only economic goals are pursued with vigour whilst the social and environmental impacts are cast as either obstacles and additional costs to be overcome, or ideals to be pursued only if the real business of economics can find the time and resources.

Whilst a TBL is better for the world than purely economic forms of accounting and goal setting, it is an unsatisfactory compromise. For PR, the TBL is a hybrid of two epistemes, the Modern and the Primal (Birkin & Polesie 2011). Since the Modern possibility of knowledge is now being replaced by the Primal, should this not enable a deep rethinking of the fundamentals of corporate performance appraisal and goal setting?

Indeed it should, and it does. As the self-referencing abstractions of Modernity in the human sciences are replaced by knowledge derived from empirically-grounded science of the Primal age, we are can envision corporations in simple, new and totally changed ways. The Modern corporation is a discrete entity seeking power and growth according to its own definitions of its economic self: the Primal organisation on the other hand is a part of a network of relations many of which need to be acknowledge and acted upon for all practical business purpose. The Primal organisation is not an economic entity trying to tread lightly on social and environmental concerns (as in the TBL) but is reconstituted as an economic/social/environmental entity seeking a harmonious balance between a range of equally valid alternatives.

In this way a Primal corporation refines success. A Primal corporation strives to be not the best in the world but the best for the world….. which is precisely the goal of a Benefit Corporation.

In the USA, Benefit Corporations are emerging to change the business world. They are a new class of corporation that:

1) creates a material positive impact on society and the environment;

2) expands fiduciary duty to require consideration of non-financial interests when making decisions; and

3) reports on its overall social and environmental performance using recognized third party standards.

But most significantly, Benefit Corp. status relieves a corporation of its obligation to maximise shareholder profit – this is why PR argues that they are becoming true Triple Top Liners (TTL). (Under current US law, shareholders can sue corporate boards for not maximizing profits.)

Since 2010, Benefit Corporation legislation has been enacted in 12 states, and is under consideration in twenty more. Make no mistake about it, B-Corps are revolutionary and they have their own Declaration of Independence.

B Corps Declaration of Independence

Behind the Mars Bar: looking deeper for sustainable food companies

Mars is the world’s largest privately owned food company with $30 billion in revenues and more than 65,000 workers around the world in 2012. It produced its first ever sustainability report recently in 2011. It was also one of the first big companies to deliver its CSR report on Facebook.

In a refreshing claim to appreciating longer time frames Paul Michaels writes in Mars's Five Principles report:  “As a private company governed by the Mars family, we think in terms of generations, not quarterly returns.” But the company does not take the step of recognising natural times scales.

Mars do have a high impact upon farming practices so adopting natural time scales would not be out of place in the company. Mars does after all call for a joint industry effort to scale up positive impacts for cocoa farmers and achieve higher yields without compromising limited natural resources so longer, more natural time scales are definitely required.

But perhaps the most significant step that Mars have taken lies in their Five Principles report. As one of the five principles, Mars have adopted Mutuality which they describe as follows:

·         A mutual benefit is a shared benefit; a shared benefit will endure.

·         We believe the standard by which our business relationships should be measured is the degree to which mutual benefits are created.

·         These benefits can take many different forms, and need not be strictly financial in nature. Likewise, while we must try to achieve the most competitive terms, the actions of Mars should never be at the expense, economic or otherwise, of others with whom we work.

According to Mars, the mutual benefits need not be financial in nature and yet they are to be the standard by which their business relations should be measured. Indeed rummaging around their website reveals a wealth measured in non-financial benefits including the sponsorship of science.

So how is Mars able to recognise these revolutionary steps in business management? At one level there is a simple answer that all companies can implement and that is they pay full attention to the knowledge we now possess of the world in which we live. A new Primal possibility of knowledge is present in the world and we are slowly taking advantage of all its exciting opportunities to make the world a better place.

The other answer is not so simple and it is likely few major companies can implement it in their present form. It is an answer that has to do with Keynes’ 1933 article on National Sufficiency:  “But experience is accumulating that remoteness between ownership and operation is an evil in the relations among men, likely or certain in the long run to set up strains and enmities which will bring to nought the financial calculation,” (see The Accountant’s Economic Revolution in the PR blog, 25^th November 2012).

Mars is a private company. It does not have to worry about maintaining a position in the financial markets. In this sense Mars has greater freedom to adapt to the emerging Primal knowledge of our world; it is not for example constrained by overweening and restricting notions of Modern good financial performance. But Mars does have remote operations created and maintained throughout its supply chain; it therefore needs to ensure that the dictates of financial performance do not reduce overall Mutuality to considerations of dominant economic aspects.

Oxfam is more critical of Mars. In its assessment of the Big 10 food companies, Oxfam ranks Mars with a 30% score which is a “Poor” performance lying in fifth place behind Nestle, Unilever, Coca-Cola and Pepsico. Middle-ranking Mars received low scores with regards to supporting women and protecting land rights, but did better with transparency and small-scale farmers. 

Big 10 Food Companies Sustainability Scorecard
Taken from Oxfam's "Behind the Brands" Report

Eric Fromm: Primal Psychologist

The emerging Primal episteme (Birkin & Polesie 2011) is based upon a new possibility of knowledge (Foucault 1970).  Science now provides a view of the origins of the world and of ourselves that simply was not available when the Modern episteme or age was established. The transition from Modern to Primal can be summarised as going from 

• abstract knowledge belief systems in Modern human sciences produced by and for mankind (which provides an epistemological or knowledge foundation); to
• trust in the findings of empirically-grounded science that so accurately and thoroughly describes and explains our world and ourselves (which provides an ontological or “being” foundation).

This kind of epistemic transition is not “forced” upon a recalcitrant mankind that has to obey its new sets of rules.  It is rather an opportunity for new ways of thinking about ourselves and the world that are created by pioneers who adopt the new episteme. They have adopted new epistemes in the past usually without using any kind of epistemic analysis knowledge or methods. They simply flourished and enthusiastically used the fresh insights that the "new episteme" provided in their own areas of knowledge to carve out a different kind of world, a whole new world.

Getting over Financial & Economic Crises

The Financial Crises of 2007/08 is judged by many economists to be the worst financial crisis since the Great Depression of the 1930s. As a result of the 2008 crisis, significant financial institutions, notably banks and stock markets, lost trillions of $US. In turn housing markets lost value resulting in evictions, foreclosures and unemployment. People saw their savings, pensions and endowments loose overnight the kind of money that takes decades of hard work to save. We are still suffering from this crises as more key business suffer or fail, high street shops and house-hold names go out of business; and  the European sovereign-debt crisis has ruined countless lives  in Greece, Portugal, Spain, Ireland and now Cyprus.

The 2008 crisis took much of the Financial & Economic world by surprise in spite of global studies and close attention from all quarters. The causes of the crisis are difficult to identify and has given rise to extensive debate. It is a global crisis and all of us are involved. The search goes on for ways to stop it happening again.

A significant amount of blame for the crisis has to be the “financialization” of the economy:

Transition to Sustainable Business

PR identifies how the world is changing. The most fundamental change that PR identifies is one that lies at the foundation of our knowledge. This fundamental change determines how knowledge is made possible. This is in essence a very simple kind of change – BUT it is difficult to perceive and accept that so much can change as a result of so little!

Intrinsic Sustainable Development (ISD) (2011) is grounded in a change of “what makes knowledge possible”.  To explain this kind of change, ISD relies on the work of Michel Foucault (1970) who called the “possibility of knowledge” an EPISTEME.  Foucault described only three different epistemes in European history from Renaissance times to Classical and then the Modern. Foucault died in 1984 before any evidence of an emerging episteme to replace the Modern was available.

In ISD, an emerging episteme is identified and called “Primal”.  On a technical level, the change from the Modern to the Primal episteme is equivalent to going from abstract belief systems to empirically grounded science (or to be even more technical from an epistemology to an ontology). On a day to day level, this means that we shift from living according to overarching societal beliefs (in notably economics and free markets) to becoming part of the living world once more.

Such changes will have a huge impact on business. John Elkington (2013, p. 62) observes: “We need to redesign our, economies, politics and culture.” Elkington gave the world the “Triple Bottom Line” approach so that businesses would acknowledge their dependence upon achieving good social and environmental performances as well as economic. But in his review of “Corporation 2020: Transforming Business for Tomorrow’s World” (Sukhdev 2012), Elkington admits his approach has been wrong.

Elkington’s approach had been to tweak corporations, change their performance at the margins to improve social and environmental conditions without a change in business core values and activities.  But Elkington now sees this as the wrong approach and he writes “The challenge is now ecological, in a broader sense: we must reshape the context within which both the corporations and the investors operate…” (Elkington 2013, p. 62).

Reading “Corporation 2020: Transforming Business for Tomorrow’s World” (Sukhdev 2012) changed Elkington’s mind. Corporations 20:20 argues that we must as a matter of some urgency shift from a 1920’s corporate model of “free-market-capitalists” and “cost-externalising” to a 2020 corporate model with the following mission: 

            Corporation 20:20 MISSION

1. The purpose of the corporation is to harness private interests to serve the public interest.

2. Corporations shall accrue fair returns for shareholders, but not at the expense of the legitimate interests of other stakeholders.

3. Corporations shall operate sustainably, meeting the needs of the present generation without compromising the ability of future generations to meet their needs.

4. Corporations shall distribute their wealth equitably among those who contribute to its creation.

5. Corporations shall be governed in a manner that is participatory, transparent, ethical, and accountable.

6. Corporations shall not infringe on the right of natural persons to govern themselves, nor infringe on other universal human rights.

For more about Corporation 20:20 visit their website here.

The Transition of Industry

Sustainable Business Models: what can change?

The book “Intrinsic Sustainable Development: epistemes, science, business and sustainability” (Birkin & Polesie 2011) is about the impact of an emerging episteme upon ourselves, society and business. Basically an episteme is what makes knowledge possible. It can seem disturbing, even frightening, to think that our world – our whole world – can change because of a change in the possibility of knowledge. But other people see this as liberating: an exciting opportunity to venture forth into new unexplored territories just as the explorers of old.

But consider too that the world does change for individuals and groups in accepted ways. Although PR does not subscribe to any revealed religious orthodoxy, consider how the members of a religious groups, even the humbling Methodists, may regard themselves as “reborn”, “renewed” or “saved” when they accept the Faith for this brings with it a new episteme – a new possibility for knowledge; caused in this case by the recognition that we live in a God-made world. In a way, Buddhism owes its whole existence to overcoming whatever “episteme” makes knowledge possible in an individual’s life – the Buddhist seeking enlightenment and freedom from this world is doing nothing less than overcoming the episteme by means of which a world is brought into existence. Finally, every page of the holy book of Islam, the Koran, exhorts followers to “know yourself” – excellent advice and you can think of this as getting to know the knowledge that that has created our view of ourselves and the world.

But you may ask what has this got to do with business?

Populating the Steady State Economy (SSE)

The Steady State Economy (SSE) as proposed by Herman Daly is a great and essential idea. He defines a SSE as: "an economy with constant stocks of people and artifacts, maintained at some desired, sufficient levels by low rates of maintenance throughput, that is, by the lowest feasible flows of matter and energy from the first stage of production to the last stage of consumption."

The above definition is taken from the website of the Center for the Advancement of the Steady State Economy (CASSE) whose webpage may be found here.

PR encourages everyone to become familiar with the SSE because it is quite simply the only way mankind can survive! Elementary arithmetic plus a recognition of physical reality reveals that we cannot continue indefinitely taking resources from our planet. We are already witnessing this overconsumption right now and it is causing social stress and deprivation worldwide… imagine what problems there will be if we pursue economic growth for another hundred, or two hundred, or three hundred years! The kind of economics that now dominates our thinking has no future.

But what if economics thinking itself is the root cause of our present problems? If economics is a cause then presumably more economics, albeit of a different kind, is not the solution.

Get Real! –John Gray on Capitalism’s Delusions

John Nicholas Gray (1948 -) is a former London School of Economics and Political Science Professor. He is a well-published author of books and he contributes regularly to the UK national press including the Guardian newspaper.

John Gray promotes realistic thinking: “The meltdown of financial markets has done more than wipe out wealth on an unprecedented scale. It has also destroyed the neo-liberal belief in progress through ever expanding production and consumption, and an anxious search is under way for a replacement creed. Religious fundamentalism is one result of this quest, Green utopianism another. Intelligent improvisation – using technical fixes to reduce the human impact on the Earth, for example – is more likely to yield results that the search for solutions. But realistic thinking goes against the grain. It is easier to inhabit an imaginary future than deal with the intractable present.” (Gray 2009, p. xxv).

The above quotation was written in 2009 in a new preface to his book “False Dawn: The Delusions of Global Capitalism” which was first published in 1998. Gray’s 1998 prophetic vision on the delusions of global capitalism was proved to be correct one decade after publication.

In “False Dawn” Gray had argued that the effect of unrestricted international free enterprise will be socially and culturally destructive. It is also unsustainable. But Gray cannot be classified as a Green, as anti-growth, or as a return-to-nature thinker. Indeed Gray argues that a Green agenda, an anti-growth recognition of physical limits and a natural utopia are not tenable. He also argues not for sustainable development but for a “sustainable retreat”. (ibid.).

If Gray is against free enterprise, greens and sustainable development, what is it precisely that he does want?

Professor John Gray

John Gray wants realism; a knowledge and action undistorted by utopian ideals and beliefs. In particular he wants to rid the world of the propaganda that free markets are a natural state of human affairs. This is also a core argument of Primal Reporter.

 In “Straw Dogs: Thoughts on Humans and Other Animals”, John Gray (2002) challenges what it means to be human. He thereby touches upon another key PR idea – that the world is changing, and a new world, or episteme (Foucault 1970), is emerging. The book “Intrinsic Sustainable Development: epistemes, science, business and sustainability” (Birkin and Polesie 2011) is about the emerging episteme.

By referring to a new world, we have not of course found a new geographical expanse to enter. However, it is arguable that PR’s new world is an even more momentous event than that. What makes our knowledge possible is changing; and this changes what we know of the world and of ourselves. In this way a whole new world is made available to explore and with that all the thrills and opportunities of pioneering and discovery. Professor John Gray is yet another a harbinger of this change.

References

Birkin, F.K., and Polesie, T.  Intrinsic Sustainable Development: Epistemes, Science, Business and Sustainability. Singapore, World Scientific Press.

Foucault, M. (1989[1970]). The Order of Things: An Archaeology of the Human Sciences. London, Routledge.

Gray, J. (2002). Straw Dogs: Thoughts on Humans and Other Animals. London, Granta.

Gray, J. (2009[1998]). False Dawn: The Delusions of Global Capitalism. London, Granta.

New Economic Order: David Korten

Is David Korten a pioneer of a new economic order? He was born in Longview, Washington in 1937 and was awarded an MBA and PhD from the Stanford University Graduate School of Business. He has taught on the Harvard Business School’s MBA and doctoral programmes. But he is far more exceptional than his brilliant academic career might indicate.

With David’s academic background and business know-how, conventional wisdom might have thought it likely that he would be a leader of some kind: perhaps a man destined to improve the business performance of America. Conventional wisdom was indeed correct on this point - but it is very unlikely it would have foreseen the nature of the improvements that David would want to make:

“Wall Street generates money in astonishing quantities through accounting tricks, financial bubbles, and debt pyramids without producing anything of real value.”

                                                From Capitalism and the Common Good, David Korten, 2012.

If Wall Street (and other financial markets) do not produce anything of real value than the legitimacy of the whole financial sector is challenged. This would indeed herald a new economic order. But where do David’s ideas come from? Are they sound?

It could be argued that David’s early, post-Stanford career from 1959 was unduly influential upon his young and passionate mind. He devoted himself to setting up business schools in low-income countries such as Ethiopia. In the developing world, David would certainly have seen the struggles, hardships and pain that might have aroused his sympathy and turned him against the securities and comforts of the American establishment. But he chose this career with the poor overseas – something within him had already turned before he even left the USA.

There is no suggestion here that David was in any way a latent Marxist; though he would have witnessed the McCarthy communist accusations in the USA, that Second Red Scare of the early 1950’s. After all, David was a business-studies student throughout that period.

But whatever resource, insight, compassion, understanding or humanity the younger David possessed that set him upon his life’s path, his later career consolidated his views. For 15 years from the late 1970s, David lived in South-east Asia and served as a Ford Foundation project specialist then as an Asia regional advisor to the United States Agency for International Development (USAID). He came to understand the root causes of development failure in South-east Asia. He began to see that the economic policies of the developed world including the USA and the UK were themselves the cause of global environmental and social crises.

Perhaps David gets his ideas by experiencing life on the outside, as it were, of the existing economic order. He got to know the downside of existing economics but unlike the millions who suffer in silence, David had the knowledge and skills to seek a solution.

Wherever his ideas came from, David is now famous for promoting a new kind of economic order. In Capitalism and the Common Good 2011, a speech David gave at the University of Oregon, he identified two kinds of economy, the existing and the emerging as follows:

The Existing Economy

“The greed-driven, money-serving, corporate-ruled Wall Street Economy measures its success exclusively by the financial profits it generates for the already rich. It neither acknowledges nor accepts responsibility for the economic, social, environmental, and political devastation it leaves in its wake.”

The Emerging Economy

“The democratic, community-rooted, market-based, life-serving Main Street economies that ordinary people are rebuilding across the nation and around the world measure success by their contribution to securing adequate and meaningful livelihoods for everyone in a balanced relationship to nature.”

David’s Emerging Economy is based on common sense, business and economic knowledge, and wide experience. But is there necessarily something else that David possesses? After all, how many business leaders in the Existing Economy posses these self-same qualities and they do not recognise the need for fundamental economic change?

What is that something else that enables David to see a world that his fellows simple cannot see? After all, it is that something else which means that David can see a new kind of economic order emerging whilst others think he is, at the best, deluded.

Does that something else have to do with epistemes, the possibilities of knowledge? An episteme change would certainly explain why David can see a wholly different world from many of his contemporaries. It is in the nature of episteme change that those with old knowledge possibilities cannot deal with, cannot see and appreciate, the new (Foucault 1970).

Perhaps we are led to conclude that David Korten’s view of economics is a consequence of his open-mindedness: his innate ability to see changes for what they are, as they take place. If this is the case then he is liberated: he deals with fresh facts untrammelled by the economics of dogma.   

David Korten

References

Korten, D. (2011). Capitalism and the Common Good. USA: Living Economies Forum. Available at <http://livingeconomiesforum.org/From-Main-Street-to-Wall-Street> [Accessed December 2012].

Foucault, M. (1970). The Order of Things: An Archaeology of the Human Sciences. London: Routledge.

The Emerging World

By changing the foundation for knowledge, we change knowledge of the world in which we live…. This is as good as changing the world itself.

Whilst it is easy to write and understand how the world may change in this way; it is not at all easy to live through such a change. The reason why this is so difficult is because we have so much knowledge and understanding derived from the old world. It is not so much the big ideas that we find difficult to change: it is the small, everyday, assumptions that we hold to be true about our world and about ourselves that keep us embedded at heart in the old world.

Children may be more easily introduced to the new world – indeed children always enter a new world, one of our and their creation. Students too may vigorously enquire and challenge the world in which they are growing intellectually. But nonetheless the established world, the world that is embedded in existing institutions, practices, cultures and beliefs is hard to displace.

In the ISD book (Intrinsic Sustainable Development, World Scientific Press, 2011) the two main characters take a life-time to leave the old world and discover a little about the new. The book is in this way a journey through knowledge; it is also a journey through the physical world. In the following extract from the book these two characters, the older boy and Grey Beard, are in Helsinki, Finland. They take the 14.10 ferry from the jetty at Skatuddskajen to the island fortress of Suomenlinna, a world heritage site.

“The Older Boy had Diagrams

In the plastic sleeves that now lay inside the cases of QC and Grey Beard were a series of diagrams and notes. They had been taken directly from teaching material that the older boy had used to illustrate the development of the Primal episteme and its consequences to management and accounting undergraduates.

In Figure 1 the older boy had wanted to show something of ‘Worlds in Transition’. He used this diagram to provide a basis for discussions. It was based on Venn diagrams in which the area occupied by an item was representative of the importance of that item.

Adapted Venn diagrams showing how the world of business is changing

The first part of Figure 1 shows the Inherited Business World in which an important, white businessman (for the older boy also intended to draw attention to the dominance of males in establishing traditional business practice) in a large, hence important, self-made area. The Natural World is located at a distance — quite separate from the Inherited Business world. The area of the traditional business world has a regular, formal shape to represent a little of its assumed certainty and control.

The second part of Figure 1 shows the Business and Environment World in which we currently live. The Natural World has here grown in importance but it has been transformed into the Environment. It overlaps the Business World in the small oval of environmental economics and business but much of the Inherited Business World remains unaffected.

The third part of Figure 1 shows the older boy’s vision of the emerging world of Primal Business in an Economic Ecology. Here, the Business World has been embedded in the ecosystem and the areas defined by all worlds have become uncertain and irregular. In this

part, the older boy introduced non-whites and females to represent increasing diversity of participants and the end of the dominance of the white businessman.”

The emerging world is based on the scientific knowledge that we now possess. This knowledge is very different from that which was available when the old world was established. It is time to move on.