Coronavirus Crisis is A Stress Test for the Entire System
Today, we celebrate the 50th anniversary of Earth Day. In this interview with Peter Bakker, WBCSD President & CEO, we look at how organisations can drive the shift towards integrated stakeholder capitalism and responsible business, especially now, in this time of crisis.
Peter Bakker leads a club of 200 influential CEOs - including those from Shell, Philips, Apple and Google - who want to make the world more sustainable. “The urgency is greater than ever”, he says. "The corona crisis is a stress test for the entire system."
Last Wednesday afternoon, we called Peter Bakker once more. Bakker is known as the former CEO of postal and parcel carrier TNT and as one of the first sustainability knights in Dutch business. A few weeks earlier, the first conversation we had was about climate, nature destruction and income inequality. But why bother with that when the world is battling a deadly virus?
"You better get used to it”, says Bakker about the pandemic that is disrupting entire societies. "Business as usual no longer exists. Global warming is also causing shocks, as shown by the wildfires in Australia and the Amazon. But the corona crisis is a stress test for the entire system. You can see the enormous shock this is causing."
Bakker, almost sixty, speaks from Switzerland. There, he leads the World Business Council for Sustainable Development, a club of two hundred CEOs, including those of Apple, Google, Volkswagen, Philips, Shell, and Unilever. In that role, he supports driving the transition to a more sustainable world. With the current crisis, he leads projects that respond directly to the pandemic. Think of projects such as setting up a supply chain that is successful in case the virus continues to spread over the next three months.
"Never waste a good crisis”, says Bakker from Geneva about the current situation. He hopes that his plea for ‘integrated capitalism’ will gain momentum. A free-market system that not only pleases shareholders but is much more attentive to people and the environment.
"The pandemic will also be a test in that respect. How do companies treat their people? Are they going to fire them en masse again? Or is the approach different this time?"
These are questions that seemed far away during the first interview. The first corona infection had yet to reach the Netherlands. We met Bakker in the Ysbreeker in Amsterdam. The establishment is named after the vessel that used to keep the Amstel navigable during heavy frost. Only this way could the city be provided with the essentials.
Six years ago, you told CEOs that pollution in the world should be over by 2020. Why the excessive confidence?
"We were just getting out of the financial crisis. My analysis was that I could not just go to those boardrooms with a story about the world in 2050, while CEOs didn't even know if they would make it to the next quarter. Then I wouldn't get that much attention. So we focused our action plan on 2020."
How are we doing?
"We are still polluting, the climate is a bigger problem than ever, the loss of biodiversity or nature destruction is only going at a faster pace. If you objectively look down at earth from above, not enough has happened. If you look more into the machine, we have made a lot of progress in some areas. We no longer have a discussion about whether we should intervene. The ‘how’ question is still there, but it is also less asked. We need to stop coal, do more with sun and wind, insulate buildings, do more with electric cars."
"The discussion has shifted to: how do we do it with sufficient scale and sufficient speed? I think we will get a huge acceleration with actions for the climate, nature and also for human rights."
With regard to the Uyghurs in China, business is notably very quiet, right?
"Of course, there is always something you have to weigh up as a business. The role of business is not to make political statements. They run their supply chain and within it, the principles of the United Nations must apply. These are now really being introduced, also with regard to human rights. Every company has its own values and principles. Most will say they do not engage in slavery or forced labour. If it occurs in their supply chain, they should be closed on that basis and relocate work elsewhere."
Screaming murder and fire during a trade mission in China is thus not necessary?
"No, especially if you work with China. That is such a large area. In some parts, you have other interests than just those of the Uyghurs. That's always a bit tricky. You do need to have a minimum level of principles and you have to make those non-negotiable."
Where does it go wrong?
"The blind spot that business still has is inequality. If you ask the average CEO to talk about their income compared to that of the workplace, then it quickly becomes silent. There was a very clear risk moment shown in Edelman's latest Trust Barometer. 56% of those questioned say that capitalism as it stands is no longer tenable. That's what Bernie Sanders says, that's what the yellow vests say."
"Capitalism as we know it today is starting to lose its license to operate."
As CEO of TNT, Bakker was ahead of his time. He spearheaded sustainability and the fight against hunger. He brought U2 singer and activist Bono to the company to act as a guest speaker. He had trucks fitted with particulate filters. At the Monza circuit, TNT organized a race for employees to drive as sustainably as possible. After the preliminaries, the best sixty drivers were allowed to compete. Bakker: "Between number 1 and number 60, there was a difference in fuel consumption of 31%."
Skepticism grew with all that attention to sustainability. Bakker was said to be too much of a loner, detached from his management and shareholders. The same criticism later came to Paul Polman when he pushed Unilever in the same direction.
Does the theme of sustainability have a broader reach with a new generation of CEOs?
"We need to detach sustainability from leaders. A few years ago, you needed people like Paul Polman, Feike Sijbesma or myself at TNT to put things on the agenda. You needed that for a while to gain credibility and attention. But if it comes down to being dependent on who the CEO is, you become vulnerable, the implementations become unpredictable, and thus, it makes a company's response to that tremendous urgency a very dangerous game."
You made yourself vulnerable at TNT. How do you look back on that?
"It created quite a bit of resistance in the beginning. But in the end, for several years in a row, we were the top-scoring company in the world in the Dow Jones Sustainability Index. Then analysts became interested, and the supervisory board became more calm. Until we were once attacked by hedge funds. Then I learned: the capital market, especially that hedge fund side of it, they did not care one bit."
In his last New Year's address, Bakker argued for a radical turnaround of capitalism. “There is no point in continuing on the old road. Companies should not only please shareholders with higher profits and thus keep hedge funds at bay, they must set clear goals for themselves in terms of people and the environment.”
Bakker says: “We have only developed capitalism around financial capital, while there is also social capital and natural capital. Nobody optimizes this. The planet is just going under. So you have to move towards an integrated capitalism. With an optimization of financial, social and environmental capital."
“But we can measure the results well with financial capital. Anyone comparing the sustainability reports cannot escape the impression that this is a mixed bag of objectives and measuring methods. Capital providers, including those of good will, such as the Dutch pension funds, need more to hold on to.”
Why is there no progress with unambiguous sustainability reports?
"Everyone who works with sustainable accounting standards is on an island. I myself am Co-Chair of the International Integrated Reporting Council, which includes a large delegation from the global reporting community. In that group, I said at a meeting, "You are as much a big part of this problem as the problem you are trying to solve is." Those different islands are not talking enough to each other. Therefore, it causes chaos. There needs to be an enormous consolidation battle there. There are currently 600 ratings and rankings for environmental and social goals. Just like there are 450 consumer indexes about what is or isn't healthy for you. What do you want business to do? But we seem to have rocked the boat, movement is starting to emerge."
You already said in 2012 that the accountant will save the world.
"I still believe it. But ever since then I have been constantly hearing: "Mr Bakker, it took us 75 years to come up with rules for financial accounting - and besides, we still have two systems in the world - how do you think we could get this done? " Then I say: well, it has to be done, because that urgency is there. Look at the fires in the Amazon and in Australia, the drought in the Netherlands. The climate problem can no longer be denied."
"You often hear that you now have to think about how you leave the planet for your children and the next generation. I think it is a completely worthless argument. I will be sixty soon and we are already experiencing it, the misery.”
This article was originally published by the World Business Council for Sustainable Development (WBCSD) on 26 March 2020. This is an English translation of an interview with WBCSD President & CEO Peter Bakker.