Market Forces, Governance, Globalisation, Innovation, Among Major Influencers
NEW YORK, 10 April, 2006 – Sustainable development will steadily advance over the next 10 years, with six major trends influencing industry world-wide, according to a new PricewaterhouseCoopers report, “Corporate Responsibility: Strategy, Management and Value.” The challenge of creating strategies that meet immediate needs without sacrificing the needs of future generations will be driven by the growing influence of: global market forces; revisions in corporate governance; high speed innovation; large scale globalisation; evolving societal requirements and communication, the report says.
“Sustainable businesses balance their economic interests with the need to be socially and environmentally responsible. The companies that succeed over the long term are those that integrate ethical considerations into company decision-making, and manage on the basis of personal integrity and widely-held organisational values,” said Sunny Misser, PricewaterhouseCoopers’ global leader of sustainable business solutions.
The report identifies the following major trends:
Growing influence of global market forces, rather than government policy. The influence of the markets in decision-making will grow as they reflect rising demand, shrinking supply, and changing patterns of demand for natural resources.
Revisions in the financial model used to set corporate and government strategy. The new model will include new scenarios, new risk factors, and a growing number of intangible and non-financial factors.
Innovation, particularly in core industries. Changing economic conditions will expand the rate of innovation exponentially to include changes in behaviour, product design, supply chains and geopolitical structure, in addition to technology.
Globalisation. International institutions will be responsible for formulating global policies; the role of national or local institutions will be limited to implementation.
Evolution, not revolution. Progress toward sustainable development will be largely incremental. Barriers to rapid change will die hard, but specific catalysts may cause spurts of great change.
Communication. The global media may influence which issues governments and industries focus on and accelerate the speed of changes in policy and behaviour.
Misser advises that the business sector needs an elemental approach – integration, action and communication. First, companies must formulate a clear strategy for behaving responsibly and integrate that strategy within their core business operations – like a gene that is encoded in their DNA and copied to each cell in the corporate body. Second, they must adhere to the values and standards they have articulated for themselves. Long-term sustainable performance does not come from proclaiming a code of conduct but from putting it into daily action. And last, they must tell the world clearly what they are doing – both their successes and their challenges. Only then can they close the gap in perceptions, maintain their reputations and act as an example to other organisations.
“Sustainability has moved from the fringes of the business world to the top of the agenda for shareholders, employees, regulators, and customers. Any miscalculation of issues related to sustainability can have serious repercussions on how the world judges a company and values its shares,” Misser said.
“There is mounting evidence that companies that act in a responsible manner consistently do better in the long run. Research by PricewaterhouseCoopers shows that more than half of institutional investors and analysts believe that good governance and disclosure about sustainability issues are critical indicators of a company’s value.”
The report also includes reviews of regional issues, highlighting key trends that will drive sustainable development. These include:
Europe. The mature, consumption-based economies of Europe are under pressure to achieve greater efficiencies, reduce their environmental impact and develop more sustainable policies and practices. Both the public and private sectors are being asked to demonstrate good governance, ethical behaviour, sound risk management, personal responsibility by directors and increased transparency.
U.S. Over 80% of U.S. energy demand is met by fossil fuels and is highly dependent on supplies from foreign nations. Since the market for sustainable goods and services has remained small, large companies have done little to develop and market them. Corporate America has taken a largely reactive approach to corporate social responsibility, leaving NGOs and other stakeholders to set the agenda.
China. Multinational companies doing business in China need to understand China’s regulatory requirements and address the lack of understanding of sustainability issues among local management. They will need to manage their corporate reputations in their home markets while operating in a country where environmental and labour standards are considered to be low.
India. Despite rapid economic growth, the wide income gap between the poor and the wealthy has resulted in uneven consumption. The private sector needs better access to capital and credit in the international markets. Closer alignment of private investors and other stakeholders is essential, as is better corporate governance.
Africa. The continent is beginning to awaken to the concept of sustainable development. Companies that assume social responsibilities in the communities in which they operate will need to introduce corporate responsibility strategies and monitoring systems, risk controls and reporting mechanisms.
Latin America. Many companies find it difficult to access credit and capital, and are vulnerable to social pressure and economic uncertainty. The historical lack of transparency in business and government has eroded credibility, and increased the need for certification. Political instability has impeded the development of sound sustainability strategies.
PricewaterhouseCoopers ( www.pwc.com) provides industry-focused assurance, tax and advisory services to build public trust and enhance value for its clients and their stakeholders. More than 130,000 people in 148 countries work collaboratively using Connected Thinking to develop fresh perspectives and practical advice. In Canada, PricewaterhouseCoopers LLP ( www.pwc.com/ca ) and its related entities have more than 4,300 partners and staff in offices across the country.