Major challenge or wishful thinking?

Filippo Veglio is the Managing Director of the World Business Council for Sustainable Development (WBCSD), association based in Geneva with consultative status with the United Nations. The WBCSD was founded in 1995 at the initiative of Swiss businessman Stephan Schmidheiny in the wake of the United Nations Conference on Environment and Development (Rio, 1992). The members of the WBCSD are some 200 multinational companies operating in some 30 economic sectors. Its members include Swiss-based companies such as Lafarge-Holcim, Louis Dreyfus Company, Nestlé, Novartis and Syngenta.

global magazine. According to the UN, business is a vital partner in achieving the SDGs. Companies shall contribute through their core activities and assess their impact both positive and negative, set ambitious goals and communicate transparently about the results. Where do you see the main challenges for your members?

Filippo Veglio: WBCSD look at the SDGs through four lenses: the risk lens, the opportunity lens, the governance and transparency lens and the collaboration lens.

Underneath, as the foundation, we place the Human Rights perspective. Business should not only focus on the positive aspects, it should also – and this is an essential and crucial contribution which enterprises can make to achieving the SDGs - look at where their negative impacts are. This is guided by the UN Guiding Principles on Business and Human Rights (see the CEO Guide to human Rights).

At the end of the day, the goal is to translate the umbrella of 17 goals and 169 targets and make the SDGs actionable: for governments - at whatever level; for civil society, but also for business.

For business, the lenses are the above mentioned : lens of risk management: the SDGs point to a number of risks, e.g. water risk, climate change, etc.. which are increasingly prevalent not anymore tomorrow or after tomorrow, but today ! and they come with increasingly expensive invoices. The risks are not risks for the future, or 2050, or for our grand-children, but the risk is to business, to operations, continuity, reputation, but lies also around legislation : are you « behind the curve », or are you thinking proactively ?

The second part is the opportunity side: from a business point of view - you can spend a lot of time on the risk side; but the solutions, the innovation, the technologies, the partnerships, the expansion come through opportunities; let’s look at the SDGs through a business case lens, i.e. the opportunity side.

The third lens links to governance and transparency: large companies like the ones which are members of the WBCSD are driven by many policies, governance systems, etc. The question is: how do you embed the SDGs in the corporate disclosure, reports, in the data that you share internally but also externally with regard to your performance? We think there is more and more emphasis and an unmistakable trend towards more transparency and credibility of data being published. There is an outside-in pressure for better data – from investors, from civil society, from governments – but also within the company; what kind of data are we generating to tell us whether we are doing things correctly or not?

The message from our side is very simple: no matter how large you are, there is only so much that you can do alone; whether you operate in food and beverages, in infrastructure, you can do a lot as an individual company; you should do a lot, you should take this into account, because there are business implications, but you are going to have to work together, in your sector, to look at some of your value-chains’ challenges, at private-public interaction, in terms of organizations which could challenge you and/or support you, what kind of legislation is necessary, what kind of dialogue with governments’ actors is necessary, in the form of responsible dialogues; so, the implications are around collaborations, outside of your four walls.

The message from WBCSD is that respect for Human rights, throughout your own operations and business relationships in line with the UN Guiding principles on Business and human rights is a significant, important opportunity and responsibility for companies to contribute to the SDGs. Of course, there are risks, opportunities, governance related issues, but all around it, we have embedded the message that human rights should be at the core of thinking, because any business will always tell you how it is progressing on the innovation side, on the partnerships side, getting market shares; this is a different language and conversation; OK, there is an acknowledgement, also generated through data and critical organizations around the world who put the fingers where it hurts, where are the supply chains challenges that any company is facing, how are your sourcing your goods and services, in what conditions of work, with which remuneration, which policies, improvement plans, and with what data disclosure ? We try to come in and we have been forcing that a lot - also through CEO engagement - because it is very important to send a strong signal through your own personal leadership to say that sustainability is not only the nice “innovation driven” part and business opportunity side, there is also a very important business responsibility angle. We think there is an unmistakable trend from companies who want to call them leaders in this space. We know there are issues, which have to be taken seriously; we know that we have to do better, all across, from within our companies but also by working with others, in improving conditions; because clearly some things are not yet where they should be !

The area of sustainability is shifting more and more from an environment only discussion, to include the social issues; if you take ESG, the S, if you take sustainable development, it would be the “people-part”. There is an unmistakable trend to say that it is great to look at the environment, but if you don’t also facture in the people, the population, the middle classes, the challenges of supply chains related to the workers and producers, you will never really tackle it; so it is humans and planet. It is not either or. That points to a wider discussion level on how the SDGs can translate.

That gives you the strategic introduction, the frame on how the WBCSD look at the SDGs.

For us the key messages related to the SDGs are : there are universal, ambitious, applicable to every country, every institution, and they present key interactions with the Paris agreement, where the World would like to be in 2030. We use them as our frame of reference, for our Vision 2050. We don’t separate the two instruments; there are complementary, they represent a trajectory.

The WBCSD was established 25 years ago, and includes some 180 to 200 members, with HQ in some 40 countries, mainly in OECD countries. 80 per cent of the members are from North America, Europe and Japan. It is open for membership from all around the World. It is an organization established by business for business (only). It is a Swiss law association registered in Geneva, a club, as membership is by invitation only; the association is driven by certain ambitions, conditions, criteria, and deliverables that companies are working towards. The idea is to have top executive “buying-in” into the membership, in at least one area of work. The conditions are all in writing and accessible to the public. Membership is on a yearly basis; i.e. members decide on a yearly basis whether they want to continue working with the WBCSD or not. The membership pool has to be renewed or to grow. WBCSD is facing issues related to mergers and acquisitions, which mean that every year it loses 8-12 members; so, there is a growth strategy all the more since sustainability is “coming out of the wood”, according to its Managing director.

The WBCSD has been created 25 years ago; hence you have reached the age of a young adult: looking back, what has been achieved and looking forward, where is the journey taking us?

The mission of the WBCSD from day one - and it continues to be the same - is how to connect the sustainability agenda to business success. Success being resilience, lower cost of capital, less risks, new opportunities; I think WBCSD from the outset was quite visionary in trying to position sustainability not as a do-good exercise, but as a business strategy.

How far have we come? Look, positively, we are slowly turning the page; it always take time to create a snowball; through WBCSD and many other organizations, there is a wider movement of networks, companies, organizations, which are finally set in motion, whereby these issues are rising to the mainstream agenda, of businesses, governments, investors. Taking the more realistic view, there are also things which we could take out of documents from 10-15 years ago which could be literally copied and pasted in current documents. And this is a recurrent feature when it comes to poverty reduction, sustainable development, equity; we could copy and paste the statements and think OMG , we said it 10 years ago ! So you could take a half full, half empty glass approach; the half full approach, i.e. there is a significant momentum which has been generated, there is significant impetus coming out of the realisation that these issues are not hitting us tomorrow, there are hitting us today, they have a cost to society, to individuals, to businesses, but there also represent an opportunity to transform economies; so I think we are finally in a stage where we either turn the page now, or it is gone … My pessimism comes from the question whether we can turn the page fast enough and really get into the delivery mode and get that go fast enough to sustain efforts across decades to really transform the economy. I don’t think we are there yet !

In WBCSD “Vision 2050”, adopted in 2010, you were envisaging a 2010-20020 “transition period”, to be followed by a “transformation period” (2020-2050). Howe do you see the situation today ?

In 2010, WBCSD came out with a vision that a business as usual approach was not viable ; the idea was how do you go from a business as usual World to a World where you have 9 billion people on the same planet with limited resources; so 2010-2020 was the decade of the “turbulent teens” (like a teenager, there was a lot of growth, but also a lot of questioning; who will pay, who is responsible, who will take actions, how to address the competition for resources, etc… ? We had this vision that in 2020, it would be the time to start “transforming”; it is nice to talk about incremental changes, but what does it mean transformation of a food system? of the energy system? How to you meddle this into systematic approaches, systemic approaches; that was the idea of a thought piece that would help us to articulate (our vision and strategies). We are now refreshing it not because it is no longer valid, but because there has been a financial crisis and a quantum leap in technology has taken place; it was around the Copenhagen climate summit; the Paris agreement AND the Agenda 2030 were concluded  in 2015; Rio + 20; these developments could not be foreseen and the idea was to paint a trajectory; our ambition now is to look 10 years back (what happened, what did not happen, what did we get right or wrong?) and to look ten years ahead.

As a business driven association, you have been working with the UN system, other International Organizations, and governments. How have you been working so far with these stakeholders ?

Basically, we have two legs; one leg is the work with our working groups, work in projects, in areas e.g. social, environmental or disclosure. The second leg is to leverage our status as a consultative body in the UN system, to convene companies to position the business voice in processes, forums, negotiations, discussions, which are taking place at the G20, UN, EU, Convention on Biodiversity, Rio +20, etc.. and to position the business voice when we think it is relevant into the agenda. To say look - to put it provocatively - business is not against everything, business has solutions, ideas, also pragmatic approaches and there are companies out here which believe that there is a role for “smart regulation”, for “smart targets”, for creating an enabling environment that will allow companies to compete on performance. So how do you create that enabling environment? Through dialogue; through positioning, though engagement, from a one on one basis all the way to a more systemic basis. So as a second leg, WBCSD has a strong advocacy component – I underline it is advocacy and not lobbying – i.e. we are not getting engaged into the day-to-day discussion of what e.g. the Swiss Parliament is debating, but we are trying to say there are bigger issues, more systemic issues that we should strive to tackle. We stay away from lobbying, but we do a lot of advocacy on issues we feel we have a different value added.

How do you obtain the advocacy mandate from your members ?

As a members focused organization, a member owned organization, it is basically very simple; WBCSD has a secretariat based in Geneva, five offices across the world, 130 Staff, who, through the CEO, answer to an Executive committee composed of 17 top executives from our member companies; we have a chairman, currently Mr. Sunny Verghese, CEO of OLAM, an agri-business company, who meet three times a year together with the management team, and we go through all issues, finance, risks, programs, strategies. It is a member ownership at the Executive committee level that gives us the direction of work and gives us all the governance and control for the organization. The core group is the Executive committee with the chair, who takes the strategic decision; plus an annual council meeting with the usual voting, approvals though an Annual General Meeting, where the members vote individually.

Specifically we have been focusing on the COP mandate from day one, the Convention on Biological Diversity, we contributed to the SDGs through the High Level Political forum, we are present around Water processes (e.g. the World Water Forum), UN Assembly week, during which many of the discussions are taking place. Generally speaking, Climate change, Biodiversity and UN- HLPF. In addition, last year, we had the G20.

The SDGs are earmarked as THE reference framework, around which multi-stakeholder dialogue should be framed. In this regard, how do you see from your business perspective, the role of NGOs ?            

I see NGOs from two parts; on the one side, their knowledge, savoir-faire, insights experience; NGOs are working on the ground, there have decades of experience; and a certain level of views that reflect a strong sense of reality.

On the other sides, we call them sometimes “the critical friends”; they can be the radar, the critical voice, in a constructive engagement, or even in a campaign level engagement, where they push companies to do more. To respond to the risk of “rainbow washing”, we are urging our companies to be credible and to take NGOs criticism seriously. Through data, technology, social media, the transaction costs of finding out what is actually happening on the ground is almost zero. So why would a company embark on something which is not credible? One can argue that we are not yet there, but this is our objective.

How do you demonstrate credibility to your “critical friends”? This role is very important and, in some cases, it is very useful to drive more catalytic engagement by companies. Depending on your business, the sector you are working in, it is challenging. The example of the movement of (mainly) young people demonstrating against climate change, represents a tremendous driver not only for creating awareness but beyond, for challenging the credibility of the measures undertaken so far. If we are not credible, there are people who will call us out! There are different ways of saying the same things but from different angles.

We might develop methodologies, the right tools – we often say companies should not compete on methodologies, but on performance; they should agree on the methodologies, and the best ones should win ! We are liberal; there should be competition, to the top ! Let’s establish the playing field and then, may the best ones win. And – it is hard to disagree nowadays – there will be winners and there will be losers. In the economy, in society, at the level of who will come out on top of this “sustainability race”; the ones who will be on top will be more resilient and successful; and I don’t mean to say that – it is an important message to underline, in our main work towards “refreshing” our Vision 2050, we have to be careful; yes, we want to drive the race to the top, but what will you do with the ones left behind ? Because those are livelihoods, revenues, sectors that may be at threat in terms of their licence to operate. One has to build into the transition elements of fairness, equity, compensation, etc… I am not here to say may the best ones win and others stay behind. There should be “shock absorbers”, the appropriate framework conditions and this is where you need engagement with governments; We want to drive, but how can we help ? and that goes back to what NGOs / critical friends are requesting: Where is the money for this ? How do you disclose your data on taxes? How do you pay your workers? All these issues - there are all valid points and NGOs put their fingers on issues which are painful - are necessary to be addressed. And there will be increasingly necessary to be addressed.  

Going back to the methodologies, there is indeed a need of methodologies - tools to drive the changes, the necessary transformation - but one needs also instruments for measuring what companies are doing; this is linked to reputational risks and the quality of data which are gathered by the companies and published, to the shareholders, but also to the public; What do we have today and could be needed in the future ? Respectively can business alone decide what they want to report on, or is there a need for regulation? Shall governments or the UN decide what is the appropriate transformation towards sustainability or not and how it should be measured and reported ?

Let me reply from two different angles. If you take the Greenhouse gas Protocol (GHG Protocol) – a methodology developed fifteen years ago by the WBCSD together with the World Resource institute in the early days of greenhouse gas emissions, a number of companies sat down with experts to look at the best way to disclose GHG emissions. This is an example of a voluntary step in the early days of the CO2 discussion which led to develop common methodologies, for governments to rely on it and for companies to decide that it was good enough so they could agree with it. It was a business-driven approach, which was found credible and useful and to this day – it has been refined since then, to scope 2 and scope 3 –, it remains at the core of how companies report on their emissions.

Another example, from another angle, is on the role of central banks in driving regulation; Mark Carney of the Bank of England, said “we have a tragedy of the horizon”; I know what is happening today and tomorrow, but I have no idea from a central bank point of view which are the systemic risks further down the road. Which are the assets, the investments, the policies that companies within my jurisdiction apply, what kind of impact do they have on systemic risks on the financial system, given the risks of stranded assets, of tremendous devaluation, etc. Here we have an example of the role of central banks’ guidance translating into Mike Bloomberg’s foundation attempt to build climate related financial disclosure. What kind of guidance and methodology is required so as to become the way on how to disclose the risks you are sitting with regard to your portfolio ? This is a different approach, with regulation coming in “from the top”.

What is important for WBCSD is to come in as a convener; e.g. related to the Task Force on Climate-related Financial Disclosures (TCFD), with companies in the oil sector, in the electricity sector, in the chemical sector; how am I going to do this ? In the last two years, we have tried to translate these guidelines into sector level guidelines. How should companies report, how should they disclose? Where are the best practices? How can we translate these guidelines into actions? This should allow companies to disclose and investors to take decisions on the basis of a credible methodology.

This is another example; one is a more “business driven”, which established the GHG protocol, the other one being more “policy driven”, central bank driven, which drive that race for performance.

Do you see yourself also as “masters” of methodologies?

There are so many tools out there and too many players competing against each other. We have tried to develop tools, e.g. the Social & Human capital and the Natural capital Protocols – building on the idea of the GHG Protocol – to develop a similar level protocol that generates buy-in. We basically build a coalition, where all the existing methodologies’ developers come together – we have done it for natural capital and for social capital – so as to stop pretending your methodology is the best but to establish a new one with the key synthesis of all the existing ones and obtain an overall agreement on some elements to allow comparability. The work has been going on for two years and we have handed it over to someone external, not to be too close to the methodology, without direct ownership, for it to be freely accessible for all.     

The risk of “rainbow washing” is out there. How do you see it and respond to it ?

You can’t get away with it anymore. We have been warning our members that it is no longer possible to come out with a logo and weak data because “the critical friends” will disclose it. Oxfam in a “Walking the talk” paper, very rightly put the finger where it hurts; we distributed that paper, we invited Oxfam to present it to our members. We picked one of the areas, which was precisely Human rights. We stressed that you cannot be a credible actor nowadays in the business community, if you only talk positively about the SDGs, without minimizing and mitigating negative impact on Human rights, as a core contribution to achieving the SDGs. Let’s take this into account. But yes, the risk is there and we keep warning about it.

The Agenda 2030 overall objective is to “leave no one behind”; some alarming levels of poverty still prevail in Africa, while this is also a continent of tremendous opportunities. How do your members look at Africa? Do you have a specific strategy for Africa?

While most of our members will have in a way or another a presence in Africa, we have very few members with headquarters in Africa. So, we lack insights about Africa, but also the voice of Africa is missing within the WBCSD. This is something we are not happy with, and that we are trying to work on. It is difficult. What kind of companies could you bring in? Some joined but left us later.

However, the strategic part of Africa being a continent of growth, of opportunities, but also a continent of risks – let’s be honest – has nothing to do with the absence of African members at that point. Many of our members are placing significant bets on the African market, and many members have significant business stakes in the African markets; as part of our Vision 2050, we are conducting specific engagement activities in Africa, so as to bring in that voice in. If you look at 2050, some 1.8 billion people will be living on that continent, there many issues which have to be addressed, and we are not at the level where we should be. Let’s be honest! But we are not afraid to acknowledge that, that this is an area where we are trying to improve, but we also have limited bandwidth to add additional resources. We are open to any ideas or partners to improve on this.         

Still in this “leave no one behind approach”, do you see opportunities in the health and education sectors or other basic services; is this on your agenda?  Despite high risks and - probably - low level of return on investments, do you see any possibilities?

If you take e.g. nutrition, to what extent is it a business agenda or not, one might find interesting what the (Geneva based) Global Alliance for Improved Nutrition (GAIN) is doing, but also our work on Climate smart Agriculture, the role of vitamins, supplements, how do you bring this into a more holistic approach ? We are still in the early days, but there is a growing recognition that there are opportunities for companies not only from an opportunity side, but also from a technological side, from a moral point of view, to think through that lens, specifically for those which have an African presence, which rely on a healthy work force, on labour quality. You can link similarly to HIV-Aids, where there is a lot which companies themselves can do, at the level of workforce, as far as testing or access to healthcare facilities. There are many parts where not only your licence to operate but your overall presence in a country, in a community, is impacted by these health issues and where it is not a direct business investment, but a strategic investment. Is it at the level where it should be? Does it match the needs? Obviously, there is a lot of debate about that. There are companies in nutrition and health which take it a bit more systemically and really try to build these alliances to connect also to livelihoods, resilient communities and people, and connect it to the overall empowerment agenda. At the end of the day, what is our legacy, what are we building here in Africa, how are we working as partners rather than as recipients? There are a lot of good intentions, but a lot more has to happen, of course.

A final question and not the least; You mentioned that you are encouraging your members to enhance their positive contributions to the SDGs, but to also to reduce their negative impact, specifically on human rights. The SDG compass (a collaborative effort by GRI, the UN Global compact and the WBCSD) underlines that the responsibility to respect human rights cannot be offset by efforts to promote human rights or advance sustainable development. These are hard core issues, when you talk e.g. about child labour. Can you elaborate?

We have put that message out again and again; as you know, on the environmental side, there is a lot of discussion about the offset mechanisms, from tree planting all the way to mechanism which allow to compensate emissions or pollutions; let us be honest, you cannot do that on the social side. No matter how many compensations you may carry out in one domain, there are not going to compensate for fundamental challenges you may face in your supply chains. There is a natural tendency in any institution to say, there are so many positive contributions we are bringing in, and yes we acknowledge the negative ones, but they can be offset in one way or the another, this is a tricky part. We have always cautioned against it. All our protocols, all our messages go into the same direction, i.e. Think on how you can mitigate and minimize negative impacts, but by no means you will be able to compensate it through whatever action. This is a longer-term strategy to really address systemic challenges that companies are facing at the level of pricing, production mechanisms, at the level of wages, working conditions, at the level of your suppliers, etc… This takes us back to the collaboration aspects mentioned above, i.e. by working with your competitors, you may be in a better position to address these issues in a more systemic way, by working with partners, including via a multi-stakeholder approach. But this cannot be compensated on a short-term basis.

Thank you very much for this conversation.