#Sustainability of Values alone would ensure profits. My reply

What’s “New” About Creating Shared Value?  05 Apr 2011 – by Michael Sadowski:

This is an interesting post http://bit.ly/h5z2YL on Sustainability

I give below my reply to the nice article from Michael that raises a number of basic issues.

Michael, very valid points raised. Thanks.

I would like to take you back to the days before ISO 9000 was introduced. In arriving at the harmonization of standards the Cecchini Committee had deliberated in detail what it means to have a standard. To quote Times Guide to 1992: “The traditonal approach, which required years of fortuitous negotiations to arrive at a common position for a single product standard, was internally bureaucratic, extremely unpopular and very time consuming. By the time the new product standard had emerged from the bureaucratic briefcase and onto the shop floor it had often been made redundant by the pace of technological development.”

Lord Cockfield in the Internal market white Paper called for the distinction in all internal market legislation to be made between ‘what is essential to harmonize and may be left to mutual recognition of national standards.” ISO 9000 set to define quality as the totality of features and characteristics of a product or a service that bear on its ability to satisfy stated or implied needs. This was a watershed definition to bring in characteristics that were not taken note of.

In case of sustainability I suggest the splitting into two areas sustainability of values and sustainability of operation [profits]. Michael Porter has been emphasizin­g – Corporate Strategy with inclusive Social Values. Semantics are important and what I see is the tossing back and forth values & value in one hand and CSR & Sustainability on the other. I recommend what Lord Cockfield mentioned the need to ‘what is essential harmonize and may be left to mutual recognition of national standards.” For example, I do not see the jargon ‘Business Ethics’ as such has any meaning, as it is too diverse in its conception left to individual interpretation.

In my opinion 10 Principles of UNGC represent the sustainability of values. If every company globally stick to the 10 principles then there could be a standard measure of performance that could give a foundation to sustainability of operation [profits] for analysis, to prove sustainability of values alone can bring forth sustainability of profits. As a corollary all chapter 11 companies had failed in sustainability of values.

Convergence to the set of 10 principles will open up the Social Values that UNGC represents. I find the situation today on sustainability similar to KPMG or Deloitte or Ernst Young function without a common accounting Standards Board such as IASB. I recommend establishment of IESB – International Ethical Standards Board – in the same fashion as IASB/IFRS and bring every company within its purview including Banking, Finance and speculative enterprises. What would surely emerge out of IESB is the measurement standards for measuring UNGC 10 principles. Looking at GRI I find the divergence of areas being accommodated losing the track on the main purpose – reporting on UNGC, thereby rendering an impossible task of convergence to the set principles for measurement as can be witnessed from their reporting sandards by EC1, 2 ,3 etc. for different companies from different industries. Whereas UNGC 10 Principles could accommodate every company globally for measurement and then comparison.

My observatio­n on Sustainabi­lity:

1. After Yam Kippur war downsizing programs involving billions of dollars in re-enginee­ring could not sustain the profits because of lack of values that impacted the overall profitabil­ity of Corporate.

2. The tools many a consulting firm propagate are similar, downsizing  programs worth a few billions. In the recent survey of 558 companies  around the world by KPMG – EIU a Progress report on CSR – there is a  stunning admission – “Deciding how to measure is more difficult than  deciding what to measure” – that makes 560 elite global corporatio­ns bereft of a corporate strategy on social values.

3. Companies who strive towards excellence in social values a. needs direction and confirmati­on that adherence to social values would lead to sustainabi­lity of profitabil­ity and b. needs a tool that would make it happen. KPMG or EIU or McKinsey and the rest are accustomed to brilliant analysis of operationa­l efficiency in the tangible field, whereas Social Values are to be measured in Intangible domain.

4. The target of communicat­ion is Society – make it simple for a farmer to understand the corporate strategy. In the stakeholders list Society holds the number 1 position for Sustainability of values.