Business in society & the importance of purpose

In this 20-minute interview, recorded in London on 28 March 2017, Björn Edlund talks about Business in Society & The Importance of Purpose.

In the film Wall Street, Gordon Gekko famously asserts that “Greed is good.” Since that film was released in 1987, we’ve had a pretty rocky ride with banks collapsing and so on; what do you think are the lessons that we should learn from the greed is good ideology?

It was a brutal film and those were brutal times in the 1980s when deregulation gave the financial industry so much open space to basically be rapacious – the Barbarians at the Gate is another famous book and film from the time. I think what we have learned is that some regulation is necessary, that human greed if left unchecked will lead entire economies into the ditch.

But we often observe, don’t we, that business is largely motivated by greed and perhaps fear as well?

Yeah and those things are related I think, because it’s almost like a feeding frenzy. What you get is – first of all greed can be measured in terms of, financial success is measurable and financial performance is the one thing that you can measure better and more thoroughly than anything else, and actually can plan for in many ways better than many other facets of running a business. So, you get the performance that you measure and shareholders accept greedy managers if you wish, as long as they run a company in a successful way in the interest of shareholders.

I guess business is just people after all, that some are good and some are bad?

Yes, I think so. And there are some sectors that have a brake built into them because they’re either very exposed to direct consumer reaction, such as the food companies or retailers, the large… Safeway’s and what have you. There are other sectors that have powerful NGO’s and governments looking into them, like the extractive sector that I come out of – Shell, for example. And those companies their morals are held firmly in place by external pressures, and because of this external pressure over time they have built up internal cultures, policies, processes, to try and keep the unbridled greed – if you want to call it the profit motive – in check.

The other thing that was wrong about the philosophy of the 1980s is Milton Friedman’s famous “The Business of Business is Business,” and he basically said anyone who runs a business for any other reason than to accrue profit is basically a bandit and a communist sympathiser and should be kicked out. Whereas today, we know that we can redefine each of those businesses. So the business of business, the first one is the purpose of the business is and what is the business of the second business is the company, its stakeholders, its communities, shareholders, employees, suppliers and so on; and the third business in “The Business of Business is Business” is basically what you do and the impact it has all across your touch points with the world around you. So, the 80s it was misstep, I think, in many ways.

What do you think now is the role of the business in society?

First of all, it’s to provide goods and services that people want, that’s why they’re there, but to do it in such a way that you can actually build and share value all the way across your activities, all the way back from the way that you work with authorities to make sure that there is a good school system, a good education and training and apprentice system if you have that in the country, all the way through to how you treat your suppliers and how you put demands on your suppliers as well to treat their own suppliers and their own stakeholders as well. So I think there is a growing understanding, and this started around the millennium actually with the UN Global Compact, that business has a role in society – not just as a provider of jobs on the one hand and provider of goods and services, and provider of profits and shareholder value, but as a sort of a social being, a being in society that has almost like a human character that needs to be nurtured and looked after.

So how do you create wealth with purpose?

Ah, the answer to how do you create wealth for purpose is one of these million dollar questions. I actually think that business is run roughly on three different fuels; one fuel is culture or energy source is culture, and you can nurture a culture and you should nurture a culture obviously because culture drives behaviour and you should have positive behaviour; the other one is strategy and so that is obviously quite important that you have a smart way of running your business; and the third very important factor is purpose, and purpose is why the company exists, and what is it here to address? And companies that understand their purpose will embed it the “why do we come to work question” into their culture in such a way that people are motivated – and not just by promotions and bonuses, but also by the fact that they’re actually doing something good, right? And they will make sure that they have a strategy and smart people to run that strategy that will make sure that people can see and make a connection between the purpose of the company and their work if they work in the company, or the purpose of the company and its products and services, if they’re somehow touched by the company from the outside.

So what’s the role of transparency in that?

Oh, transparency is the life blood, I think, for anything that you need in business. You need to understand your numbers so you know if you’re in debt or if you’re doing well, if you can do long range financial planning and so on, but you also need to have transparency in terms of behaviour: the manager’s behaviour, the behaviour of the company, the way the company interacts with everybody who it touches from authorities, governments through to clients and customers and their own employees.

So transparency is sort of … without transparency you cannot see the purpose of a company clearly, you cannot see whether its performance is really for real or whether it’s just some kind of mirror game that’s being played. So transparency is – and it’s become … we almost have too much information now, so the transparency, I think, for me also is sort of the old journalistic thing of picking out what’s important among all the facts that are there, and people will look at different things and analysts will take a number here and make a projection and then do a line from A to B; people who are interested in the societal impact of companies will look at other things, such as are there protests against the company’s projects? Is the company being delayed in its projects? Is it being held up as a good citizen or as a bad citizen?

We’ve just seen in London recently the launch of something called the Corporate Human Rights Benchmark which looks at the human rights performance of companies in three different sectors. And it is the first time that this is really now being measured with indicators that you can actually look very carefully at how a company has performed in certain areas that have a direct impact on recognised human rights.

As a professional communications advisor, how do you advise executives on how to be good corporate citizens?

Well you can’t talk to them that way because then they will sort of, they will buy you a coffee and send you home. So it’s question of appealing … let them discover in themselves what we used to call in Shell their own teachable point of view, and make the connections themselves between the company’s espoused values and their own behaviour as leaders and the company’s behaviour and performance in society around it and show them that they’re good examples. If you look at the leading lights of corporate social responsibility and companies that are actually managed on the back of a well understood and implemented purpose, you can point to…Paul Polman of Unilever for example and people will say, ‘Okay, fine, so well he’s seems to be a pretty popular guy,’ and if you’re a senior executive, if you’re a CEO of company, well you also want to be a pretty popular guy because that’s one of the reasons that people take those positions is they want to be in the limelight. So you say, ‘Well, look what they have done; look at what he has done and look at the changes they have made, and this is how it might turn out in terms of processes and structures and new goals or performance measurements in your company,’ and that’s how you talk to them about being a good citizen.

But if he doesn’t want to change or she doesn’t want to change?

Well, then you move on. [Laughter]

If somebody doesn’t want to change and they think everything is okay, they wouldn’t have an advisor anyway, or they wouldn’t talk about those things. They would say, ‘Make sure that I look less…’ I don’t know ‘…fat in the company and in the report,’ if you’re work internally, or ‘I don’t like the blue, make it red’ or whatever, and then, I mean in my life, I would have just moved on to do something else because if somebody doesn’t want to listen to discussions around things like purpose, well, they’re not worth working for basically.

Give me an example of how you’ve made a difference, where you’ve made a difference in this way?

Well, so in the world of public relations in companies there are several things you could work on: you work on the story of a company, so how does a company talk about itself and what it does, and that story then becomes part of the conversation around a company and it gets expressed in all sorts of ways, but probably the best and most effective way of expressing it is to write good speeches for the CEO or have somebody do it. And when the CEO starts talking about the company in a different way, well the people who report to the CEO will start talking about the company in a different way and within a quarter of a year or something you will see that the story has changed.

One time in Shell when I was quite new – I joined Shell a year or so after the reserves crisis they had when they’d overstated reserves and basically the market forced the Anglo-Dutch company to become one, because it had been Royal Dutch Petroleum and Shell Transport and Trading, before that had sort of traded as the Shell Group, but basically they were two different companies and the market had wanted them to merge forever and they did. But also what the market had done, especially under the immense scrutiny that they were under where the CEO had to leave, the Head of the Division that was implicated and having overstated the fuel reserves had to leave and the Head of Finance had to leave and they became totally gun shy, and from having been a fairly visible company a company that had lots of stakes planted in terms of the social role of business all of a sudden became schtum. So one of the things I had to do in the beginning was to go into not just to the Executive Committee but to the Board of Directors and basically say, ‘We have to decide which hill we’re on here,’ and I told them in very simple terms, “I think the story of Shell is being told but it’s not told by us anymore. And we’re one of the world’s ten biggest companies and isn’t it a shame that other people are deciding who we are?” Because that’s what happens, we are what other people know about us. And they nodded and I said, “In 1995 after the Brent Spar disaster, the NGO’s took half of the Shell story and took it over and now the analysts have stolen the rest. When are we going to take it back?” And they nodded and I said, “Well, this is what we see out of the research there’s a good and residual goodwill around Shell among the people that we survey, and they are all saying we haven’t heard from you in a while, why has Shell become so silent?” So, then I said, “We have to define the hill we’re on – BP at the time was on a green hill, Exxon Mobil was on a performance hill and where is our hill? How high is it? What’s the view from there and what do other people see when they look at us?”

So, as you can hear, it’s almost like somebody telling stories to kids, but I thought rather than going in with brands and value and this and mission and all sorts, I basically said, “Look it’s storytelling issue and we have ways of telling stories,” and then they said fine. So with that, we then defined the six basic themes that we wanted to talk about, because going from totally silent to one key message would have been impossible because Shell is so diverse. And so that’s what we did and it stocked up, hired people, got the good speech writers, got good people in all the disciplines of corporate communications and made sure that we took back control of our story and we could show it every month in the media analysis that wherever a Shell person, anyone from someone who worked in a lab all the way up to the CEO was quoted it was a better story than when other people talked about us. And that was the simple message and that’s how I changed the story in Shell.

So taking control of your own story is key?

Yeah, absolutely.

So what advice would you give to other people to do that?

The same you have to decide which hill you’re on. You look at your sector, who are your nearest competitors? What do people think about them? What have people thought about you in the past? Is there something you want to change? I mean in our case in Shell it was we have to turn the volume up and refocus our story again and take control of it and make people look at other things, ‘My God, are they going to survive?’ which had been sort of the conversation around Shell for a while.

So, in any company, you sort of basically say, ‘Okay, what’s the story? How do we tell it? How closely do you in the executive suite want to be involved, because you can outsource most of it through your media relations people or your film makers or video makers or the people who create advertising for you and you can get allies to talk on their behalf and you can go to the industry associations and so on and so forth, but if they say, ‘No, no, we want to tell the story,’ then fine. So then here is how it’s packaged for the analyst world; here is how its packaged through the media for others: locally, regionally, internationally, all the way from the FT and the Economist through to, I don’t know, Nuremburg and Utrecht and if you’re somewhere and you have an office in Nuremburg in Germany. So it’s the same, you just have to…there are certain things you could do and certain instruments you have to play on, and then you have to decide what’s your tune? How loud is it? What’s the beat and what regional variations do you have – you know, Samba in Brazil and, I don’t know…

And in deciding that storytelling and that beat and that tune that you’re selling, how does that affect the sense of purpose that your employees have?

Okay, so people are proud to read about … the simple fact is people are proud to read about their company in the paper – if the story is good. And you can appeal to their sense of solidarity if the story is bad, I mean if the story is bad for a reason not just if it’s bad journalism but if something bad has happened and the company is doing something to put the situation right.

The purpose is at the heart of your story because explaining to people why you exist – in Shell’s case, we talked about meeting the energy challenge, which is a very simple way of basically saying we’re an energy company and until people have totally perfected harmless energy we’re going to have work with hydrocarbons for a while. And so wherever you are, you decide what your story is, and at the heart of that story is your purpose.

So as we look to the future, do you see a dramatic repositioning of the role of business in society taking place?

A gradual rather than dramatic. I see a gradual change taking place as these…

But the role of communications has changed as it’s become more widespread. It’s so much quicker than before isn’t it?

Yeah, it’s true. And, of course, to manage the interface between the company and its outside publics is the role of communications basically. But, actually, to me, it’s making sure that you have some kind of lever on the story and also make sure that you know and understand that internal communications is probably the most important thing you can be doing.

The gradual change comes from the fact that as transparency has grown, I mean it started, I think, with the more or less with the invention of the UN Global Compact as I said before, which looked at a company’s performance economically, environmentally and in society, okay? And over time since 2000, when the UN Secretary General, Kofi Annan launched it, over time there have become better measurements, I mean there were good measurements already for the financial performance side of things and pretty good measurements on the environmental performance – now, of course, there’s the debate around climate change and so on and so forth, but in terms of chemistry which was the difficult thing until recently, that is very clear, so people know what’s harmful and what’s harmless and so on and you can measure effluence and a lot more controls have been built into production and so processes rather than having them end of pipe where they used to be.

What is gradually changing is that now that the understanding of how companies have an impact in society around them, how they perform on societal measures such as human rights, which basically covers … it’s a good proxy for most of the societal interaction. And performance measures go up there and they become part of the mainstream of how companies are valued, yeah? And the analysts will look at it and investors will look at it from that perspective, and then companies will adopt that because they want to see themselves presented in the most attractive way to potential investors. So that’s the gradual change. Every reporting cycle, which is basically every quarter the wheel turns just a little more.

But the other thing, of course, is that this will come with some cost because it takes time and effort to have to explain to people who don’t really have a great interest in who you are and what you do, what it is that you do and why you are in business. And we see very clearly in the rapid … rapidly turning wheel of communications that in order to be able to attract the best people you have to be very clear about your mission and your vision and your purpose, because that’s what young people look at, they’re not going to work just to make money they’d rather go to work somewhere in a start-up where the future is risky than to go to work for a large behemoth if they feel that the culture is wrong in the large behemoth, right? And all the way through your stakeholder circle you will find that people want more information about who you are, so this is how the gradual change takes place.