THE NEW HORIZON OF BUSINESS AS A FORCE FOR GOOD: CHALLENGES FOR HIGHER EDUCATION AND THE NEXT GENERATION OF BUSINESS LEADERS K K Tse Ph.D., MBA

Founder and Chief Education Officer

Education for Good CIC Ltd.

A Certified B Corp

World Business Ethics Forum,

Hong Kong Baptist University,

December 12-13, 2016, HK

What’s good about Brexit and Donald Trump in the White House?

A wake up call !!!

• Anti establishment

• Anti big-business

• Anti business-as-usual

THE PROBLEM IS…

Far too often, people do not wake up regardless how thundering the call might be. Do you notice anyone waking up since the 79-day Occupy Central in Hong Kong two years ago?

Business as a Force for Greed

Vs

Business as a Force for Good

The wake-up call for businesses

Greed is Good !!!

“The (2008) crisis resulted from the meanness and greed of business leaders.

The richest people made the most mistakes with the least accountability.”

Jeff Immelt,

Chairman and CEO,

General Electric

•Greed might be part of human nature

•The trouble is: we have an economic system that relentlessly pushes people towards greed

”There is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits.”

Milton Friedman, 1970

FOR A LONG TIME….

The unquestioned assumption of the

capitalist enterprise:

Just focus on maximizing profits for the

shareholders

“The capitalist system is under siege.

Business has been criticized as a major cause of social, environmental, and economic problems.

Companies are widely thought to be prospering at the expense of their communities.

Trust in business has fallen to new lows.”

Michael Porter and Mark Kramer

2011

CREATING SHARED VALUE

• From an initiative to a movement

•Embraced by hundreds of businesses worldwide

• Fortune Magazine began in 2015 publishing annual lists of Change the World companies using the shared value framework

THE B TEAM ADMITS….

•Business is now waking up to the reality that if we carry on using the natural resources of the world unsustainably, they’ll quite simply run out.

•More people are living in poverty than ever before, inequalities are increasing in many parts of the world and unemployment rates are at frightening levels.

THE B TEAM RESPONSE…

•Much of the blame rests with the principles and practices of ‘business as usual’.

•Businesses have been a major contributor to the problems and we, as business leaders, have the responsibility of creating sustainable solutions.

THE B TEAM VISION

A world in which the purpose of business is to become

a driving force for social, environmental and economic

benefit.

(no mention of profits!)

CONSCIOUS CAPITALISM AS A MOVEMENT

• “Conscious Capitalism” is a way of thinking about capitalism that makes a positive impact on the world.

•Conscious businesses are galvanized by higher purposes that serve, align and integrate the interests of all their major stakeholders.

CONSCIOUS CAPITALISM ENSURES A CONSISTENCY OF ACTION AND OBJECTIVES OVER THE LONG-TERM THAT BENEFIT THE BUSINESS AS A WHOLE, NOT SHORT-TERM GOALS AND PROFITS.

A blueprint to

build a

disruptively

better business

THE NEW CAPITALIST MANIFESTO

• The problem isn't capitalism itself, but that greed proliferates in it.

• The question we should be asking isn't 'What can we do to stop rewarding greed in capitalism?'

• The question we should be asking is: 'What can we do to stop rewarding greed in any system...'

THE NEW CAPITALIST MANIFESTO

•Making sense of the new guiding principles of

business design in the 21st Century

•Case studies of Google, Apple, Walmart,

Interface, Nike, and many inspiring examples

•Must-read for all business students (and

professors)

ENTER B CORPS

•Certified B Corps

•Benefit Corporation legislation

•B Impact Assessment

CERTIFIED B CORPS

• B Lab (a non-profit organization) in the US is the global certifying body

• Companies from any part of the world could apply for B Corp certification

• Started in 2007, there are now close to 2,000 certified B Corps from over 60 countries

BENEFIT CORPORATION LEGISLATION

• A new corporate form, just like LLC or limited company

• Over 33 states in the US have enacted legislations to allow for Benefit Corporation registration

• Explicit statement in the articles of incorporation that the company will not only make profit for the shareholders but also take into account of its impact on the employees, the community and the environment

IN A NUTSHELL….

Benefit Corporation is a new class of corporation that

• A) creates a material positive impact on society and the environment;

• B) redefines fiduciary duty to require considerations of non-financial interests when making decisions; and

• C) reports annually to the public on its overall social and environmental performance

B IMPACT ASSESSMENT

• A free, online tool for companies to assess its impact on the employees, community, and environment, and its quality of corporate governance

• Easy to use but difficult to have high scores on all aspects

• Full score is 200

• Companies that score over 80 could apply for Certified B Corp status

• Over 60,000 companies worldwide have used it

• The first book on B Corps

• Author Ryan Honeyman was in Hong Kong as Keynote Speaker of the Social Enterprise Summit, September 2016

MBA GRADUATES FOR B CORPS

In response to student demand, Columbia, New York

University, and Yale business schools, among others,

now forgive student loans of their MBA graduates who

go on to work for Certified B Corps.

More and more business schools in the U.S. are

joining this rank.

WHAT DO ALL THE ABOVE HAVE IN COMMON?

• not just concepts and theories

• not just research and publications

• but practice and actions

• All aspire to be MOVEMENTS to inspire other businesses to change

RE-DEFINE BUSINESS AND BUSINESS SUCCESS

•Business enterprise: not just for maximizing profits for the shareholders, but creating shared value for all stakeholders

•Business success: not competing to be the largest or most profitable, but competing to be the BEST for the world

ALL TOWARDS THE SAME GOAL

• These movements are complementary to each other

• They are Vital, Urgent, Visionary, Challenging, and will shape the development of the world capitalist system in the decades (centuries ?) to come

A CASE STUDY: PATAGONIA

Patagonia grew

out of a small

company that

made tools for

climbers.

Now a major

maker of outdoor

apparel.

1970

The largest supplier of climbing hardware in the US

1986

Started giving 10% of annual profits to support environmental groups Later evolved into the 1% club – member companies commit to donate 1% of sales or 10% of profit annually to support environmental causes

SUCCESS, RAPID GROWTH, RECESSION, MASS LAYOFF….

Why are we in business, anyway?

A NEW MISSION STATEMENT….

Build the best product, cause no unnecessary harm,

use business to inspire and implement solutions to the

environmental crisis.

SOUNDS LIKE AN ORDINARY MISSION STATEMENT

•Why ‘cause no unnecessary harm’?

•Implies recognition of harm being done

•The most that the company can do is not to cause ‘unnecessary’ harm

Patagonia was, and still is, serious

about the harm that the company

was (and is) causing

FOR EXAMPLE: COTTON CLOTHING

• Industrially grown cotton was bad for the environment

•10% of all agricultural chemicals in the US were used to produce cotton

•Even today, cotton is grown on 2.4% of the world’s cropland, yet it consumes 24% of insecticides and 11% of pesticides

1996

•Patagonia went for 100% organic cotton, despite its higher costs

•Not an easy choice

“Leading an examined life in business is

a pain in the ass.” Founder

Yvon Chouinard

NO TURNING BACK

Persistently raising standards for its materials and suppliers.

2008

• Inspired Walmart to start using organic cotton for an increasing range of its clothing products

•Together, the two chains became the biggest retailer of organic cotton products

2009

• Teamed up with Walmart to set up Sustainable Apparel Coalition to set standards for sustainable sourcing of apparel along the supplier chain

• Today, the Coalition has a global membership of 175 major retailers, manufacturers, suppliers, and NGOs

THE FUNDAMENTAL CHALLENGE….

Can Patagonia continue to grow without

expanding its environmental footprint?

THE UNEXPECTED BUT NATURAL RESPONSE

Aggressively encouraging its

customers NOT to buy things they

don’t need

Could you imagine Alibaba

becoming a certified B Corp?

COMMON THREAD INITIATIVE

•Encourages customers to repair the cloths or send them to the company for repairs

•Operates the largest garment-repair facility in North America

•Repaired more than 40,000 garments in 2015

THE KEY MESSAGE

“ The most environmentally friendly fashion is

in your wardrobe.”

2012

•Became a Certified B Corp and has been one of the most iconic B Corps ever since

•Amended its articles of incorporation to codify the company’s commitment to social and environmental good.

3 KEY INSIGHTS

1. Business can be profitable AND

a force for good at the same time

2. Power of One – against the current

3. Part of a movement to change the

world

THE BREAKFAST MENU PARABLE

• Animals in a farm were discussing what changes to be made in the breakfast menu

• Finally decided to have bacon and eggs from now on

• Representatives were sent to talk to the hens for supply of eggs

• Representatives were sent to talk to the pigs for supply of bacon

• End of story

THE MORAL: PARTICIPATION VS COMMITMENT

Supply of eggs = participation

Supply of bacon = commitment

CSR = participation

B Corp = commitment

CHALLENGES FOR HIGHER EDUCATION

• The business world is changing fast.

Is university education keeping pace with it?

•No.

• In any case, too slow – far too slow in responding, including Business Schools.

Have you ever seen a course on

Business as a Force for Good?

•Business schools are still teaching Business as Usual

•Most business school professors are schooled in the old business world

EDUCATING THE NEW GENERATION OF BUSINESS LEADERS

• We have to alert them to the emerging trends of business transformation

• We have to make them aware that businesses must go beyond making profits and have a vital role in tackling many of the social and environmental challenges

• We have to enable them to realize that business is indeed a force for good

The Challenge: how to do it ?

SOME NOT-SO-POSITIVE EXPERIENCE WITH UNIVERSITIES

• Inter-University Social Entrepreneurship Taskforce

• Set up jointly by British Council, HK and Education for Good CIC Ltd. in 2013

• Presidents of each of the eight local universities nominated two professors to join the Taskforce

• Objective: to promote teaching and research on social entrepreneurship

• 3 years on: little has happened

• Universities administrators and professors have other priorities

We need a new, bold, innovative,

yet practical approach.

HERE IT IS….

•Funding is believing

•Seeing is believing

•Hearing is believeing

•Doing is believing

FUNDING IS BELIEVING

•We need funding commitment from the University

•Fortunately it doesn’t require too much funding

•Less than HK$1 million per annum will suffice

SEEING IS BELIEVING

A delegation of 5 to 10 business school professors headed by the Dean to attend the annual B Corp Champions Retreat in the US to meet, observe and talk to hundreds of B Corps from all over the world

HEARING IS BELIEVING

•Every year, invite 5 to 10 CEOs of iconic B Corps from different parts of the world to HK to share their experience with faculty members, students and business leaders TOGETHER

• ‘Businesses inspire businesses’ – no better way to having CEOs inspiring CEOS

•Not 5 to 10 to be invited in one go, but 1 to 2 every quarter, for far greater overall impact

DOING IS BELIEVING

This is the most exciting one and potentially with the greatest impact

INSIGHTS FROM BEST FOR NYC

• In 2015, New York City Economic Development Corporation initiated the BEST for NYC program

•Building on the growing popularity of B Corps and the availability of the free, online B Impact Assessment tool from B Lab

• Invites all companies to use the BIM tool to assess themselves on how they treat their employees, the community, and the environment

• Companies with high scores are publicly recognized and their products/services promoted as the BEST for New York City

HOW IT WORKS

• Any employee from any company could initiate the assessment online and free of charge.

• Simple. Powerful. Win-win for everyone.

• The program is being replicated in other cities inside and outside the US.

A BEST FOR HK PROGRAM WITH BUSINESS STUDENTS TAKING THE LEAD?

•Business students could take part in teams

•Go through a one-day training workshop on B Corps

•Do their own research and study with an online Guide

• Identify a local company that they think should become a B Corp

THE CHALLENGE BEGINS…

• Contact the company to set up a presentation to senior management

• The student team uses the presentation to convince the company to take the BIM

• Assist in the BIM process

• Facilitate the company to make an informed decision on whether or not to go for B Corp application

• Share their experience and learning with fellow students and professors

THE BEAUTY OF THE PROGRAM….

• Simple

• Doable

• Inexpensive to administer

• Highly experiential

• Challenging learning experience

• Great benefits to students and businesses

MY VISION OF B CORP DEVELOPMENT IN HK

• Within 3 years, a sustainable momentum will be created

• A growing number of companies will become certified B Corps (currently only one in HK)

• HK B Corps joining the global B Corp community to deepen the movement in this part of the world

• HK B Corps inspiring B Corp development inside China

• All HK and PRC companies doing business in One Belt One Road countries will be B Corps

Support me and university partners to

realize this vision

Contact me at

kakuitse@gmail.com