Measuring change – Prof. Balkenende on inclusive growth and shared value
Former Dutch Prime Minister, Professor Jan Peter Balkenende spoke about organisations realising economic and social value when he met business alumni at Rotterdam School of Management, Erasmus University (RSM) on Wednesday 12 September.
Around 175 participants at the alumni meeting of the Part-time Master Bedrijfskunde (PMB) heard that it is no longer just the social enterprises or good causes seeking to improve society. Now, commercial organisations have adopted the goal of making more than just a profit. They look for ways in which they can create social added value.
Jan Peter Balkenende is professor of Governance, Institutions and Internationalisation at Erasmus School of Economics at Erasmus University and works for accountancy and consultancy firm EY. He described the routines, processes and reports that are focused on achieving economic and social value.
The UN’s Sustainable Development Goals are a recognised framework for sustainability, and more and more companies use them.
Balkenende responded to questions from the audience about politicians’ awareness of the problem, where the responsibility lies, and how companies deal with the tension between short- and long-term solutions. The fundamental question of whether or not sustainability is financially sustainable was also raised.*
"Change is already happening," says Balkenende, and gave examples of companies communicating about sustainability and people being active in promoting it.
He mentioned the Goldschmeding Foundation, initiated and funded by Frits Goldschmeding, founder of Randstad who initiates and funds projects that support an inclusive and sustainable society.
In every investment
He also mentioned the CEOs of some Singaporean companies who wear the logo of the SDGs on the lapel of their jackets to remind them that they must involve the SDGs in all their investment decisions.
He referred to China’s mega-project, the ‘One Belt, One Road’ network of railroads and shipping that links 70 countries across Asia, Europe, and Africa. It is not just a project about digitalisation and improving the infrastructure, he said; it is also a project which makes a connection with sustainability.
Balkenende is hopeful about these developments, and said he was encouraged by the commitment to sustainability shown by around 30 US states that are keeping to the Paris Climate Agreement despite the US federal government under President Trump rescinding support.
Balkenende identified three related themes for business: first, the UN’s SDGs that encourage actions for improvements. Second, climate change, which has everything to do with how raw materials are used – as much as 1.4 times more than needed. This requires much more consideration for circular economies. And third, Balkenende said populations and business must more questions, such as ‘do we really need to produce this?’; ‘can we use this jointly or keep using it for longer?’ and ‘can we reuse the waste?'.
CEOs have a moral obligation to consider their legacy – to consider what the organisation and the individual stand for, he said.
His conclusions and recommendations for action were that every company must create social value, which he defined as inclusive growth and shared value. At the same time, a company is not a discrete entity; it does not stand alone in its importance but within a chain of manufacturers and suppliers. Stakeholders must therefore form alliances with each other and with NGOs.
Business should keep its eye on the long term as well as the short term; this approach has already seen the reinvention of Dutch companies such as DSM, Philips, and Unilever said the professor. He added that gross domestic product (GDP) is no longer a good measure of a country’s success, because it does not include the costs of unsustainable production. Balkenende explained that true performance can be measured by integrated reporting., which summarises value creation over time.
Measurability of change
The professor – a former prime minister of the Netherlands – said the role of government should be to finance innovation and adapt regulations, not only nationally but also regionally and locally, for companies of all sizes. Governments should also promote sustainable procurement and encourage partnerships that create networks of organisations in the supply, manufacture and distribution chains.
“Growth is good. Growing is in our nature. But we must learn to grow sustainably,” he said. “Development co-operation has long served the interests of the industry. Now it is about the measurability of the change.” He noted that this required leadership and action.
* This question – of whether or not sustainability is financially sustainable – is explored by RSM’s Prof. Rob van Tulder in his recently published short book: Business and the Sustainable Development Goals – a framework for effective corporate involvement, which is free to download.
Rotterdam School of Management, Erasmus University (RSM) is one of Europe’s top 10 business schools. RSM provides ground-breaking research and education furthering excellence in all aspects of management and is based in the international port city of Rotterdam – a vital nexus of business, logistics and trade. RSM’s primary focus is on developing business leaders with international careers who can become a force for positive change by carrying their innovative mindset into a sustainable future. Our first-class range of bachelor, master, MBA, PhD and executive programmes encourage them to become critical, creative, caring and collaborative thinkers and doers. Study information and activities for future students, executives and alumni are also organised from the RSM office in Chengdu, China. www.rsm.nl
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