Business: a force for positive change
RSM Leadership Summit – 6 October 2017
Welcoming the RSM community of business managers and executives, alumni and students to the Van Nelle Fabriek in Rotterdam, Dean Steef van de Velde said business can and should play a key role in addressing and solving society’s wicked problems. The ninth RSM Leadership Summit hosted by Rotterdam School of Management, Erasmus University (RSM) on 6 October tackled the role of business in addressing inequality, poverty, and climate change.
The 500-strong audience heard speakers from global corporations and academia who had experienced or researched tackling the world’s wicked problems. They described what to aim for in leadership, and challenges that can be expected. Speakers described their experiences of powerful leadership themes, their personal values and finding a purpose; all of these are intrinsic to enabling business to be a force for positive change.
But external influences can derail the process; the audience also heard experiences of overcoming obstacles.
The RSM Leadership Summit audience took part in two round table sessions to discuss their goals, guided by RSM Advisory Board members and distinguished alumni. Descriptions of the round table sessions are here.
Prof. Steef van de Velde
RSM has a mission to be a force for positive change in the world, said the Dean in his welcome. “We have a remit to enhance the management and practice of business, so we have responsibility to address these challenges too.” The challenges of wicked problems correspond to the United Nation’s 17 Sustainable Development Goals (SDGs), which are well known, non-political, and easy to define as positive change, he explained.
RSM works towards the UN’s 17 SDGs in three ways; through its academic research; through its engagement with external stakeholders such as governments, industry and civil society; and most importantly through educating students and alumni to be agents of positive change who can create value and wellbeing for everyone. “They are the key to a sustainable world,” he said.
Feike Sijbesma: Businesses cannot be successful in a society that fails
Does business have the power to change the world? Yes, it does, said Feike Sijbesma, CEO of Royal DSM and an alumnus of RSM. He described how he has steered the global science-based company active in health, nutrition and materials, over the past 10 years. He talked about powerful themes that show the importance of context, personal values and purpose in being a force for positive change. He described RSM’s ‘Force for positive change’ mission as a way of making sure its graduates know what to do with their influence.
“Food and sustainability is our core business, said Sijbesma. “DSM is a sound company with clear values and wants to have an impact on the world.” From its origins in 1902 as a coalmining company in the Netherlands, ‘providing energy and pollution at the same speed’, DSM now has €10 billion in annual sales, and employs 25,000 people in 250 locations on five continents. A quarter of its innovative food ingredient products were launched in the last five years; 45 per cent of its business comes from countries with developing economies.
Adapting the most
Sijbesma, who originally trained as a molecular biologist, was deeply influenced by the English naturalist Charles Darwin, who proposed the theory of evolution in On the Origin of Species by Means of Natural Selection, or the Preservation of Favoured Races in the Struggle for Life, published in 1859. This book is the source of the phrase ‘the survival of the fittest’.
But ‘fittest’ in 19th century English means ‘most fit-for-purpose’ – not the most athletic. “To my own surprise, it’s not the biggest, strongest or fastest that will survive, but the one that adapts the most,” said Sijbesma.
The role of business goes further
Many people think the world is clearly organised: governments take care of society; and NGOs such as the International Monetary Fund (IMF) and the United Nations (UN) ‘organise the global chaos a little bit’. Companies make money.
“Governments cannot solve all the problems of the world any more, even if they ever could,” said Sijbesma, but business and government together have the ability to solve problems.
Inequality will hurt business
The real purpose of the economy is the allocation and distribution of resources or competences, explained Sijbesma, enabling communities to co-exist. And while business has contributed to global welfare, the distribution of wealth is unequal. One per cent of the global population owns as much as the other 99 per cent. “And inequality is growing; this one per cent is shrinking. Soon it will be a half per cent,” he said. Consumption is also unequal, with one billion people (of a total global population of 7.6 billion) consuming as much as 45 per cent of all produce. “This is totally unsustainable; the inequality will not continue – and in my opinion it will hurt business.”
Fixing climate change now
Sijbesma said there is enough money, food and the means to distribute it to avoid 9,000 infant deaths per day due to starvation. He told the audience that visiting places where changes in the climate mean that people are no longer able to grow their own food ‒ Somalia, Swaziland and Bangladesh ‒ with the UN and the World Food Programme made a big impression on him. “Sadly, our causing climate change has an immediate effect on their lives.” He said he did not understand why governments stopped funding the UN’s food aid to deal with the banking crisis.
What’s more, the cost of solving the problem later will be much higher than the cost of solving it now. He quoted Mark Carney, Governor of the Bank of England, who said fixing climate change now is important for the future of the economy and financial stability.
“Companies need to change the narrative. Businesses cannot be successful in a society that fails. They need to take care of the planet and of society – not just of a group of stakeholders.”
Short-termism and active shareholders
Active shareholders expect the company to deliver more money faster from short-term developments, said Sijbesma, but this strategy conflicts with business innovations to increase sustainability that work for the long term.
“I cannot change the company in one quarter. I have a broader responsibility,” he said.
Pension funds are among those investors demanding instant dividends; with fewer people making contributions and more people to take care of, they too are under huge pressure, and sometimes threaten to withdraw their investments in DSM unless its shares produce more yield. “I understand the dynamic; this is what we’re living with,” he said. “But if we focus only on profit and we forget the problems of the world, then it will hurt us in the end.”
Define your values
He defined and defended the company’s values directly to shareholders at the Annual General Meeting (AGM) when they asked why their approval had not been sought when DSM joined the World Food Programme, and accusing the firm of hobbyism for investing in a cause that was not obviously a business one. But as the biggest ingredient company in the world, DSM has a responsibility to address the problem of hunger, and those that choose to become DSM shareholders share that responsibility, he said.
Don’t hide behind being pragmatic
It’s easy to have great values when times are good and there’s no pressure. “You will have critical moments too,” he told the audience. “At that moment, don’t hide behind being pragmatic under pressure – this is the moment to show leadership and what you stand for. Don’t forget your values.”
Choose your competencies
Many people don’t even know that the UN’s SDGs are the global strategy for 200 nations; there are 6.5 billion people who have no clue what they are. “That’s like a company in which the strategy is only known in the boardroom.” But embedding a few SDGs into a company strategy – and choosing them according to the company’s competences ‒ makes having a separate corporate social responsibility (CSR) report ‘old-fashioned’, said Sijbesma. DSM choses to support SDGs 2, 3, 7, 13, and 12 by identifying its own competences. “These are not the ones we like, but the ones we can achieve; we can contribute to ending climate change and hunger.”
Using direct action on hunger and health
Sijbesma realised early in his tenure as CEO that DSM food ingredient products should be healthier. He told the UN that the emphasis should be not just addressing hunger but providing nutrition, and asked for 99 other companies to join DSM in speeding up the process. Now, 400 companies are involved in improving nutrition with African foods. The initiative started in Rwanda using food produced and processed locally for the local population, making it the first African country self-sufficient in healthy food with the assistance of development aid agencies.
Using direct action and advocacy for climate action
By changing its own business model in favour of acting against climate change, DSM enables its customers to do so too, says Sijbesma. DSM wants to reduce its own emissions, increase energy efficiency and use more renewable energy sources. “DSM is Number 2, just after Apple, for changing the world,” he told the audience. Sijbesma believes the price of carbon emissions should be increased as an economic incentive away from fossil fuels.
Apply your own values to the leadership model
Increasing motivation in the company also makes for better engagement and makes the company more productive. Leadership that shapes and directs connections and develops people to deliver results makes for a better employer ‒ and that always has value for shareholders, he said. There are examples of great leaders doing bad as well as those doing good. “You should apply your own set of values to any leadership model,” he advised and described RSM’s ‘Force for positive change’ mission as a way of making sure its graduates know what to do with their influence.
Don’t underestimate gender diversity
In conclusion Sijbesma advocated the right mix of men and women, and talents. “Don’t underestimate the impact of gender diversity,” he said. While admitting he was generalising, Sijbesma said that women think and react differently to men. “They ask more questions about context before they start doing something. Men start something, and figure out the context while doing it.” A combination [of men and women] is more effective, he said.
Prof. Michaéla Schippers: How to set goals
Prof. Michaéla Schippers, Professor of Behaviour and Performance Management at RSM, helps people find their goal in life instead of ‘just being busy’. In her presentation, she explained the importance of what the Japanese call ‘Ikagai’, or having a purpose in life. It can boost the immune system, lower stress hormones, and prolong life. People with a purpose in life also become more active, leading to new interests and connections,” she said.
She described how, through goal-setting, RSM has helped students become motivated and achieve more; drop-out rates and the gender gap decreased. Students thought about how they will achieve their goals before stating them publically with an I WILL statement.
Making a good start
The audience’s values of self-transcendence (when people consider themselves to be part of the universe), and those of self-enhancement (being motivated to feel good about yourself) were measured by Prof. Schippers’ questionnaire, asking how they could make the world a better place. Prof. Schippers revealed the RSM Leadership Summit audience scored highly on self-transcendent values in a questionnaire that was sent out to ticket-holders the week before the event. “This means a lot of business leaders and students are making a good start on being a force for positive change,” she said. Goals included: ‘putting people, planet and profit in the right order when doing business’, ‘making sure all employees participate in local activities to give back to the community’, and ‘make every choice I make count’.
Measure your impact
It’s important to also reflect on your goals, said Prof. Schippers. Ask yourself if it’s important that the world is at peace, that we ‘do good’ for the environment, or is it equally important to have wealth and the authority to lead?
“Our mission is evidence-based, and I hope all our students and alumni will be self-transcendent leaders.” She concluded by urging the audience to think about what drives them, and what actions they take to achieve their goals. She urged companies and managers to let employees set goals for themselves, and told them: “‘Do good’ for the world. But measure your impact. Make sure it matters.”
Moderator Dory Grandia reminded the audience that being a force for positive change means ‘being in it for the long haul’. Businesses must get their values and goals defined for themselves before ‘wandering into the contest’, she said.
Goals change with age
Feike Sijbesma responded to a comment from alumni around one of the tables, who said they were changing careers from one profession to another. “We realise no goal is for ever; it changes with age, but it has to make you happy and there has to be fun. So from an academic and practical viewpoint, how do you connect those two?” they asked.
Feike Sijbesma answered by referring again to Darwin’s book, The Origin of Species and its concept of adaptation; adapt and reinvent yourself, he said. “Learn where your shortcomings are. It’s a hard lesson and difficult to deal with, but the only successful model.”
Time out to reflect
Michaéla Schippers said although RSM students are asked to reflect for at least 4-6 hours, other people usually hardly ever take time out to reflect. “We should do this in companies too,” she said, and advised setting personal goals and sharing them with each other not just during strategy days. People should ask themselves if their personal goals still fit with the company, using structured thinking and writing down goals rather than targets. “Take time out, and use an evidence-based intervention,” she said. Feike Sijbesma agreed. “Do what she said – and make an ‘I WILL’ statement!” he recommended.
Distinguished Alumni Award
Following a networking lunch, the Summit audience were introduced to RSM’s newest Distinguished Alumni, with the presentation of the Distinguished Alumni Awards 2017 by Feike Sijbesma, himself a recipient of the Distinguished Alumni Award in 2009.
The award for Entrepreneurial Spirit went to Zahir Dehnadi (International Full-time MBA 2010) and was accepted on his behalf by his colleague Michael Correnti, who extended Zahir’s thanks to his nominator and former classmate Rasim Kenar, plus RSM faculty and organisers.
The award for Social Impact went to Elizabeth Rogers (International Full-time MBA 2013) who was not able to attend but sent a video message of thanks from Nairobi, Kenya, where she is installing a 3D printer to create an income for village women. She was nominated by RSM’s sustainability co-ordinator Joey Johannsen.
The award for Business Achievement went to Sofya Shuster (MSc Finance & Investments, 2011), who said she was honoured and humbled to receive the award, particularly from the university that played such an important role in her life. She was grateful to faculty, staff and classmates. “I came from an ordinary Moscow family,” she said. “I could not imagine having the opportunity to study abroad and having an international career. With a Dutch government scholarship, I had the opportunity to come to RSM for a new chapter and new achievements.”
She valued the support she had in her early development and education, ‘one of the most important values we can have’, she said. “My career and development was shaped by Erasmus University and by RSM in particular. I’m grateful for that. I really admire what Steef and the entire staff are doing at RSM.” Sofya was nominated by RSM’s Career Development Manager Vildana Gačić.
Corien Wortmann-Kool: Investing in leaders, not laggard
Corien Wortmann-Kool is Chair of the Board of the fourth-largest pension fund in the world, that of ABP Pensionfund, and has to balance social and environmental values when considering large investments.
ABP Pension Fund invests €400 billion and has 2.9 million beneficiaries; one in six workers in the Netherlands will receive a pension from ABP’s fund. ABP’s responsible investment policies have been in place since 2015 when surveys showed pension fund contributors demanded sustainable, responsible ways of investing.
Sustainable development investments
“For our Vision 2020, ABP aims to use its influence as a large and long-term investor as a force for good without compromising risk and return,” she said, adding that engagement is integrated into ABP’s new policy. ABP’s portfolio managers consider the efforts towards SDGs of companies in its investment portfolio.
The company aims to be transparent and accountable when it comes to investing sustainably; the results can be seen in ABP’s annual report.
Wortmann-Kool explained that ABP’s sustainable development investments work towards the Paris Climate Agreement, and contribute to achieving the UN’s SDGs. For example, ABP aims to reduce the CO2 footprint of its equity portfolio by 25 per cent, and boost investments in renewable energy from €1 billion to €5 billion by 2020.
Searching out positive influence
ABP leads the pension industry in its initiatives to raise standards for environmental, social and corporate governance (ESG) and assessment of investments, including the UN Principles for Responsible Investment and Corporate Human Rights Benchmark, said Wortmann-Kool. Every portfolio manager must actively search for investments with a positive influence on people and the environment, and maintain a very active dialogue with participants and stakeholders.
Leaders and laggards
ABP divides companies into ‘leaders’ with good returns and good levels of risk, and ‘laggards’ with no prospects for supporting the SDGs, which are therefore an unattractive investment prospect. Companies thinking about contributing to sustainability become ‘potentials’, and ABP helps companies to make this positive step.
Portfolio managers assess companies’ investment potential with ABP’s SDG criteria in mind. “Promising companies want us to invest in them, which motivates them,” she added. When engaging and influencing companies, ABP specifically focuses on avoiding child labour, respecting human rights and encouraging safe working conditions. This has meant that some companies manufacturing mobile phones and tablets have changed their policy to avoid child labour because of pressure from ABP.
Contributing to growth
Wortmann-Kool said ABP wants to positively affect products and services using the investment appeal of the SDGs, however: “We don’t call them impact investments yet, and methodologies for measuring their impact are still under construction.”
ABP intends to invest €58 billion in these kind of investments and will soon develop goals for 2030 with a focus on the Netherlands for its Dutch pension fund. It intends to directly invest and contribute to start-ups in the Netherlands. “We have interesting examples in the circular economy and real estate,” said Wortmann-Kool. “It’s also our responsibility to contribute to sustainable economic development and growth in the Netherlands.”
Prof. Hans van Oosterhout: Shareholder activism – the dos and don’ts
A couple of recent cases have made Hans van Oosterhout, Professor of Corporate Governance and Responsibility at RSM, question if it was possible to make business strategies more sustainable against the wishes or opinions of activist shareholders.
He described the takeover bids by Kraft Heinz for Unilever, known for its sustainable business practices, and by PPG Industries for Dutch paints and coatings group AkzoNobel – a company with sustainability at its heart. So are sustainable strategies really sustainable? Do shareholders support them, and do they actually create a sustainable reality for the firm and the beneficiaries that they target? Prof. Van Oosterhout explored the relationship between sustainable strategies and shareholders.
Do they pay off for shareholders?
Hundreds of studies since the 1980s have produced a mixed bag of results, even when researchers have used advanced techniques to investigate if sustainable business strategies benefit shareholders. The increasing power of shareholders makes it hard to know; they have more power because of lower costs for selling shares, and easier ways to vote at shareholder meetings via apps rather than attending in person, as used to be the case.
Shareholders voting at the AGM by itself may not be enough to influence strategies, but it has scared managers a lot said the professor. But managers need not be afraid. Managers’ and directors’ proposals at AGMs get typically 90 per cent majorities, but shareholder proposals don’t get much support he said. Van Oosterhout concluded managers need to be courageous in front of shareholders and take the lead; “If the sustainable strategy will benefit business, then enact it,” he said.
Van Oosterhout also presented caveats: voting is typically done by minority shareholders ‒ it’s the only way they can speak to the firm, he said but majority shareholders act behind the scenes, so CEOs must build coalitions to deal with these.
Learn to read the writing on the wall
And even though shareholders rarely make a difference in corporate decision-making, as little as four per cent dissent against management decisions is a ‘canary in the coal mine’ indicator of disagreement with the board’s actions, and can predict changes afoot in the board. The signalling of even a small amount of shareholder dissent should herald the development of sustainable strategies. Managers should be more politician-like, observing the ‘electorate’ and building coalitions behind the scenes.
Do politicians make a difference?
It’s common practice to appoint politicians to the board of businesses in the Netherlands and in France. Such appointments are often precipitated by a crisis of legitimacy such as pollution incidents, bribery scandals or tax issues, said the professor. Formally, the company will say it’s because they want to bridge relationships with the community and change their ways. “Symbolically, the public will think everything is well in the company, and that should be good,” said Van Oosterhout. “But do politicians actually make a difference?”
“Politicians are more likely to be kissing babies than making a real difference,” he said. “We found that politicians from the right are least likely to produce bridges with the community.”
Symbolism over substance
Very often you see firms make announcements – such as strategizing for SDGs ‒ for symbolic reasons and to give themselves a positive aura, but it’s a matter of ‘symbolism over substance’, said the professor.
Another empty gesture is talk of a share buyback ‒ when a company buys back shares to reduce the number on the open market. Remarkably the share price rises even if the buyback never actually happens. “The market doesn’t really learn from this,” said Van Oosterhout.
The business world should differentiate clearly between strategies that are merely symbolically sustainable, and those that really make a difference.
Shareholder voting should be limited to most important matters, he said, and explained this his job – as Professor of Corporate Governance and Responsibility ‒ is to research the effects of these strategies. “This is what RSM’s role should be; to help make strategies that focus on things that really matter and have buy-in from your shareholder base,” echoing what Feike Sijbesma said earlier: DSM wants to attract ‘the right kind of shareholders’ and provide a long term investment horizon for its long term investors.
“There’s a lot of evidence out there on the relationship between sustainable strategies and sustainable outputs, and we’re only just beginning to explore them. We can do more,” he said.
Korstiaan Zandvliet: The power of the crowd
RSM alumnus Korstiaan Zandvliet founded crowdfunding platform Symbid with two fellow RSM students in 2010.
He explained how it helps ventures to create sustainable value for shareholders and stakeholders. “I used to work towards creating a profit, and didn’t believe in social ventures. I could’ve created more sustainable value earlier in my career if I’d realised sooner,” he admitted.
Keeping the world inhabitable
Zandvliet said creating meaningful connections between organisations – but most importantly people: staff, clients, vendors – needs to go beyond the quest for simple profit, if organisations want to ‘do good’.
“Time is running out in our quest to solve the world’s greatest challenges,” Zandvliet said. The situation is beyond the state of being critical, and at the point of being irreversible. “Industry leaders and entrepreneurs must take the lead, but not through subsidies or charity,” he recommended, and warned of a lack of resilience and societal agility which is making it impossible to overcome the biggest challenge of keeping the Earth inhabitable.
Crowdfunding closes the gap between rich and poor
Zandvliet argued the capitalistic system needs to be rebuilt from the ground up, and the additional costs accounted for. “I firmly believe we can collectively change the course of the planet and society through entrepreneurship. For example, anyone who wants to close the gap between rich and poor can invest through crowdfunding through Symbid.”
Zandvliet introduced two of Symbid’s latest investments that have resulted in social and environmental improvements. Veiligebuurt.nl has reduced burglaries by 30 per cent within two years in the neighbourhoods in which it operates; it connects neighbours without distributing phone numbers. And social enterprise Sea Ranger Service trains unemployed youths to become sea rangers to protect marine areas. Symbid helps them raise money and encourages new crew members to join up.
The worst mistake
Allowing Symbid to enter the US stock market was ‘the worst mistake’ the small company could make, said Zandvliet. “We had a rollercoaster ride but then it all fell through. We asked each other what happened. We realised we’d wandered away from our goals. We got carried away under shareholder pressure and internationalisation. We then decided to do things differently.”
Stick to your values
Symbid restructured itself to become a private company again, and rehired its staff. “My fancy title of CEO was gone. But what I gained was more valuable: insight into organisational dynamics and working with people I like, which was the case for staff too. Within four weeks after restructuring we made a profit ‒ for the first time in five years! Together with the crowd – all of you – we’re crawling up,” he said.
Zandvliet said he learns daily about ‘the values that we try to practise within Symbid and all our ventures’.
“You can also be a force for positive change by connecting, and being transparent with everything you do. Provide trust and remain entrepreneurial: we’ve got to be innovative if we want to face all these challenges head-on. Once employed the right way, you have the power to be that force for positive change.”