Friday, August 04, 2023

From the Business Commission to Tackle Inequality: "Tackling inequality: An Agenda for Business Action"


It is with some interest that I read through the Business Commission to Tackle Inequality (BCTI) report: Tackling Inequality: An Agenda for Business Action" (3 May 2023) (Press Release here). It is worth reading if only for its pedigree.  The  BCTI Co-Chairs included Peter Bakker (President & CEO, WBCSD); Lynn Forester de Rothschild (Founder, Council for Inclusive Capitalism); Alan Jope (CEO, Unilever); Ilham Kadri (CEO, Solvay & Executive Committee Chair, WBCSD); Sanjiv Puri (Chairman & Managing Director, ITC Limited); Jonas Prising (Chairman and CEO, ManpowerGroup); and Sunny Verghese (Co-founder & Group CEO, Olam International Ltd.). Certainly, if they put a collective mind to it, an influential group. 

This elite group has as its focus inequality--a term that has certainly undergone a substantial transformation in the last century or more. It is, however, a term that, though its inflection and object may have changed dramatically, has shown some staying power in the ideological vocabulary of groups across the political spectrum and across ideologies of power. 

These thought leaders look around at the world and they see, though the lens of inequality, the potential for the instability of the world order, and everyone's place in it.

At a time when the richest 10% of the global population earns more than half of the world’s income and holds virtually all of the world’s wealth, and when only a handful of countries have the right conditions in place for genuine upward mobility, people are losing faith that the political and economic systems business depends on will deliver for them, and their families. At the same time, we stand on the brink of the largest cost of living crisis in a generation as the Russian invasion of Ukraine gives rise to a perfect storm of food, energy and financial crises that will impact the most vulnerable in our societies the hardest. (Tackling Inequality: An Agenda for Business Action. p. 3).

Something must be done and the private sector has a role to play in efforts to return stability and prosperity on a more equitable basis. That, in a sense, drives policy towards, if not to, equality.  "Many leading companies are already embracing this role by working to level the playing field. The call to action
now is for all businesses to maximize their potential to head off the risks posed by mounting inequality and ensure that equal opportunities and better outcomes are available for all." (Ibid. emphasis added). Balancing notions of equality as grounded in opportunity (the traditional and markets affirming approach) and outcome (a more radically leveling and 'managerial' approach) becomes the central issue for converting intention to action, and action to accountability. 

To this task comes BCTI:

The BCTI is convened and powered by the World Business Council for Sustainable Development (WBCSD), and brings together more than 60 Commissioners – a group of global leaders from business, the investor community, intergovernmental organizations, civil society and academia. These Commissioners have committed to guide the development of the BCTI’s work and spearhead a global movement, leveraging their internal decision-making power and external networks and influence to drive change. (Ibid., p. 4).

The Executive Summary follows below, along with the table of contents. 

 Of greatest interest perhaps is the discussion of BCI's ten point action plan. These are grouped into six categories:

1. Respecting Human Rights. This posits one action-- implementation of the UN Guiding Principles for Business and Human Rights ("Adopting policies and practices that put respect for human dignity at the center of how business gets done").

2. Enhancing access to essential products and services. This embraces one action: making essential products more accessible and affordable. It is presented in a markets respectful way--that valuation and accessibility will in the long run produce a larger and more talented pool of labor and consumers that will enhance corporate and societal value.  The notion, here, is to rethink valuation in production and the calculus of value enhancement. The specifics will make all the difference int he world, of course. 

3. Creating jobs and economic opportunities for all. This is divided into two actions: (a) promoting a diverse, inclusive and equitable workplace and value chain; and (b) training to ensure that current employees remain useful in the future (prepare people for future work). These are all presented as a sort of business case for a broader values based production calculus. 

4. Distributing value and risk equitably. This quite ambitious category consists of three action items: (a) a sufficient amount of safe work; (b) an aspiration to an undefined living wage and income; and (c) cultivating a respect for organized collective labor rights. The idea here is as old as those expressed by Henry Ford in the Famous 1919 US case Dodge v Ford: happy, well used and paid workers make great consumers and reduce labor issues even when they can act in concert. They also contribute to social stability that ought to make political authorities happy as well.  

5. Enabling governmental action. This is divided into two action items: (a) a commitment to support effective public policy; and (b) adopt responsible tax practices.  Of course, people may differ on what these mean even as both business and public administrators battle over details. At least there is an effort to align vision around inequality and tax.

6. Accelerating climate and nature action. This revolves around one action item: a just transition to a net-zero and nature positive economy.  Of course what "just transition" means  will likely shape the space of possibly large gaps between stakeholders.So will the starting point for just transition: "Acting in line with science."  But again, everyone may now be marching in the same direction.

 


 



EXECUTIVE SUMMARY

Launched in September 2021, the Business Commission to Tackle Inequality (BCTI) represents a cross-sectoral and multi-stakeholder coalition of more than 60 organizations and their leaders – convened
by the World Business Council for Sustainable Development (WBCSD). These leaders have come together to put addressing inequality at the heart of business’ agenda for sustainable growth, recognizing that we will not have sustainable growth if we do not consider how the fruits of growth are distributed.

Through its Commissioners, the BCTI is working to mobilize the private sector to tackle inequality and generate shared prosperity for all by driving greater levels of business awareness, investment and action in
proportion to the urgency and scale of the challenge posed by mounting levels of inequality globally.

This flagship report represents a culmination of these efforts. It establishes a clear and compelling case for business action, while also addressing a key constraint on business action to date: a lack of clarity
and alignment on what it is that business can, and should, do. It provides a common agenda for private sector action, rooted in respect for human rights and a commitment to equity and social justice, that business leaders can leverage for analysis and strategy setting, confident of its legitimacy and potential to drive impact at scale.


Inequality as asystemic risk

Our world today is characterized by stark inequalities of income, wealth and wellbeing. For example, the top 10% of earners now take home 52% of total global pay, while the lowest-paid 50% receive just 8.5%. Meanwhile, the richest 10% of the world’s population owns over three-quarters of all wealth, while the poorest 50% own a mere 2%. This distribution of income and wealth is leaving hundreds of millions of people struggling to meet their basic needs.

Even more fundamentally, behind these inequalities of income, wealth and wellbeing lie inequalities of opportunity: deep structural differences in people’s prospects based on their personal characteristics and backgrounds – factors that are largely outside their control. 

Meanwhile, a number of major trends and developments are making the situation worse. Climate change, the continued effects of the COVID-19 pandemic, conflict and cost of living crises are all hitting the most vulnerable the hardest.

The high level and structural nature of inequality today make it an urgent systemic risk – one that is threatening not only individual communities or companies, but entire societies and economies. Inequality is eroding trust in our political and economic systems, unraveling the social fabric, fueling civil and political unrest, increasing the damage that crises like COVID-19 and climate change cause, constraining
economic growth and undermining our collective capacity to tackle complex global challenges. It also represents a significant and mounting business risk.

Fortunately, inequality is not a fact of nature but a product of our systems, which we can change. Reducing inequality will require concerted action across all sectors of society – and business has an essential role to play.

A clear and compelling case for business action

The business case for tackling inequality is a fundamental one. It is about mitigating both systemic and business risk and building a world of opportunity in which business can thrive in the long term.

At the same time, a shift is underway in the way business performance is perceived and measured by consumers, employees and governments. This shift is unlocking a variety of company-level benefits associated with efforts to tackle inequality. These include securing license to operate, attracting and retaining leading talent, winning consumers, staying ahead of policy and regulatory change, and even protecting and enhancing access to capital. 

Of course, measures to tackle inequality will come with costs as well as benefits. The cost-benefit calculus is complex, and there will be trade-offs as well as win-wins, especially in the short term. However, the cost of action must be balanced against the cost of inaction – which can be expected to increase sharply as the consequences of inequality continue to emerge. Tackling inequality is a critical part of fiduciary duty and an investment in long-term business success. 

The role of business

The inequality we see today is a systemic issue and therefore requires a systemic, multi-stakeholder response. Governments will have a central role to play in driving this agenda but other stakeholder groups
including businesses, investors, and civil society more broadly will also have vital contributions to make.

For its part, business provides the lion’s share of the products, services and jobs people need to sustain themselves and their families around the world. In partnership with government, the private sector has fueled innovation, wealth creation and rising living standards over the course of centuries, while market
economies have delivered – and continue to deliver – enormous benefits to huge swaths of the global population. However, in recent decades, the benefits and risks of business activity have become increasingly uneven, and certain business models and practices have contributed to widening social and economic gaps.

We must now harness the power of market economies to address these gaps and improve outcomes.
Business has at its disposal powerful tools that can be deployed to create and distribute value more equitably, bringing down structural and behavioral barriers and expanding opportunity for those who
need it most. Many leading companies are already leveraging these tools to level the playing field. The call to action now is for all businesses to use these tools to their fullest potential to head off the risks posed
by mounting inequality and ensure that equal opportunities and better outcomes are available for all.

At a high level, this agenda incorporates six broad categories of intervention by business. At its core is a commitment to respect human rights in accordance with the UN Guiding Principles on Business and Human Rights. The agenda also encompasses endeavors to ensure that the underserved in our communities have better access to essential products and services; to create and sustain jobs and
economic opportunities for all; to distribute value and risk equitably; and to support and encourage governments in playing their role effectively. Finally, the agenda for business action to tackle inequality
must also include efforts to arrest climate change and nature loss, and mitigate their impacts on the most vulnerable.

Catalytic actions that business can take

Under these six overarching categories, the BCTI has identified 10 catalytic actions that individual companies can take, and that stakeholders increasingly expect them to take, to start to tackle inequality. Each one is an avenue through which business exerts significant influence over the opportunities people have and the outcomes they experience.

The potential for any given action to deliver change will differ from region to region and company to company, and it will be up to individual organizations to prioritize the actions with the greatest potential for impact given their existing capabilities, and geographic, political and cultural contexts. Most companies will find that they have already made strides in some of these areas, as many of them are long-standing sustainable business topics.

Other areas may represent relatively new and untapped opportunities. The lens of tackling inequality provides us with the opportunity to explore these action areas as part of a holistic and interconnected agenda.




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