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Good afternoon, ladies and gentlemen, welcome to the panel entitled Sustainability
and Corporate Competitiveness.
My name is Yoko Ishikura, I'm a professor at the Graduate Business
School ICS of Hitotsubashi University in Tokyo.
I would really like to extend my special welcome to you
because this is one of the last panels for the second day.
All you have is… and it’s always very difficult
after the very intensive session for two days.
But we work and you might have heard about sustainability
and competitiveness so many times over the past two days which feels like
two weeks but we want to make you, the panel, much more interesting
and exciting and provocative.
So with me today is a distinguished group of panelists.
Right next to me is Dov Seidman, who is the Founder
and Chairman and CEO of LRN.
Right next to Dov is Mark Foster, Group Chief Executive,
Global Markets and Management Consulting, Accenture.
And right next to Mark is Klaus Kleinfeld,
who just came off from the other meeting so that he could make it here.
And he is the Chairman and CEO of Alcoa.
And last but not least is Eckhard Cordes, Chairman and CEO of METRO GROUP,
who is one of the mentors of the Annual Meeting of the New Champions 2010.
So the sustainability and corporate competitiveness,
what do we mean by sustainability?
We have heard so much about sustainability
and we have heard so much about the competitiveness over the past two days.
You may have zillions of different definitions of sustainability
and competitiveness but what we want to do is to take a little bit different
perspective on the term and the definition of sustainability
and we want to step back a little bit and I really would like to start off
with Dov Seidman who would give us a new framework
of thinking about sustainability.
So Dov, take it away. -Thank you, Yoko.
I’d like to thank the panel and each and every one of you gentlemen.
Speaking of sustainability, I actually counted,
there are at least 10 sessions at the World Economic Forum
with sustainability in the title, so it’s up to us to figure out
the relationship between sustainability and economic growth, prosperity
and therefore even progress and we need to align our thinking
about what that looks like and aligning our thinking starts
by stepping back and deepening our thinking
and trying to get to the essence of what sustainability is all about.
Raise your hand if you’ve been following by any chance the story going on
at Hewlett-Packard in California.
Hewlett-Packard, HP. You know, the HP way?
You're probably thinking of August, right?
The CEO moving on.
I think the real story is not August, it’s April.
In April, Hewlett-Packard was selected as number one amongst 200 companies
for their environmental sustainability program and they got a distinguished award.
In that same month, they did an internal employee survey
and two-thirds of HP employees declared that they would gladly leave the company
and quit that day if they could find an equivalent job.
What is the relationship between the sustainability of the enterprise,
the HP way, a company with a legendary iconic journey
and tradition that is now threatened not because of what happened
in August but because of something that happened in April
at the same month that they won an award.
So I think, in the spirit of Davos, that we reframe and we rethink
and we change the title of this session not from Sustainability
and Competitive Advantage but Competitive Advantage through Sustainability.
In other words, Sustainable Competitive Advantage.
A hint in terms of where I'm going,
I think the word sustainability is a long word,
it should always modify something: sustainable behavior,
sustainable consumption, sustainable employee engagement.
And if we think of it that way, we will, I think,
start to get in touch with what it’s about.
But in order to think of it that way, we need to step back
and think about the nature of competitive advantage itself
because we know we’re living in a new world where crisis not only happens,
it happens more often than ever.
What has been the nature of competitive advantage?
Heretofore it’s been called too big to fail.
The strategy which we start with young entrepreneurs,
indeed new champions as we tell them “How are you going to scale up your business?”
AIG’s motto, AIG to a lot of business in this part of the world,
AIG’s motto was “The strength to be here,” and they needed a bailout.
Merrill Lynch’s motto was “A tradition of trust”
and they needed a bailout.
Historically, we’ve associated sustainability, power,
the ability to be here forever with size and we asked a “how much” question.
How many customers? How much money on the balance sheet?
How much? How much? How much?
Sustainability is not about how much, it’s about how.
How we relate to society, how we relate to our people,
and how we inspire the best in them and in our customer.
What is the opposite of too big to fail? What about becoming too sustainable to fail?
Too significant to fail? Too valuable to society to fail?
Relationships that are so deep because they're so sustainable
that we’re going to be in this wherever we’re going, forever and together.
And if we start to ask a different question,
if a leader would ask the simple question
“What makes my relationship with my colleagues sustainable?”
How I treat them.
What makes the relationship between a company
and its customers sustainable?
It can't be price, that’s a commodity,
it has to be something that transcends price;
maybe the rich experience that is at the foundation of loyalty.
And if we start to ask those questions, we will start to understand
that the new realities that we are heading into have shifted competitive
advantage from too big to fail to too sustainable to fail.
What has been at the root of this?
I see Tom Friedman in the back so in a world I’ll say “The world is flat.”
In other words it’s connected, it’s hyper connected.
In addition to being connected and you so eloquently described that,
connected means interconnected.
There are four consequences of interconnection.
The first is commoditization.
We are not winning on product and service anymore.
We can get advantages.
It’s important to celebrate brilliant and remarkable technological
and product innovations but whatever advantage they give us
has not been sustainable and we’ve lived through that.
Transparency is another result of interconnectivity.
In a world in which nothing stays hidden,
we’ve got to act as though we have nothing to hide.
In order to act as though we have nothing to hide
in a world in which nothing stays hidden, in fact, we better have nothing to hide.
And we can spend a lot of time being sure that in a transparent world,
we get our behaviors right.
But I think the greatest single consequence of interconnectivity
is that the nature of our connections is exposed.
If the only reason someone works at one of your companies
is what you pay them, they should leave if someone pays them more, right?
If the only reason someone buys from you is price,
they should switch loyalty if someone undercuts you.
In a connected world,
we’re seeing the nature of the connections for what they are.
Are we connected situationally? Are we connected sustainably?
Are we doing business transactionally? Are we doing business deeply?
Is this experience meaningfully rich or superficial and shallow?
Everybody is in search of new glue, a new source, a deep,
sustainable connection in a world that has no more friction
and less artificiality with the nature of the connections is exposed.
And I think the next and greatest consequence
of interconnectivity which is an amoral statement is that some amount
of interconnectivity has finally led, and I say this deliberately,
to moral and ethical interdependence.
My problem is your problem and your problem is my problem.
Your water is a water that I will be drinking one day.
David Hume, the philosopher, Said
“The moral imagination diminishes with distance.”
In an interconnected world, there is no more distance.
Business can no longer extract itself from society
and say “In the name of business we have license to operate differently,
we are part of society, interconnected and therefore interdependent
with other human beings.
So I believe that the nature of competitive advantage
has shifted from “too big to fail” to ideas, to imagination,
to relationships, to connections, and to behavior.
Indeed I believe we’ve entered the era of behavior.
Now behaviors always mattered but it matters now more than ever
and perhaps in ways it never has.
Facebook is another country with 500 million citizens
and people are behaving on Facebook in ways they never have.
And all behavior has to come from some place, right?
All behavior has a root.
And behavior comes from one of two places:
sustainable values or situational values.
I can either behave in any way the situation allows, what I can and can't do
based on following some rules or I might be propelled by sustainable values.
Situational thinking is here and now, short term,
I might not see you again, I’d get as much advantage as I can.
Sustainable values make me think forever and make me think about you,
they literally sustain my relationship with you, with my customer,
with society, with the environment,
future generations, and my grandchildren.
Sustainable values are also human values, like transparency, truth, honesty, fairness.
They're the values that literally allow for deep sustainable relationships amongst
human beings in a world in which humanity is now at the center of business.
and sustainable values are the only values that do double duty.
They simultaneously control and supply a bulwark against crises
and bad things happening and simultaneously propel
and inspire and guide us for the long term.
And business has come to understand this. Chevron is now the human energy company.
Cisco is the human network. Dow is the human element.
Deer is human flourishing. Allied Bank is we speak human.
One company after another is holding itself out to society
and saying “The reason we want you to have a relationship with us
is deep down we stand for something and we stand for something
that transcends how we make money, our product, and our service.
And we want to take these values that we’ve just proclaimed to
and live them in a way that will form the basis of a relationship.”
Now the key lesson here, and we’ve seen this with BP because
BP ironically was one of the first companies to declare itself as beyond.
It too said that we are beyond petroleum.
So what we’re learning is that in this interconnected world,
we cannot accomplish sustainability defined this way for a marketing department.
The only way we can accomplish this is with CEOs who,
as part of the culture, leave sustainable values into the DNA
and fabric of the company and translate these commitments
and values into corporate practices,
leadership and individual behaviors that the world can see in others in any way.
In this way, sustainability is an ethic of human behavior,
it’s a platform for human innovation, it’s a relationship, and it’s a strategy,
it’s a strategy for growth and sustainability.
And when you call something a strategy,
you have to have the commitment to stick with it for five,
ten years and beyond and go on a journey.
Now we’re going to have a lot of discussion about the implications
of sustainability redefined as sustainable something,
sustainable culture, but let me just say one thing,
I think the greatest single implication since sustainable values
is that we are shifting from governing our countries,
governing our societies, governing our companies,
i.e. using carrots and sticks against rules, regulations, internal policies,
and published quarterly results and annual goals to fostering culture.
We should have learned this lesson in 1986 when the Challenger
blew out of the sky tragically.
We went into NASA through the lens of governance and we said
“They lacked internal controls.”
A 500-page report said they lacked internal controls
and then we put them in place.
2003 we had another great tragedy, the Columbia, and we went into NASA
and we said “They had all the controls but their culture suppressed them.”
The idea here is to create the new windows,
the human operating system to see that behavior
and relationships is the new stellar application of the 21st century
and to create a human culture that leaves this behavior in every decision
and every interaction.
And the greatest single implication of that is that managers can do
governance but leaders need to go on a transformative journey to foster
the types of cultures that are rooted in sustainable values.
So I think that this conversation could potentially be enriched
if we were to agree to not use the word sustainability
and embrace the word sustainable and attach it to everything
that we’re doing as leaders to create a new source of propellant energy,
the greatest human energy of all: human ideas, human inspiration.
Thank you. -Thank you.
So this is a little bit of a different way of looking at sustainability
even though the sustainability has been used extensively
over the past two days and so forth.
And as you can see, the general theme of this –
sub-theme of this session is called “Going Beyond Green Goals.”
So we’re not just talking about green,
as I’ve said we’re talking much more about ethical
and philosophical dimensions of being sustainable.
So I would really like to turn to Klaus
to talk a little bit about your experience of whether –
and try to build on what Dov said in terms of CEO, leaders practicing it.
Sure, I’d be happy to.
Let me make it very simple and just refer to what means to Alcoa
because I think the word sustainability is a pretty new word
and therefore it means a lot of different things to different people.
Let me start and it is my defense of it also inside of Alcoa,
let me start with the product first.
We are lucky to have what we call the miracle metal,
it has a lot of components, three important ones in this regard is,
it’s lightweight, it is very strong, and it’s fully recyclable,
75% of all aluminum ever produced on this planet is still in use today.
If you recycle aluminum you save 95% of energy.
So that alone is great.
What we give to our customers is lightweight and strong.
If you think just of the automotive industry,
a recent example here in China, we helped the company…,
very strong here in the building of buses and trucks,
to build a lightweight aluminum intense bus and guess what?
This vehicle is actually saving more than 12% of weight
which equals 7% of greenhouse gas emissions so virtually gasoline consumption.
Same thing holds true whenever you apply aluminum in automobiles.
You can save about 10% weight, that’s one facet.
Let me go to another facet, Alcoa’s processes,
Alcoa’s own way how to use energy.
Aluminum production is a very energy intense industry.
We have, since 1990 basically until last year,
reduced our greenhouse gas footprint by 30% on absolute basis,
30% at the same time, we have doubled the production
so 30% on absolute while doubling the production.
We have set a new goal for us that in the next 10 years
we are going to further bring down our greenhouse gas footprint by 43%.
And when we discussed that internally, we said that we want to anchor it
and show also to ourselves and actually to, as in the previous argument,
to our own people because it’s an element of pride.
We actually want to anchor these in our incentive system.
and we start with it this year, 5% of our financial incentives this year
is tied to our reduction of the greenhouse gas footprint, that’s the second facet.
The third facet is safety.
We’ve said we don’t want to hurt anybody who works for us.
It’s actually a management mistake if anybody gets hurt inside of the company.
And actually before the word sustainability was invented,
the Alcoans around the world would have prided themselves
that we are leaders inside as well as outside our industry
in what we call environment health and safety,
that’s what we use as a word for sustainability.
And again, just to give you one example that shows that,
if you work in our core facility, and obviously we have many facilities
that are in pretty unruly places, you are four times safer than
if you were to work in an average US industrial environment,
four times safer, obviously a huge issue of pride for us.
Then let’s go to communities.
On the community side we just recently opened a new mine
in the middle of the Amazon, a new offsite mine.
We would have never gotten the license from the Brazilian government
is we had not had and earned the reputation that when
we do something like that, we do it in a sustainable way.
So we came and said we are not going to do this in a compound fashion,
build a compound and this is good for the expats that work there
and around that where pretty much nothing happens.
We said we will do that together with the communities.
Now I'm not saying that this was an easy task, frankly,
it was a very complicated task because the most complicated thing here
was to enable the communities to be basically taking care,
expressing their own desires and putting it into programmatic format.
Out of this came, in this place called… this thing that they call “Agenda Positiva.”
Agenda Positiva is a whole development program for society for a number
of communities that has things in there like building out the educational system.
We helped build two schools and we helped build two vocational education centers.
Two new hospitals were built, actually one is a brand new one
and another one is an extension not for the people that we send there
but for the communities which was a very, very new concept and frankly,
with that came one of the first computer tomography scanners
into the Amazon connected with a normal – basically
a high speed data link via satellite so you can actually perform eHealth there
and if you have somebody being hurt there,
some real professional outside of… can do the diagnosis and help in the treatment.
So all of that happened that included things like better fish farming
and included things like chicken farming as well as chicken slaughter houses
which doesn’t sound like a big deal but I tell you it was a new experience
for me as a CEO whenever I went in there to be accused that the chicken
slaughter house was not on time – built on time –
and it actually shows the enormous breadth and also the fun I think that comes
along with that when you then see those communities grow.
And last but not least, I would say another facet on the policy front,
obviously this is a complicated issue, we pride ourselves that at a time
when the word “climate change” was not only not popular
but actually a no-word in the US, we became a founding member of the…
and since then have been very strongly fighting for a carbon regulation in the US?
Why are we doing that? Why are we doing that?
Because it is directly linked to competitiveness,
directly linked to competitiveness; competitiveness to our customers,
to lightweight strong recyclability; directly linked to getting better talent.
If you ask today people that Alcoa interviews, why young people,
why they actually want to join Alcoa, there is almost no one who doesn’t say
“I scanned the internet, I saw what you are doing, and this is a company
“that I feel is doing the right thing, stands for the right values,
“I can imagine that this is the right place for me.”
And then also for the sustainability part for the pride on your own employees,
that’s another factor. And another factor is winning projects.
What I mentioned winning licenses to operate, what I mentioned in the Amazon,
same thing holds true in Iceland, we just opened a… a year ago in Iceland.
Guess what? Why were we selected by the Iceland government?
Because the Iceland made a shootout and basically was looking at a company
that they felt was portraying the right values.
Same thing happened to us just recently about a year ago when we announced
that we are now building one of the largest aluminum systems in Saudi Arabia.
They also want to go for very sustainable development.
So in a way, I think I couldn’t make a better case,
Sustainability and competitiveness, as we want.
Thank you very much with how you're practicing with Davos talking about
in terms of the product and the things like that.
I may come back to you and ask you how the behaviors of the workers
or the people who work sort of change and how you let them to –
we sort of understand what kind of things you have been doing and so forth.
But let’s go into Eckhard and if you could share with us
your experience of the METRO GROUP particularly under the framework
of what Dov was talking about, values and behaviors and things like that.
Thank you. I'm the CEO of a retainer company so we own manufacturing processes.
Nevertheless, and that’s about how the whole thing started.
We embarked on greenhouse reduction efforts, that was a starting point, many years ago.
We have already established clear targets to what extent…
And then subsequently we have evolved in understanding,
I think it’s getting close to what you said,
we have developed an understanding that sustainability goes far
beyond greenhouse emission targets or something
and I’ll start with an example now, established sustainable relationships.
What we do is, and again, it’s just an example to start with,
we establish sustainable relationships with our suppliers especially
in the emerging countries.
So when it comes to food and vegetable product offering,
for instance here in this country or in India or in Pakistan or in Vietnam,
we select our suppliers, the farmers, and we train them, we educate them.
In India, for instance, 40% of fish, for instance, which we –
or fresh products I’d rather say, fresh products which we sold weren’t
good anymore once I they were in the shop so we established cooling chains.
We trained people in hygiene standards for their sheep, stuff like that.
So yes, we do it in our own interest because we raise the quality standards
of our product which we sell but at the same time, we train them,
we make them better suppliers and what comes with it is obviously
a long term sustainable relationship. The same holds true for our HR policy.
Especially in Eastern European countries like Russia or countries that do not
provide vocational training as we have it, for instance, in Germany,
we establish trainings for our employees in that regard that sort of mirror image
the German system in… training.
Again, this is – it helps us because we create more qualified –
higher qualified employees but obviously it helps our employees.
They will become higher skilled or develop higher skills.
And again it establishes a sustainable relationship with our employees
because who we train and now has sort of a tendency to stay with us.
Then the important point I want to make is that all these –
to develop a sustainable approach to doing business requires that everybody
in the company knows that the boss is behind it so that’s why we established
last year a sustainability board at METRO GROUP
and this sustainability board is chaired by myself
and all relevant functions are involved.
There’s talk about supplies, we talked about HR policy,
we talked about greenhouse emission reduction goals,
so it’s a very comprehensive approach if you look at it and what we say
internally is don’t mix sustainability up with good corporate citizenship,
that’s different.
Corporate citizenship is sort of a one time effort;
I make a donation for whatever, a school or something,
it’s sort of a one time thing or it’s pursuing sustainability target
or establishing such policies and behaviors is a long term thing
or in other words it must become – and in our case that is so –
it has become an integral part of how we do business.
I could go on with examples but I don’t want to bore you.
We were very proud when we were picked by, or selected by UNIDO,
this is the United Nations Development Organization, actually last year,
they teamed up with us in order to carry out training programs for suppliers,
for farmers in developing countries.
We started the first program with them with UNIDO in Egypt
and we are currently in advanced talks again together
with UNIDO to do the same in India.
So to cut a long story short, the most important thing is or the two
most important things are it must become part of your business,
not just an add-on, and it must be fully and completely
and visibly supported by the CEO.
Okay, great, thank you very much.
I think your case sort of reflects the movement beyond starting
with the greenhouse and then going on to sustainable relationship
with customers as well as with the employees.
And I think, as you mentioned, it’s got to be the integral part
of the business rather than the separate part and the boss is behind it.
That’s what I was talking about, the leaders are the ones.
Let me turn to Mark Foster and because you have done –
your company has done research survey at the global CEOs related to this issue
and if you can share with us whether you see the result sort of reflecting what Dov
and others were talking about in terms much more expanded
or broader view of sustainability or it still stays with green goals or other things.
Thank you, Yoko.
And in the good news about the survey which we conducted
which was a survey conducted for the 10th anniversary
of the UN Global Compact and it was a survey
that was of some 1000 business leaders, CEOs, academics,
etc. including some 750 CEOs of whom 50 were interviewed
individually including Klaus.
And I was delighted when I read the interview notes,
he remains entirely consistent with the interview which is outstanding.
The key takeaway from that discussion was absolutely that this extended definition
of sustainability, we may be stuck with the word for a while,
but certainly the extended definition is absolutely at the heart
of what came out from the study.
And the study took place at a pretty interesting time
and part of the context of the study was sustainability,
where has the theme of sustainability gone in a kind of post-down term,
largely actually around post-Copenhagen world,
where were business leaders in terms of their focus on this issue,
was it dropped off the agenda, dropped down the agenda, where was it.
And I think that the really positive news that came out from that discussion
was that there was some 80% of the CEOs actually said
that in a way the downturn, the outcomes of the downturn made
the whole topic more important to their business.
93% of them actually said that it was fundamental to their future business success
and that the key thing now was how they embedded
it deeply in their organizations.
They did very much validate the conversations down this panel
with regard to the expansion of the definition,
very much including areas such as labor rights, education,
license to operate, etc. in those themes.
And in fact it was interesting, 72% of them in fact had education
as their top expansive definition of how they felt they should be playing
a part in why the society, 66% chose climate change and then on
into other topics such as the use of your global resources commodities, etc.
And I think, to pick up specifically on Dov’s definition,
the idea of trust as an underpinning concept and really at the heart
of development of grants, of the contract with employees,
the relationship with customers, and the broader connection
to the investor community was something that was coming through more strongly
than ever and I think that’s a straight validation
of the picture that came through here.
I think particularly we’ve all seen in a number of examples you gave,
talked to how the trust issue and the brand issue have become
really intertwined with this whole area.
Some of the other stuff that came out from that discussion was also
a real sense of some of the challenges so I think that the underlying theme
was we’ve been talking about this for a long time,
now we’re in the era of execution and action, which is good,
but it was also a case of saying that it’s a world of huge complexity.
I think most of the CEOs reflected that in fact they're so interdependent,
inter-organization inside and intra-organization that those issues
of how you get the end-to-end processes lined up across functional connections,
the ecosystem aligned around this was really one of the critical challenges
that were there, then it came down to the strategic priorities,
where do I put my energy and effort, particularly the balance between short
and long term which all of us grapple with every day,
and even now I think particularly as we live in this sort of low growth
multi-speed world, the issue about where you place long term bets versus
responding to an immediate pressure is something that people are grappling with.
And then fundamentally they said it was about behavior,
so the behavior word exactly to Dov’s term, it was down in
“How do I change the behaviors in my organization,
“the mindsets, the culture, fundamentally?”
That’s a long term journey and it underpins this entire area.
And then outside pressures they were struggling with were fundamentally
“What do my customers think about this?”
And the customers, yes at one level, are sending mixed signals.
Some of them were saying “We really, really want you.
We’re driving you on this journey towards being sustainable
and that is one of the pressures that underpins many of our organization’s
activities at the same time the signals about how much customers
are prepared to pay for that are ambiguous and the investor community came out
frankly as one of the biggest challenges because there was a strong sense
from the group that in fact the investor community was not in fact recognizing
or valuing sufficiently sustainability as a driver and so many organizations
and CEOs and boards live in that world of a shareholder the term
and that was a real challenge.
So maybe I’ll come on to taking about some of the solutions that came out
from that but that’s a sense of the mood of the survey.
Great. Thank you very much, speakers.
I think Mark’s result of the explanation of the survey sort of raises
a lot of issues in the sense that, yes the corporations agree on the
broadened definition of sustainability and yet when it comes to the execution,
how do we do it and how do the customers react
and when we have zillions of things we do very quickly
and in particular how do the investors react to it.
Dov, let me turn to you and sort of listening to the other two CEOs
and the result of the survey, do you think we’re going
to the sort of right direction or are we off or if so, what do we do with it?
Well it’s clear we’re on a journey and like life, journey’s are curvilinear.
They're up and down and there's a lot to figure out.
Maybe I can pull this together by your point, Mark,
about trust being foundational, I think trust is a sustainable value.
But to illustrate the distinction between governance and culture,
let me ask the audience a question. We’ve just met right now.
Please your hand if you think the virtue of trust lies
in you for being trustworthy or in me for trusting you.
Raise your hand if it’s you for being trustworthy.
How about me for trusting you?
So here is the sustainable value and we’re 50-50.
According to Aristotle, it’s actually me for trusting you.
You see, you're just sitting there, I'm the one taking the risk,
I'm giving you the power to do right by me or to let me down.
And we’ve equated through governance trust with who’s trustworthy
so we set up all these checks and balances, we go looking for trust,
and we trust our people, we trust our suppliers, etc.
Now raise your hand if you want progress.
Keep your hand up if you believe you need to innovate to have progress.
Keep your had up if someone needs to take a risk in order to innovate to have progress.
But how are we going to have trust if you say “I trust you to innovate
but I need to go get two signatures to get $10 in order to spend to innovate?”
So what's happening is here we are, we took a sustainable value
and a 30,000 feed, we all say “I'm all for trust”
but we don’t know how to start to give it away in our relationships
in a meaningful way to get the risk and innovation and progress that we want.
And why is this so difficult to think of the big S?
We are no longer asking employees for continuous improvement, an inch at a time.
We’re asking for creative disruption, disruptive innovation, imagination,
ideas, relationships, we are asking for the heightened human experience
and the only way to get that is to create cultures that are so full of trust
and so replete with rules that sit on top of people.
I’ll give you the best example of this, the other day I landed in Las Vegas
on a Southwest Airlines flight and the flight attendant got on the loudspeaker,
leaving the company values, and she said “Listen,
we’ve done some research just like you’ve done in Southwest Airlines
and it turns out that before you get off the plane,
if you cross your seatbelts one over the other,
you're going to have luck at the tables when you're gambling.”
And we looked at each other and we said “We’ll do it” and we did it.
It turns out there's a federal regulation that says that seatbelts
need to be crossed before the next plane can take off.
She got us to help her do her job that would have taken her six minutes to do it.
It turns out they have a six-minute operational advantage.
They turn their planes around,
Southwest Airlines’ six minutes faster than their nearest rival.
It would have taken her six minutes to cross the seatbelts.
They also have a brand proposition. Home on time, fun, no frills and safe.
She lived that.
And there’s no rule in the company that says when you land in Las Vegas, tell that joke.
And when she goes to Phoenix she’s going to innovate and tell a new joke.
And I think the secret here is to understand that trust is something you give away
and if we create an environment so full of trust,
our employees will not only stay connected, they're going to go on a journey
of innovation that we’re trying to inspire them on.
Okay, thank you very much.
Let me turn the topic around a little bit and say while we have a lot of new champions
and global growth companies and to the companies who are now becoming global,
particularly from the emerging economies, what kind of advises would you give,
I am talking to two CEOs, to make sure that they're sustainable
advantage is through these sort of broadened concept rather
than just a green goals of carbon footprint?
The kind of advise, I think we’re going to have –
and I don’t want to be rude here but what you have to do, in my view,
is to come up with the right measures.
I mean there are ethical standards and all that, yes,
but in addition to that you have to understand your customer’s behavior
and your customer’s preferences.
Unless you do it, in my view, you will not find the right measures.
There is a study that has been conducted by McKinsey for the retaining industry,
I admit that, I think it’s two or three years ago,
and the outcome is that the – especially customers
of higher education would refrain from buying at a retailer that it seen
as not in that case environmentally conscious or not pursuing sustainable policy.
That is so, so my message is to some extent,
don’t get me wrong, you are forced to do something,
but that if obviously not enough so you must touch the point
and you must build it into the organization.
And that would be my advise, it’s too forward,
but understand what you need to do in order to be competitive,
that’s one thing, and then act to it and them implement it,
try to get it into the DNA of your team, of your employees and then invest,
I don’t want to talk too much about METRO
but I think it was yesterday or the day before yesterday,
we were informed by Dow Jones that we moved up in the Dow Jones sustainability
and everybody in the company’s happy.
They can't say “I don’t care,”
so there is something that is positively seen in the company.
And once you have reached that status you create lots of win-wins.
The company is making progress so again, to sum it up,
two messages: understand market requirements,
customer’s preferences, customer’s needs,
and then do more than just that,
and sort of waterfall the message down in the company.
Thank you very much.
Or if the question is what would I recommend to somebody
who has a start up firm in a developing country.
I think that, number one, you're blessed because you have
a lot of role models that you can learn from and you should not give it up.
You should look around in your industry or outside of the industry to boast actually
and learn from the good things as well as from the mistakes in general.
Secondly, I think it has been – whatever you choose has to be
genuine to your business and genuine to your corporate persona
and the corporate persona very often starts with the founder.
If it’s just a PR cap, looks good, “Hey, why don’t we spin this?”
People are too smart, customers are too smart,
they look through this, it might work well for a month
or whatever but won't work if you build something for the long term.
If you are in it for the long term,
I think it really has to be genuine because otherwise,
you will not be credible and people will look through it
and there are gazillions of things really depending on which business you're in,
which industry you're in and I could come up with thousands of things.
I just saw… I saw on Sunday in New York the folks from…
and I still remember their engagement with UNOS on the micro-loan/micro-credit
thing which I thought was outstanding and to use that to build a milk industry
in places that never really had that, those are great things
and there are thousands of those examples around most of the small companies.
I think one of the good things about the new champions
and looking at the days that they come out from the survey was that in fact even more,
by 98% of organizations in this region, for example,
felt that sustainability was core to their business success
or even more if you like than the general population of companies out there.
So the starting point in terms of awareness, therefore,
from the new leaders of this part of the world is not high
and this in some cases be ahead.
I think also it’s clear that they're going to be defining,
the point about authenticity, they're going to be defining
what this is for them in their own terms, in their own rights which is
I think frankly also going to be incredibly creative
and valuable for the whole world to understand that.
I think in the end of the day the kind of things that came out from the report
again in terms of what people should do to move on down the journey
I think it probably do still applies and that’s probably been touched on already,
the point about how do you make sure you're continuing to shape
and understand the consumer behaviors in the market they operate
and that is a very fundamental piece.
The second piece is to work on the skills,
the mindsets, the culture of the organization.
A lot of that comes down to leadership behaviors, the kind of awards you give
and there are some things you can put in place
and begin to think about in terms of how, as a new company,
you set the tone around your operating model and your performance management
approaches that are underpinning this thinking and I think again
back to the comments made by Dov, it’s very much not about rules,
it’s very much about principles.
It’s the principles you set in your organization
and the fact that they see you living those principles I think is so key.
Okay, thank you very much.
I would like to – since we have about 10 minutes or so,
I would like to open it up to the floor. Gentleman over here.
If you could mention your name and address to whoever
you're addressing the question to and just limit it to one question please.
Thank you. -…from Zimbabwe.
I think the message is very clear, that sustainability should be
part of the strategy so that this sustainability be embedded in strategy
which brings us issues of how are we crafting strategy as a company, as a nation.
Are we involving the customers? Are we involving the government?
Are we involving the community in the developmental strategy?
And then on leadership, leadership is about making others leaders.
In other words, the outward measure of leadership is making yourself
irrelevant in the organization,
how are we ensuring that we are making ourselves irrelevant as CEOs.
Lastly, innovation won't happen without failure.
How are we building in tolerance for failure so we can motivate
and encourage innovation?
It sounds like three questions but I’d love to hear form anybody.
I think I can make it one answer: Yes, yes, and yes again.
Which I think for the first question of who do you involve? Customers?
Yeah, I think the more you involve the better you're off.
It doesn’t hurt to get smarter and to understand that there will be
conflicts in there and the world is a complex world
but it’s actually better to handle complexity instead of closing your eyes
and very often the good news is you find some solutions to balance it off
and China is a beautiful example of having found some solutions at one point,
not for all of them but for a lot of them and having achieved these goals
of the last 20/30 years that we are all enjoying here
so I would definitely involve them all.
And in regards to making yourself irrelevant as a leader,
a very ambitious goal, a very ambitious goal I tell you.
And I would also agree that not many are half that.
I think the biggest aspect was coming from a lot of folks here,
I think if you have an inspiring theme, the theme by itself creates
so much meaning for the employees that it gives them inspiration
because there are days when you're going to be frustrated
and I’ll tell you when I joined Alcoa and people asked me
“How can you make something relevant than just a shiny metal?”
I told the story of my father who has originally an engineer
and then became and aerospace engineer
and when I was probably nine years old,
he came home with a little piece of something
and he said “Look at that, this is a metal,” and he made me guess how heavy this is.
And it looked heavy, I have touched metal before,
then he dropped it to my hand
and I was big time surprised how light it was.
And then he was telling me about the strength of this metal.
For him this meant the biggest inspiration that he had in his life to make people fly,
that’s what it meant to him.
And when you have that inspiration, it goes a long way. -Thank you. Dov?
You said yes, yes, yes, I can also give you a one word answer
to the questions so collaboration is a behavior;
if you create a relationship rooted in sustainable values you can collaborate,
of course collaborate with strategy.
The way to make one leader irrelevant and not needing a hero is to foster
a culture that is producing one leader after another.
See my family can't copy your family, yours can't copy mine.
we always learned in business that the source of our greatest advantage
is to create something that can't be copied.
Culture is the only thing that competition can't copy, we just let it happen,
we don’t get intentional and deliberate our culture
and figure out what are all the levels that allow us to strengthen our culture.
And finally, if there's a lot of trust in the culture,
people might take risks and they're going to trust that their boss
is not going to think they're stupid or that if they spend $10,
they're not going to get fired for that and high trust people take the risk
because they trust that something bad’s not going to happen to them or failure,
all of this has to be rooted in sustainable values.
And let me just add one thing, I think, Klaus,
the world inspiration is the most important word in this conversation.
As leaders we have three choices: we can coerce people,
my way or the highway, get me the report by 5 o’clock;
we can motivate them but carrots and sticks are commodities,
your competitors have carrots and sticks; or we can inspire them,
and to inspire someone is to go in, inspire,
to speak about beliefs that they share with you,
to enlist them in a vision that they think is worthy of who they are
and their hard work and to do something significant not just successful.
And I think that the most free and cheap and renewable energy is inspiration,
carrots and sticks cost you something and inspiration is cheap, affordable,
and clean, and renewable and I think that inspirational leaders can create
these cultures to create human energy so I think it’s the most important word.
Let me take some other questions.
My question is every can say they are doing sustainable things
but some countries are saying one thing and doing another so how we control
when they face the benefits near us through sustainable things/items?
I think clearly and in the day the one word we’ve instantly
not used very much in this conversation so far is regulation
which I think is part of quite a healthy thing because many people
would have sized it off by thinking sustainability was about how you respond
to regulatory environments and I think clearly there is a lot of discussion
around some aspects of this storyline that do you see in the world the policy
and regulation and the broader picture and you can see parts of the world
living with varying degrees of haste and urgency and the commitment around that.
I think it comes back to the –
to me it comes back to the theme of the whole topic here.
In a way, my view, our view would be that the organizations
and the countries that get this are the ones that are going to thrive in the long term;
that actually if you are getting it in terms of your broader view
about how you create enterprises in your own country
and how they connect with the rest of the world and again it’s individual enterprise,
and I think at the end of the day, the things that have been all learned
around this whole topic over the past decade is its businesses that actually
set the agenda around this governments and at the end of the day
I think the business will pick up this form.
Those that do will have competitive advantage or perhaps maybe to dig into the point
that Dov made again earlier, we would call it competitive essence.
It’s actually what's inside the organization that at the end I think will get
a different shade and I think those organizations and countries
that maybe don’t quite get it will be able to slow the party
and it’s a competitive world out there. -Thank you very much.
I'm Christopher Moon, I represent Global Trade Union.
The word competitiveness is dirty
And threatening words for workers and for trade unions.
This is because we don’t accept in every company, in every country unions
and workers are constantly reminded that we are an increasingly interdependent
globalized economy and therefore we have to be competitive.
I want to emphasize that workers in trade union are not understood
that it is necessary for them to be competitive.
But it cannot be done in the simplified form as it has been going on and still continuing.
What I'm referring to is the fact that employers are resorting to cost cutting:
reducing wages, preventing workers from forming trade union,
from collective bargaining, and even when we speak
to governments in developing countries, for example, they always tell us.
For us it is very simple, we are depending on every eye.
If a multinational company comes to our country and say
“I'm bringing in $100,000 million and therefore on the conditionalities
“that you must exempt us from all the coverage under the law.”
So today you have free trade zone, particularly every country
where it’s like cowboy town, employees can do what they like,
they can forget about every kind of regulation that is in place.
The fact is this is not working, workers’ wages today are being suppressed.
If we look at the financial crisis we can understand very clearly.
It is not sustainable.
Workers they do note earn enough to be good consumers.
This is why you see one of the response of government to the financial crisis
is to packages where they give back subsidies to the individual. Why?
Because workers are not earning enough and therefore it is not sustainable.
I just want to take this opportunity
to emphasize that there are other ways to be competitive.
There are unions that we represent which are prepared to sit down with employers
to discuss on the basis of how they can be more competitive through mechanism,
through training and other processes,
to increase productivity and profitability.
There can be no easy way by just reducing wages.
And I think is very clear, if you look at the United States for example,
we can study – recently we stood at companies which have
the most number of retrenched staff and the CEO are the one that earning
the full salary so I think there's something wrong.
Thank you very much.
If I may, just a quick example, addressing what you said.
At the end of the day it’s the company that has to, in their regard, establish rules.
What do I mean?
We are a retailer, we sell/retail blue jeans.
Many of them are being manufactured in Bangladesh, obviously low wages.
Our policy is that each and every supplier we work
with must be audited by us, whether or not our requirements
in respect to working conditions and payment levels are fulfilled.
If not, now comes the difficult part, if not then we ask the supplier to improve,
for instance, working conditions or increase pay and we audit again.
If in the second – after the second audit our requirements are not fulfilled,
then the supplier is either delisted or we do not start to work with them.
We’ve talked to NGOs about it and they said they totally call this
as wrong because if you don’t establish a working relationship
with such a supplier then things will not change, that is also true.
What can we do if he and probably the supplier refuses to fulfill our requirements.
So the role is complex but I would sleep better if customers would not come
to our stores and want to buy jeans at the price of eight Euros or $8
but they would be prepared to pay $50but this is unfortunately not the case.
So what I'm saying is you have to manage tradeoffs here and it’s a simple of jeans,
what do you do, I'm speaking from experience here.
We have a list of supplies and then we’re criticized by NGOs
and then that’s the point is I want to make.
Okay, any questions? Maybe there please.
I want to relate to the comment of the investors value of sustainability
as the source of competitiveness.
Many companies nowadays publish sustainability report
and disclose their environmental impacts but I see there's disconnect
with their financial statements and I wonder if there's any way
of converting sustainability into more tangible numbers
to integrate into financial statement.
Yeah, well there's a big movement happening I can assure you
and unfortunately there's not all positive.
These days you see Bloomberg and… both trying to incorporate
into their regular reporting on publicly listed companies sustainability measures.
This is currently evolving.
The first things that I have seen were rather shocking than encouraging
because the validity of the data was so off.
I think one of the issues is that it would help to have that,
I couldn’t agree more, I think this the sustainability report is not a bad thing,
frankly, we have one global one as well as one for China regions,
actually they are not forced to do it but most of the things that are very,
very important for them, for their employees, and for their customers
and for their recruiting efforts to have something like that.
But what we definitely need to develop that further
and to come to a standard set of measures, I see that in our industry
in a very strange way because we compete
in the packaging industry for… bottles like this.
And people tell me it gets recycled.
Yes, it gets recycled and ends up in the bottom of this carpet once,
that’s recycling, you can do with it.
Whereas when you do it in aluminum, you can recycle it forever.
After 60 days you throw it away, after 60 days it comes back as a new can.
But we cannot get that currently into our sustainability measures,
end-to-end measures, that’s a bit of a problem
and I think we all have to jointly work on it so I would encourage you
to continue to push, we will too.
Since we’re running out of time and I know there are quite a bit
of questions still but I would like to close the session
but if we can just kind of give you a little more different perspectives
on sustainability and competitiveness at this session after you hear
a lot of other items or the issues related to sustainability
and leave you with a little bit more things to think about throughout tomorrow,
we’ll be very happy.
Please join me to give a big hand to the distinguished group of panelists
and thank you very much for you.