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The Future Examined: Corporate Citizenry and Human Rights

Professor Mervyn King SC has been a tireless campaigner in the global push for good corporate citizens.

For most of his distinguished career, Professor Mervyn King SC has been a tireless campaigner in the global push for companies to become good corporate citizens.

Prof. King is one of the world’s leading experts in corporate governance and reporting and will soon visit Melbourne to deliver Deakin University’s 2018 Law School Oration on ‘Corporate Citizenry and Human Rights’.

A senior counsel and former judge of the Supreme Court of South Africa, he is President of the International Integrated Reporting Council (IIRC) , Chairman of the King Committee on Corporate Governance in South Africa, Chairman Emeritus of the Global Reporting Initiative in Amsterdam, and a member of the Private Sector Advisory Group to the World Bank on Corporate Governance.

For decades, he’s been delivering the message that a company’s ability to create value for itself depends on its ability to create value for others.

‘In our resource-constrained world, being a good corporate citizen  is critical and we need companies whose business model has as little adverse impact as possible on society and the environment,’ he says.

Until the late 20th century, companies focused more on maximising profits and did not take account of how their business models were impacting on society and the environment.

‘But to operate successfully, organisations depend on a variety of resources and relationships including social, human and intellectual capital. No company operates in a shareholder bubble but in a community that it’s dependent upon,’ he says.

Prof. King has been a chairman, director and chief executive of several companies listed on the London, Luxembourg and Johannesburg Stock Exchanges. He consults widely on sustainability and corporate governance issues and has received global recognition for his work.  

He says the swing towards corporate accountability began when organisations started looking at their ‘intangible’ assets.

‘By the end of the 20th century we’d reached ecological overshoot. We were using assets faster than nature was regenerating them and with continuing population growth, investors and shareholders began asking about long-term strategies. Was this business going to create value long term in the resource-deprived world?’

In the shadow of reputational risk – aided by speedy digital communications – companies soon faced demand for enhanced business reporting, and transparency around issues like legitimate supply chains, human rights, stakeholder relationships, and environmental sustainability.

‘By 2002, financial reporting alone was not enough and investors were looking at the bigger picture. As some of the biggest consumers of natural assets, organisations knew they could not carry on with “business as usual” and would have to learn to make more but with less. They had to move from a focus on short term profits to focus on the company’s long term health.’

Former chair of the United Nations’ Committee on Governance and Oversight, Prof. King says that the UN’s Sustainable Development Goals set out three crucial dimensions – economic, social and environmental.

‘The UN describes them as indivisible and integrated so it’s imperative that a good corporate citizen has a business model which positively impacts on all three elements.’

He believes a key driver of 21st century corporate accountability is the ‘millennials’ who find the notion of making profits at any cost unacceptable.

‘A few years ago a PhD student told me, “we can deal with the GFC, it’s the GEC – the Global Environment Crunch – which your generation created that worries us”. So there is a mindset change in the customer of today and tomorrow.’

Another mindset change is the call by capital providers for responsible investment.

‘Particularly in pension funds,’ he explains. ‘For example, if I’m a trustee of your pension fund it’s my duty to invest your money in a company that’s going to survive in a resource-constrained world. It must have a long term value creation strategy.’

It’s taking account, he says, of what the IIRC labels as the six sources of value creation: financial, manufactured, human, intellectual, natural and social – and the relationships between the company and its stakeholders.

‘Companies must adopt an integrated-thinking model in developing a strategy to deal with the impact on the environment. A company-centric governance model is where the board realises they are the heart, mind and soul of the company and acts in its best interests.’

With an extensive calendar of global appointments, Prof. King is encouraged by the ‘breakthroughs’ he’s seeing in the international community.

 At the IIRC’s most recent meeting in Amsterdam, 64 countries had adopted integrated thinking into their reporting models and he says organisations ‘representing trillions of dollars’ have now signed up to the UN’s Principles of Responsible Investment.

He’s also impressed with Australia’s efforts and says Deakin University’s Chancellor John Stanhope (Chairman of Australia Post) and KMPG Fellow Michael Bray are among those leading the charge.

‘They are corporate leaders who have been pushing to get good citizenry and integrated thinking into business models around Australia.’

Prof. King calls the consequence of operating purely for profit as ‘unsustainable development’ that’s no longer acceptable.

‘We have to learn to make more, in a sustainable manner, with less. Companies cannot carry on in what I call a “take, make, waste mentality” where they may be acting lawfully but are actually committing wrongs against humanity.’

Originally published on The Australian.

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