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Sustainability : Corporate Evolution through Consciousness

Dr. A.K.BalyanMD&CEO

Petronet LNG Limited

SAFIM

New Delhi

18th January, 2014

Do We Need a New Business Paradigm?• Historians will one day view the 20th century as

the great struggle between Capitalism and Socialism. Capitalism won this battle decisively, but it did not capture the minds of the intellectuals or the hearts of the people.

• Corporations: the most influential institutions in the world, but they are widely perceived as greedy, selfish, exploitative, & not trustworthy

• Current financial crisis & recession being blamed on “greedy” financial corporations & deregulation, rather than bad government regulations & monetary policies, combined with widespread governmental incompetence and corruption

• Corporations & capitalism have serious “branding” problems & we appear to now be moving backwards toward either government control of companies (Fascism) or government ownership (Socialism)

• What is needed instead in the 21st century is Conscious Capitalism

What Then is Conscious Capitalism?

• Conscious Capitalism is based on three primary principles:

1. A Conscious Business has a higher purpose that transcends maximizing profits. It is focused on fulfilling its higher purpose, which evolves dynamically over time.

2. The enterprise is managed to optimize value for all of the major interdependent stakeholders.

3. Conscious Leadership to the enterprise & its stakeholders.

What is the Purpose of a Business?

• What is the purpose of most professions?

• If all the professions have a purpose that relates to the public good, why doesn’t business?

• Who defines the purpose of any business?

• Surely it is the entrepreneurs who create the business that define the original purpose of the business

?

Entrepreneurs Create the Original Purpose

• Entrepreneurs of the Conscious Business are also entrepreneurs of meaning

• Stakeholder community of customers, employees, investors, suppliers, and communities co-evolve the purpose of the Conscious Business over time

• Businesses flourishing over the long-term evolve their purpose to higher levels of complexity and meaning

Great Companies Have Great Purposes

• Service to Others: Expressing Love & CareThe Good

• Discovery & the Pursuit of TruthThe True

• Excellence & the Quest for PerfectionThe Beautiful

• Changing & Improving the WorldThe Heroic

Which of these great purposes will be at the core of your own organization?

The Paradox of Profits• Happiness is a by-product of

other things:– purpose, service, excellence – personal growth– friendship, generosity, forgiveness,

love & compassion • Profits are best when not primary

goal:– higher business purpose– great products & services– customer satisfaction – employee happiness– supplier partnerships

Long-Term Profits are Maximized by

not Making them the Primary Goal• Business is not a machine, it is a complex adaptive

system of interdependent stakeholders • Leadership’s job is to fulfill the deeper purpose of the

business, optimize the health & value of the entire business system, be a servant leader to the business

• Optimize entire interdependent system = highest long-term profits & shareholder value

• The price system is a tool for leadership to use—a valuable source of information

Creating Prosperity through Profits & Growth

Percentage World Population Living on Less Than $1 per Day

0 50 100

2003

1980

1950

1820

Less than $1Less than $2

• Business has a fundamental responsibility to create prosperity for society & the world

• The percentage of people living on less than $1 per day has dropped from 85% in 1820 to only 20% today

Source: World Bank (constant 2003 dollars)

Caring About our Environment

• We strongly support organic, local, & sustainable agriculture

• Sustainable seafood—Marine Stewardship Council plus farmed fish standards with 3rd party certification

• Commitment to recycling and alternative energy: up to 100% Wind Energy Credits.

• Green Building, fuel cells and solar installations

• Store & Facility Green Mission Teams• Animal Welfare program for livestock• Environmental strategy should be

thought of as win-win-win-win

• Non-profits do understand the importance of deeper purpose & mission—corporations need to learn from them

• Are non-profits able to transcend self-interest because they have an deeper purpose? Problem of self-interested, self-perpetuating Boards.

• Anti-profit mentality frequently creates inefficiencies, waste, & stagnation

• Many are not financially sustainable over the long-term—they need to learn from corporations

• Non-profit organizations also need to evolve to a more holistic model

Conscious Capitalism & Non-Profit Organizations

The Conscious Non-Profit Organization Model:

Holistic Interdependence

GoodAltruistic

(Non-Profits)vs. Evil

Greedy, Selfish(Corporations)

Corporate Social Responsibility Conscious CapitalismShareholder-oriented Stakeholder-orientedHas nothing to do with corporate purpose Incorporates higher purposeAdds ethical and financial burden to business goals

Reconciles caring and profitability through higher synergies

Consistent with traditional, mechanistic view of business

Holistic, ecosystem view of business as a complex adaptive system

Often an “add-on” – grafted on to traditional business model—usually as a separate CSR Department or is part of the Public Relations Department

Social responsibility is at the core of business model and is the responsibility of the entire company—not just one separate department

Easy to meet as a charitable gesture—frequently just another PR messaging strategy—green washing

Requires genuine transformation

Assumes all good deeds are equally desirable and are not connected to company’s core mission

Requires that good deeds also advance the company’s core mission[1]

Source :Daniel Yankelovich, Profit with Honor: The New Stage of Market Capitalism

Corporate Social Responsibility is not Conscious Capitalism

From Traditional Capitalism to Conscious Capitalism

From This To thisProfit-focus Purpose-focusOnly shareholders win                              All stakeholders

winShort-Term                                                                Long-TermZero Sum                                                      Win-Win-

Win-WinSelf-centered HolisticConflicts of interest                                                    Harmony

of InterestsParasitic                                                                    MutualisticExploitative                                                         Creating ValueTrade-offs                                                                     SynergiesDisliked Valued/LovedNot Trusted Trusted

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Shared Values for the Global Market Promoting Responsible Global Corporate Citizenship Encouraging Companies to meet Social Concerns Launched by the then UN Secretary General , Mr.Kofi Annan on

26th July, 2000 Objective :- To work towards a more stable and inclusive

global market by encouraging the business community to build universal principles into their strategic vision and work practices

Moving towards Conscious Capitalism – The Global Compact Initiative

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Global Compact – Millennium Development Goals

• Subscribing to Global Compact also involves recognizing the relevance of the Millennium Development Goals and the role of business and of the various institutions of society so that these goals can be reached.

• Millennium Development Goals are:– Eradicate extreme poverty and hunger– Achieve universal primary education– Promote gender equality and empower women– Reduce child mortality– Improve maternal health– Combat HIV/AIDS, Malaria and other diseases– Ensure environment sustainability– Develop a global partnership for development

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Global Compact is….

A Voluntary initiative to promote sustainable development and good corporate citizenship

A set of values based on universally accepted

principles

A network of companies and other stake holders Flexible , so that it can be adapted to concrete

needs and situation of individual company.

Ten principles of Global CompactHUMAN RIGHTS

Principle 1 Business should support and respect the protection of internationally proclaimed

human rights within their sphere of influence; and

Principle 2 Make sure that they are not compliant in human abuse

Ten principles of Global CompactLABOUR

Principle 3 Business should uphold the freedom of association and the effective recognition of

right to collective bargainingPrinciple 4 The Elimination of all forms of forced and

Compulsory labourPrinciple 5 The Effective Abolition of Child LabourPrinciple 6 Eliminate discrimination in respect of employment

and occupation

Ten principles of Global CompactENVIRONMENT

Principle 7 Business should support a precautionary approach to environmental challenges

Principle 8 Undertake initiative to promote greater environmental responsibility

Principle 9 Encourage the development and diffusion of environmentally friendly technologies

ANTICORRUPTION

Principle 10 Business should work against Corruption in all its forms including extortion and bribery

Conclusion Conscious Capitalism—New Paradigm for the 21st

Century• A Conscious Business has a higher purpose that

transcends maximizing profits. It is focused on fulfilling its higher purpose, which evolves dynamically over time.

• The enterprise is managed to optimize value for all of the major interdependent stakeholders.

• Conscious Leadership to the enterprise & its stakeholders.

• This way of thinking about business transforms the underlying ethics of the enterprise to win-win-win-win-win-win.

• The larger societal brands of business and capitalism will evolve toward fulfilling the deepest ideals that humans aspire to—all things Good, True, Beautiful, and Heroic.

Thank You