I have fond memories of my visits to Cairo and many other places in Egypt and look forward to returning later this year for COP 27, when I hope to be able to visit your campus in person. But in the meantime, it is good to be with you virtually. Thank you for the invitation to speak about the important relationship between business and society.

Business is the engine of human progress, but that engine does not always run smoothly. Ever since the exploits of the Chinese salt barons of the ancient Han dynasty, society has had a difficult relationship with business, leading to cycles of suspicion and mistrust. Some business leaders are content to let these cycles play out, believing that trust always returns. But the evidence shows that the failure to change this pattern is hugely damaging both for the companies themselves and for wider society.

Examples are plenty, particularly in my home country. At its heyday in the late eighteenth century, the world’s first multinational, the East India Company, accounted for more than half the world’s trade. It deployed a private army of more than 250,000 to rule over its subjects, who numbered roughly one fifth of the world’s population. Successive generations of British men used the Company to loot India of its riches to fund lavish lifestyles. Under the leadership of Clive of India, the company stockpiled food in the face of a famine which wiped out one third of the inhabitants of Bengal. This business model of brazen exploitation worked well for over two hundred and fifty years, but in the end its irresponsible behaviour was the cause of its own downfall. The legacy of that period and the ill-will it created still shapes geopolitical and societal relationships today.

Trust between business and society matters for a number of reasons.

First, it bolsters relationships when the inevitable happens – failure. All companies fail in some way at some stage. Failures can take the form of poor financial performance, the wrong strategy, corruption, corporate tax evasion or unfair employee pay. High impact tax minimisation schemes, however legal, have gnawed away at the sustainability of Facebook and others; banks in the wake of the 2008 financial crisis were heavily criticised and many underrated for many years. A reservoir of good will, built up in advance, has the potential to sustain a company when things go wrong. The reservoir is drawn down and must be replenished.

Second, trust pays. In 2015 I authored the book called Connect. Research for the book, showed that the approximately 30% of corporate earnings could be at stake if trust break down with stakeholders. To illustrate the point perfectly, two weeks after the book was released, the VW diesel emissions scandal broke, and the company’s share price dropped about 30 per cent.

And third, today’s technology and global communications mean that when trust breaks down, reputations can be destroyed on a global scale. People have the tools to hold companies to account in real time. Transparency and accountability are no longer optional.

Gaining society’s trust must be an outcome of a company’s fundamental business strategy – it is not something that can be confected or managed. Business leaders must integrate the concerns of society into all the decisions they make. This does not mean agreeing with everyone all the time. But it does mean making rather than simply asserting your case.

The most successful example of this during my time at BP involved the island of Papua in Indonesia. It was a battleground between separatist insurgents and state-backed security forces. BP had drawn up plans to build a liquefication plant for LNG in a fragile and remote place which was home to several vulnerable local communities. In the broader context local differences and armed conflict, our actions had the potential to cause serious problems. Our approach was to establish an independent advisory panel to listen, encourage debate, examine our activities and issue reports, which were sent to all stakeholders simultaneously without any influence from BP. The panel advised on the cultural sensitivities surrounding the relocation of two villages and made sure that the contractor did not slip on commitments to local employment as part of the construction process. This approach added credibility to BP as a company that genuinely wanted to act in everyone’s best interest and thus underpinned the success of the project.

I began to be encouraged to see that a new approach was needed when I was at Stanford Business School in 1980. At that time, almost every businessperson was preoccupied with shareholder value theory – that the duty of business leaders was to make as much profit as possible for their shareholders, and to look after the interests of other stakeholders only as much as the law required. It contributed to the damaging impression that companies are driven by self-interest, and indifferent to the needs of those around them. But business cannot be conducted in isolation from society, public policy and human feelings. It is a wonderous weave of numbers and people.

In 1997 I returned to Stanford as CEO of BP and became the first leader of a major oil and gas company to acknowledge the risk posed by climate change and pledge to do something about it. This was the first attempt by any major oil company to put climate considerations at the heart of corporate strategy.

This was a time when Corporate Social Responsibility – or CSR – was the tool of choice. It failed because it was almost always detached from a company’s core commercial activity. In the words of one FTSE 100 Chairman who I interviewed: CSR was something that companies look at for ‘half an hour on a Friday afternoon’. It failed to help Enron, for example, a company which had an excellent record of CSR initiatives before it was uncovered as a sham. Ultimately, CSR’s greatest problem was that it failed to ensure that companies operated in a trustworthy manner.

The world has changed in the last twenty years. In 2000 I was part of the launch of the UN Global Compact. This was operationalised in 2015 when the UN General Assembly launched the Sustainable Development Goals. They range from education and zero hunger to climate action and gender equality. This shifted focus away from CSR and corporate citizenship, towards considering and attempting to estimate the direct impact on society of a company’s activity.

This has led to the development of the ESG frameworks now increasingly used around the world. There are many providers of ratings – apparent measures of how well a company is doing in attending to the environment, societal goals and its own governance. These are more often than not assessments based on judgements rather than hard edged measurements. This can allow companies to signal virtues rather then perform against commitments that are benchmarked against others – as you would normally expect in financial performance. But for real effectiveness, hard edged targets need to be established independently, and performance assessed independently, on a regular basis. Results need to be communicated to stakeholders transparently and they have to inform corporate strategy. And we must not lose the key point – that great performance on ESG measures leads to a sustainable company which should perform sustainably.

The Environmental strand of ESG is foundational because without a sustainable environment, humanity cannot continue to live in harmonious societies or prosper in business. I am now the Chairman of BeyondNetZero, a climate growth equity venture which has been established in partnership with General Atlantic. We invest in companies delivering practical solutions to the many problems of climate change but only if they are prepared to set rigorous and independently verified annual science-based targets and have their performance independently measured.

When astronauts return to earth after a mission, the often describe what they call the Overview Effect. This is the change that occurs when they see the world from above as a fragile dot, a finely tuned system and a place where borders are invisible. We are all connected and equally dependent on a fragile resource, so it follows that we all have a responsibility to prevent catastrophe. There can be no greater basis on which to form a connection between business and society. It will not be easy, but I am optimistic that the companies of the future will push the boundaries in their quest to deliver for the future of humanity. And that they will succeed.

The views expressed in this commentary are the personal views of Lord John Browne and do not necessarily reflect the views of General Atlantic Service Company, L.P. (together with its affiliates, “General Atlantic”) or BeyondNetZero. The views expressed reflect the current views of Lord John Browne as of the date hereof, and neither Lord John Browne, General Atlantic nor BeyondNetZero undertake any responsibility to advise you of any changes in the views expressed herein.

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