Deutsche Welle (English edition)
Davos 2020: Is big business coming to save the day?
The world economy produces wealth… as well as copious amounts of greenhouse gases, rising inequality and a devastating loss of biodiversity. Corporations now suddenly promise to fix all this. But will they really?
Walking down the Promenade, Davos's main street, it almost feels like it's a charity convention that's in town, not a gathering of 119 billionaires, lots and lots of hotshot CEOs and business delegates. "Let's make business the greatest platform for change," reads the sign on one corporation's rented shop front.
Another went with "Is growth an illusion?" in bright and curvy neon letters you'd rather expect on the wall of a hipster coffee shop.
Further down the road there's the "SDG tent" which hosts open sessions on topics like the future of capitalism, sustainable finance or LGBTI rights — all paid for by companies keen to show how committed they are to helping achieve the 17 sustainable development goals (SDGs) set by the UN.
Sustainability — this time for real?
The message companies are trying to send is pretty clear: We
have woken up, they want to tell the world. Gone are the days of profit over morals. We now care about the environment. We now care about making this world a better place.
But haven't companies been telling this story for pretty much as long as the World Economic Forum (WEF) has existed? And still the world is not on track to reach the goals it has set for itself — take the 2015 Paris Climate Agreement or the SDGs. So is big business really going to follow through on its promises this time?
The anti-WEF protestors on the Promenade have certainly made up their minds. "Do you really think that institutions and corporations that have been thinking and doing business in one way may change just like that just to be nice to others?" Sebastian Justiniano asks. "I don't think so."
Changing to make more money
Svein Tore Holsether disagrees. He's the CEO of Yara, a Norwegian corporation whose main business is the production of synthetic fertilizer. That makes it part of the agricultural sector that accounts for one quarter of global greenhouse gas emissions.
Sitting in a quiet corner in one of Davos's fancy hotel lobbies, Holsether explains why he wants to turn Yara into a more sustainable company. "I think it represents an incredible business opportunity," he says. "We run our businesses for profit and that's something we need in order to reinvest and develop the business."
He talks about how Yara shifted their strategy towards developing new solutions after the Paris Climate Agreement. How they, for example, are planning to help farmers maximize yield, so they need less land, which would then be free for trees that would suck carbon emissions out of the air. How this would be good for the environment, food security, the farmers — and, of course, Yara's bottom line.
"That's become more and more clear in recent years that companies that are able to adapt their business models to both the challenges but also the opportunities that we see now are also the ones that will survive," he says.
Go green or go home?
In fact, companies may have less and less of a choice in whether they want to go green or not. The Global Risks Report released ahead of the WEF listed environmental factors as the biggest threat to the world order. Extreme weather and natural disasters caused by climate change do hurt business.
Read more: China’s economic woes threaten to derail climate actions
And even Larry Fink, the CEO of the world's largest asset manager, BlackRock, recently warned that companies not taking sustainability seriously could run into trouble when looking for financing in the future.
Whether such a marketdriven transformation of the economy would happen fast enough is yet another question. Yara's carbon dioxide emissions, for example, have gone up from around 10 million tons in 2013 to 16.6 tons in 2018, despite the new sustainability strategy.
So if market forces may actually work too slowly to get businesses to behave more sustainably, what can get the job done quicker? Some argue what's needed is an economic mind shift on what the purpose of a business is.
The big idea thrown around at Davos this year was the concept of stakeholder capitalism. It's the notion that companies do not just have a responsibility to generate profits for their investors but to everyone affected by their actions, like their workforce, consumers or the environment.
Making stakeholder capitalism work
The economist Mariana Mazzucato is all for it, as long as it's more than just an empty buzzword. "Given the crisis that we're facing — not just the climate but also inequality, health systems, the welfare state kind of collapsing in many ways around the world — we don't have time to bullshit," she says.
Governments should rethink how they invest in the economy and particularly what they demand in return for it. After all, giving money to companies makes them a stakeholder, and an important one at that. As an example for how this could work, she mentions the German government, which tied public loans to steel companies to their ability to reduce their carbon footprint.
"Make it conditional," she says. "They have to or they die. That's what we do in other areas. You can't abuse children in a factory. There's the law, you'll be put out of business. We need to make things mandatory." She adds though that this would only work with proper metrics in place that make sure businesses deliver on what they've promised.
An initiative that's working on such metrics is the nonprofit World Benchmarking Alliance (WBA). They drew up a list of the world's 2,000 most influential companies that together make up half of the global economy. Currently, a team of around 50 people is busy ranking them by how they contribute to achieving the various SDGs.
By making these benchmarks available for free, they hope, it will be possible to hold companies accountable and make sure they follow through on their commitments.
"It's like New Year's resolutions, right?" says WBA's CEO Gerbrand Haberkamp. "We know that it's hard to keep them. And it's the same for companies. When it's February, it's hard to still go to the gym. This is why we need these benchmarks," he explains.
Where does all that leave us? So are the shiny sustainability campaigns more than smoke and mirrors? Are businesses really starting to behave more responsibly? Yes, it seems some really are. Not necessarily because they have a big heart, but because it makes commercial sense.
Are they changing fast enough? No, they are certainly not. It's probably best put in the words of climate scientist Johan Rockström: "We're still having islands of success in an ocean of ignorance."
orded for 2018.
But how could accounts, signed off by Deloitte, have been so wrong? Tighe explains that there were three elements to the financial mismanagement presided over by Delaney.
On one hand, he was securing front-loaded sponsorship deals to advance funds to the FAI which the sponsors could pull out of at any time. One deal, with the company Frasers Group (formerly Sports Direct), advanced €6 million to the FAI. However, the company pulled the plug on the deal in March.
"Suddenly rather than having €6 million income, you have €6 million extra liability," says Tighe. "Who agrees to a mad deal like that?"
Then there was Delaney's personal payments and arrangements, largely hidden from view. When the extent of those liabilities were revealed, the association's debt deepened sharply.
Amid the growing toxicity of the FAI brand in the face of the crisis, government funding was pulled and the association‘s main sponsor, the Telecommunications firm Three, said it would not renew its contract. It was the perfect storm.
Seeking an injury time equalizer
While a reconfigured FAI is currently trying to rebuild itself, its immediate future is anything but secure according to Niamh Brennan, academic director of the University College Dublin Centre for Corporate Governance.
She says the FAI is "without question" under threat. "I mean, it has just got this extraordinary burden of liabilities and no assets of quality." She says the FAI's status as a body of cultural significance will "possibly" save it from liquidation. But even if the association survives, and the Euro 2020 matches take place as normal, she says the FAI is facing years of hardship which will prove very damaging.
"Just like the way Ireland got out of the financial crisis was through austerity, that is what will happen with the FAI. It will be austerity. There won't be much money for football, it will be all going to serve the liabilities."
Tighe and his colleague Paul Rowan are currently working on a book about the scandal, titled Champagne Football, due to be released later this year. It will delve further into how Delaney effectively ended up running a national football association without supervision and leaving it on the brink of going bust.
Brennan says she has seen several such cases in her time studying corporate governance and says the FAI affair is a classic case of "board capture," where a CEO takes complete control of a board and operates outside of meaningful scrutiny.
"Certain types of people get to the top of organizations," she told DW. "People who are willing to be ruthless, to ruthlessly stamp down on anyone who will prevent them getting to the top. And remember, if you are researching psychopaths, you will typically find them in two places. One is in prisons and secondly, is at the top of organizations."
For the FAI, its more than 200 permanent staff and its lengthy list of creditors, they are waiting anxiously to see what, if any, deal UEFA can strike with the government. Until such time, their future, as well as the future of Irish football itself, is up in the air.