Peter Vanham and André Hoffman discuss their book. "The New Nature of Business," with students during a recent visit to the Yale School of the Environment.
How to Rev Up One of the Greatest Engines of Sustainability
During a recent visit to the School of the Environment, André Hoffmann, vice-chair of the global healthcare company Roche, and business journalist Peter Vanham discussed their new book, "The New Nature of Business: The Path to Prosperity & Sustainability," and explained why we can no longer afford to measure business success solely in terms of financial return.
What is the primary purpose of a business? If asked, how many business owners, managers, or even members of the public would answer “to make money, of course”? In their new book,"The New Nature of Business: The Path to Prosperity & Sustainability," André Hoffmann, vice-chair of Roche, one of the world’s largest healthcare companies, and business journalist Peter Vanham argue that a business’ success shouldn’t be measured solely in terms of financial return, but by the positive impact it has at the "execution of its purpose" — and how well it preserves and, where possible, expands the world’s human, social, and natural capital.
Hoffmann and Vanham personally expanded on some of the ideas in the book and took questions from students during a discussion moderated by Dan Esty, Hillhouse Professor of Environmental Law and Policy, at Kroon Hall on October 31. During the visit, they also talked with YSE News about how companies can become a driving force for sustainability and overcome the fear of being the first mover.
Q: What motivated you to write this book now? Was it something that had been building up or was there a particular catalyst?
André Hoffmann: When I was born, there were three billion people on the planet. Today there are eight billion. And these eight billion largely lead better lives, longer lives, healthier lives, better-educated lives, than the three billion we had at the time when I was born. So, our current system is a story of success, and, by this estimate, we have prosperity.
I think it's why we need now to really think about the importance of the system to allow us to do something about the sustainability, rather than just create prosperity.
And that's very much the reason why we wrote this book. Why is the current prosperity not sustainable? In three big buckets, we are losing social capital; we are losing human capital; and we are losing natural capital. So, the first bucket, the social capital, is what is society. What are the big parts of the social contract that unite us, or sometimes disunite us? How can we continue to work on this? We see that that particular capital, at the moment, is in a serious strain and that needs to be addressed. Secondly, we have the human capital. Are we happy? Are we in a position where we can do what it is that we want to do? And then, thirdly, of course, nature. Nature, not because it's beautiful and because we can go and spend the weekend in the forest, but nature because it is, quite simply, the life support system on earth. Without nature, we don't exist, and we're losing it very fast.
So, the idea of creating these three buckets is because everything we do in life has an impact on each one of these three capitals. And we have chosen to measure society, to measure humanity, to measure success in business, in government, in NGOs, in any sort of endeavor we do as a group in humanity, we have chosen to measure it just by a financial course. And that is an incredibly narrow measure of a very complex phenomenon.
Peter Vanham: I met André shortly before we started writing the book. I'm a business journalist, and I have a business education background, so I've grown convinced that business, for better or for worse, is the greatest engine of our system. Obviously, when it comes to sustainability, it can be perhaps an engine for the worst. It creates a lot of destruction. And so, it was quite inspiring to find a business leader who truly, truly cares about the environment, about nature, about the social, human, and natural capital.
If (business) wants to create good going forward, it will benefit from having a voice from within the system to say, ‘Here's what we should do; here's why we should do it; here's how we should do it.’
I think the idea of saying that you're going to fall behind if you are valuing nature is probably based on the wrong way of evaluating success.”
André Hoffmann Vice-Chair, Roche
Q: One of the most expressed concerns from the business community in terms of sustainability is the fear of being the first mover by taking the initiative to value nature, or incorporate sustainability, in a way that hasn’t been done previously. How do you alleviate this type of anxiety among business leaders?
André Hoffmann: I think the idea of saying that you're going to fall behind if you are valuing nature is probably based on the wrong way of evaluating success. What is success for a business? Success for a business is not just next quarter. Success is also having a positive impact at the execution of your purpose. I think that for a lot of companies that is currently becoming more and more important.
Now of course, when you differentiate, you have to satisfy competition. So, my answer to you would be, if you want to alleviate anxiety among leaders, you have to make sure that there is proper regulation in place. You need a level playing field. This level playing field you can only get if you get to a true public-private partnership.
Peter Vanham: If you add the perspective of another generation, people who are perhaps not business leaders, but are employees, I know a lot of people my age and the next generation who feel anxiety about the changes that our climate is undergoing.
The feeling of powerlessness, of not being able to do something about it, it's not a good feeling, right? What I find to be empowering is when you shift from considering yourself an outsider to that whole process to being able to go and be an insider with the power to change something, do something about it. If, as an employee, you're able to find a company you can work for where you can actually move the needle, where you can do something about this, that I think can also help shift mindset from that feeling of anxiety and powerlessness to a feeling of purposefulness and being able to do something.
Q: The book includes a first-hand account of Roche’s sustainability practice, as told by André and several other senior leaders in the company. It also gives some compelling examples of successful sustainability efforts in other companies, such as Schneider Electric and IKEA. Were there any commonalities among these companies in terms of culture or an environment that enabled these types of sustainability efforts?
Peter Vanham: One of the commonalities with some of these companies is that they had a stable long-term and majority shareholder, or stable long-term governance. There's clearly, I think, a link between having a long-term owner or steward to the company and being able to put this topic of sustainability on the agenda. So, that to me was one that stood out.
Now, some of the companies that we looked at were public companies. And there, one of the commonalities that I found is that the managers of these companies … one of the tactics they applied was to find a constellation of stakeholders who would be willing to go with them on that journey. So, they would find, in some cases, it was suppliers. In some cases, it was customers. In some cases, it was local governments. In some cases, it was, in fact, the shareholders. They would find allies to be able to pursue that agenda that goes beyond the short-term profit maximization that is so ingrained into a corporate agenda. Those are two commonalities that I found.
Q: How do you take this mandate to focus on business as a social good, not just as an extractive force, and extend it to consumers and other groups in the wider community?
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André Hoffmann: If we want to move people's opinion, we are going to need more data that can be applied to the three capitals — social, human, and natural. What is happening to the social capital, i.e., us together, the social contract? How do we influence that by our dealings? At the same time, how do we help people to realize their potential and to feel able to contribute to society collectively, but also individually? How do we do that in a way that is going to be also positive for nature? We need to understand that each one of these movements is an interdependent movement on the social, the human, and the natural capital.
So, if you really want to be able to create a sustainable society, you need to first understand the interdependencies between the three capitals, between the social, the human, and the natural, because each one of our decisions has an impact.
How do we put all these pieces of puzzles together to create the sustainable society we need? And once we have succeeded in asking the right questions — once we are humble enough to accept the fact that the current status quo is not survivable — we can then have the power to do something about it.
