Business and Society

(Script for Katerva Award Conference in Tokyo on March 7, 2012)

Your Highness, Ladies and Gentlemen;

It is a great honor for me and my firm, Deloitte to have an opportunity to speak here at the very first Katerva Conference.

Over 160 years ago Deloitte began accounting business in London and grew together with our global and regional clients. Now we operate in over 150 countries with 180,000 people. We provide audit, consulting, financial advisory, risk management and tax services.

For almost two decades, Deloitte has participated at the Annual Meeting of World Economic Forum at Davos, Switzerland and at its regional summits throughout the year. We helped produce fresh ideas and offered forward-thinking approaches to some of the most important and critical issues confronting businesses, governments, and society.

Business and Society

In Davos this year, Deloitte introduced important research findings on attitudes of business leaders and the Millennial generation regarding business and its role in society. Millennial generation may not be well known at least here in Japan. It’s young generation which we defined as people born after 1981, people of 30 years old and younger.  

This Millennial generation survey was conducted in late 2011. The research explored the opinions of over 1,000 Millennial generation in our firm in 13 countries. In addition, Deloitte sponsored a survey of 390 business leaders of over 50% of them C-suite around the world. This survey was conducted by the Economist Intelligence Unit, one of the entities of Economist magazine Group. Both surveys considered the purpose, impact, and leadership of business in wider society.

Societal purpose

The findings of our survey endorse the importance of the societal purpose of business. This creates opportunities for business leaders and for the long-term success of their businesses. Today’s business leaders can do more to understand the purpose, impact, and leadership expected of business in society, and the business leaders can do more to articulate their own contribution to it.

Business plays a fundamental role in creating the society of the future. It is hard to imagine society without business. Business facilitates breakthroughs in technology, trade, information management, and organizational development.

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Respondents to the surveys believe that business has the greatest potential of any sector in society to effect positive societal change. Faith in business is particularly strong among Millennial generation, but business leaders today are not quite meeting their expectations. There is more to be done. Almost 50% of Millennial respondents believe that business leaders today think too much about the short term and are entirely focused on profit. Around a third of Millennial generation believe that today’s business leaders lack awareness of wider society. These findings invite business leaders to ensure that the longer-term role of their business in society is clearly understood and communicated both internally and externally.

Performance against purpose

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Today more companies than ever have a value statement, a code of conduct, a commitment to sustainable practices, or philanthropic or community investments. 56% of the 2011 Fortune Global 500 companies have published their ‘values’ and 69% their code of conduct.

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However, after the global financial crisis, public trust in business has never been so low. Based on the statistics announced by Edelman Trust Barometer in 2011, trust in business declined by 8% in the United States compared with 2010, 5% in the United Kingdom, and 4% here in Japan.

Last year, as you know so called the “Occupy Protesters Movement” took place primarily in the United States. It suggests that, for some communities at least, business is not meeting society’s expectations. The introduction of codes, value statements, and various Corporate Responsibility activities are perceived as peripheral of the business. However, this is not enough to convince society that business is making a valuable contribution to building a better society.

It has been reported that 64% of ‘Occupiers’ were younger than 34 years old.

This Millennial generation will eventually “occupy” the future of our society. These people will play the future role as the engine of business productivity, and will be the future leaders of the private sector. This generation holds the key to prosperity worldwide.

It is said that the Millennial generation has different priorities and expectations. This was supported by our survey. They want to make a positive difference in the world. Based on our survey, the majority of them want to work for an organization that cares about how it impacts and contributes to society. The Millennial generation will be in high demand for their working lives.

I know many companies here in Japan have code of conduct or “SHAZE”, “SHAKUN” in Japanese. However, I don’t think there are many companies which make sure how these codes relate to their business strategies and its people’s behavior.

Generalized statements about the purpose of business are not sufficient at all. Companies can better understand the contribution that their businesses make to the economic, environmental, and social progress of the economy. They can make that contribution clearer to their wider constituency and they can share progress against their purpose on a regular basis.

Any business can identify and articulate the reason for its company’s existence. And any business can craft a narrative that expresses how its products and services contribute to building a flourishing society.

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In the survey sponsored by Deloitte, business leaders were asked about stakeholder awareness of their own company’s statement of purpose. 55% of Internal stakeholders were considered most informed, believing it to be widely known throughout their organization. In contrast, only 25% felt their customers, consumers, or clients could explain the societal purpose of their enterprise. Even fewer (23%) believed their industry or competitors would be aware of it.

It is the time for corporate sector to consider better articulating and communicating the role that business plays in pioneering innovation and driving societal development.

Doing so, today’s business leaders can not only engage better with the central priorities of the Millennial generation but also can bring a range of other benefits. A shared societal purpose inspires teamwork, cohesion, and community. It can serve as the ignition key for extraordinary effort, harnessing the hearts of people.

Both thinking and feeling are essential to make sustained change, and both are found in successful organizations. The true key to change is in people’s emotions. That is why a shared sense of societal purpose is very important to drive a change in organizational identity and culture.

Just after the great earthquake in East Japan, a number of employees of parcel delivery service, Yamato Transport began participating in the rescue activities in the disaster area using the company’s delivery trucks. This decision was made by the employees themselves and it was performed without the permission by the headquarters. Knowing the fact afterwards, the CEO of Yamato became extremely pleased and proud of their activities which were performed without his permission, because it is great evidence that the employees truly understand the societal purpose of the company.

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The message from both the Millennial population and the business leaders was that the success of business should not be measured on profit alone and that the purpose of business cannot be defined in purely economic or financial terms. Profit as the sole measure of success is rejected by 92% of Millennial generation and 71% of business leaders.

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I know many companies report community investment and environment-friendly activities. Business should report not only financial performance but its positive impact on wider society and its performance against its societal purpose. As a matter of fact, according to the business leaders survey, 76% of business leader believed that the value of a company should be measured by the positive contribution that its core business makes to society as well as by the profits.

It is no more Corporate Social Responsibility which is rather remote from business or departments which concern only day-to-day business dealing with customers and vendors. It is no more “Responsibility” at all. It is now a core part of business.

‘Responsibility to society’ stops to be just about the side effects of core business. Instead, The Societal Purpose of Business starts to be seen as integral to every layer of strategic and operational planning. And it is a crucial part of answering the question of where the business is trying to get to over the long term, and how it is planning to get there.

Decisions and activities must be traced back to the societal purpose of the business. Societal purpose helps integrate sustainability and commitments into any operational systems, business plans, or performance goals.

A shared sense of societal purpose can significantly help to drive organizational change in this direction. By reimagining the purpose of an organization, the organization can empower and enable it to drive towards a sustainable future.