Q and A: This is how stakeholder capitalism can help heal the planet

“Planet Earth is sick… so we have to heal it.”

These are the words of Peter Brabeck-Letmathe, Chairman Emeritus of Nestlé, and former Chairman and CEO of Nestlé SA, speaking about the unprecedented environmental challenges facing mankind. At the 2020 World Economic Forum Annual Meeting in Davos, discussions are focusing on stakeholder capitalism – a system in which private corporations are trustees of society and work for the benefit of everyone. As the Forum’s Founder and Executive Chairman Klaus Schwab says, this model is the best response to today’s social and environmental challenges. Here, Brabeck-Letmathe talks about what stakeholder capitalism means for businesses and why we must act now to conserve our planet’s future. What does stakeholder capitalism mean to you?

Stakeholder capitalism involves a rethink of how commerce operates. It means that as a business we can no longer only create value for shareholders. Instead our business policy needs to create value for the many people, resources and communities it impacts. Whereas shareholder capitalism exploits resources to maximize shareholder returns, the businesses of tomorrow must include wider considerations, adding value for employees, our community, and to another important stakeholder… planet Earth.

We must realize it’s stupid to convert nature into cash and then use the cash to try to repair the damage we’ve done to nature. We must develop business policies that take into account the health of our natural world and a sustainable approach to using our planet’s resources. How can businesses reconcile the profit motive with the need to preserve the natural world?

If you look at things on a macro level, then obviously what we are doing to the planet doesn’t make any sense. Unfortunately, not everyone considers the global implications of their actions so nature’s resources are being abused. Take water as an example. The world currently uses, or overuses, almost a third too much water, and this over-exploitation will grow to 40% of what is sustainably available. It’s alarming because this irresponsible behaviour towards water will lead us within the coming decade to a major ecological problem that will impact every aspect of life on Earth. Why? Because we don’t give value to it. Producers can use and abuse the planet’s water without limit or cost. When we talk about creating value, we must include the planet. Placing a monetary value on the water used by industry would cause businesses to rethink their production processes to use less. Crop farmers would be incentivized to adopt irrigation methods that minimize water consumption, for example; manufacturers would veer away from water-intensive processes, reuse water, or invest in factories that can operate water-free.

If we learn to use our natural resources in a more responsible manner, can we sustainably feed our growing population? This is a vital question. And my answer is yes, we could, but we have to change. The current agricultural model is too resource-intensive and not sustainable in the long term. It has no respect for our planet, so we have to move to a system of regenerative agriculture.

It’s not enough to simply eliminate food waste, for example; we have to rethink the basics of how we produce food. Today, plants receive about 2.7 times more water than they really need, which can be substantially reduced, according to research at ETH Zürich. New technologies like precision agriculture, microbiome treatments, synthetic biology and other developments could help replace today’s model of depletion with tomorrow’s culture of regeneration. These solutions all make good business sense. Microbiome technology, which allows the transfer of the microbiome of eg. A drought resistant plant to a normal one, can increase agricultural yield by between 17% to 35%, without genetically modifying crops. So the idea of creating shared value is part of a valid business proposition.

What should business leaders do differently in 2020 to speed up change? We need to ask the right questions and make sure what we are doing helps the planet recuperate. At the moment when we talk of climate change, the solutions all lie in reducing CO2 levels in the atmosphere. This is important, but the issue is more complex and multifaceted.

Fundamental questions need to be addressed about how we can reduce our energy needs and where our energy is coming from. Moving from petrol or diesel engines to electric cars reduces CO2 emissions, but simply swapping the power unit in today’s heavy SUVs will not be as effective as producing lightweight cars that run on smaller, less energy-hungry power units. Synthetic fuels also aim to reduce CO2, but it takes up to 9100 thousands of litres of water to produce one litre of biofuel. Running out of water is one of the biggest threats the planet faces, yet we are aggravating the situation. In solving the pollution, we are damaging the planet in other ways.

Simply asking how we reduce carbon dioxide levels is not a holistic enough approach. With every action we need to look at whether what we are doing damages the planet or heals it. Where do we go from here? How do we persuade the world’s business leaders to adopt more ecologically friendly practices?

It’s important to understand that the situation can’t be resolved by any one single player. We all have a role to play: organizations, business leaders, policy-makers and others. Organizations such as the World Economic Forum provide an important platform to raise awareness of the issues and decide on the best courses of action for the long-term wellbeing of our planet. Moving forward requires a commitment from the private sector to devise business policy that’s broader, more holistic and in harmony with the health of the environment. Governments also need to be forward-thinking and consider the environmental impact of the legislation they implement. We need to move to a regenerative economy, to build business models that repair the damage done to our natural resources. Together, we must usher in a new era, where our planet is respected as a vital stakeholder in the economy of the future.