Business leaders must also take the real world’ into account

Leading the Way is a column written by PricewaterhouseCoopers professional staff. It appears in the Business section of the Bangkok Post twice each month. The column provides specialised advice to corporate decision-makers in Thailand on global and local business trends.

This article appeared in the March 31, 2009 issue of the Bangkok Post.

By Dato' Johan Raslan

We face a daily barrage of news of distressed economies caused by the near collapse of key financial markets, extreme volatility in oil and gas prices reflecting demand/supply mismatches, global saving and spending imbalances, and severe climate change complications - all symptoms of a world in calamity.

To say we live in troubled times is an understatement.

However, while many of us struggle to come to terms with the economic storm that grips us, how many of us recognise the fragility of our world? We face the unprecedented challenge of three crises at once - climate change, an energy shortage and the financial downturn - which directly and indirectly affects business performance. In the wider scheme of things, this means our world's sustainability.

The forest for the trees: In the face of adversity, business leaders should refrain from an over-focus on short-term earnings at the expense of long-term value creation and security. Otherwise known as short-termism, this is perhaps one of the main culprits of the current economic turmoil. Short-termism has led to a distortion of values and priorities and a seemingly endless string of bad decisions.

Many of us could hardly be faulted for making our businesses' health our top, and only, priority in the current environment. But short-sighted behaviour will work against us. The danger in short-termism is in its appeal - that is, the promise of immediate profits for those who are able to make the most of the moment. It is the very thing that got us into the economic turmoil we now face that could plunge us into even greater despair.

Leaders who forsake long-term and sustainable development do so at their own peril, and that of everyone who depends on them. In fact, we should begin measuring our success in decades, not quarters.

What is the sustainability agenda? The sustainability agenda begins with making a commitment to incorporating social, environmental, economic and ethical factors into a company's strategic decision making. It extends to evaluating how these factors affect the business - including all of its stakeholders - and what risks and opportunities these factors present. Finally, the sustainability agenda asks businesses to adopt measures to mitigate risks and take advantage of opportunities. ("The Sustainability Agenda: Industry Perspectives", PricewaterhouseCoopers, 2008)

At the heart of it: Many of us acknowledge and understand the argument for embedding sustainability thinking into the way we do business. The question - a daunting one in spite of its brevity - is, how?

The fact is, sustainability issues pose a myriad set of challenges and individual business sectors require unique solutions. How do we as a business community - so varied in our industries, in where we come from and where we're headed to - find a common resolution that we can work together on?

At a recent World Business Council for Sustainable Development (WBCSD) workshop, I was heartened to hear the participants agree that the answer to this lies simply in people. At the heart of our sustainability woes, the group agreed, it is the values and actions of those in leadership roles and their people, that can make or break the sustainability cause.

Responsible and sustainable vision - your baseline: The leader's role is crucial. Leaders set the tone for how businesses achieve success - and the methods they employ to get to where they want to be. Those who inspire their people with a vision founded on sustainability and responsible behaviour will ensure that these values become a part of their organisations.

At this point in our history, and here I am talking about the history of the capitalist enterprise, perhaps it is time we returned to the basics - old-fashioned values such as integrity, accountability and transparency. Late last year, at the fifth Conference on Ethics in Business: Corporate Culture and Spirituality at the European Parliament in Brussels, a diverse group of leaders agreed that corporate ethics is the answer to the economic crisis.

Leaders must recognise that their business activities affect the environment, community, people and marketplace within which they operate: the business world and the "real" world are intertwined, and actions on either side affect the other.(Written by Dato' Johan Raslan, joint executive chairman of PwC SEAPEN Region, which comprises Malaysia, Thailand, Vietnam, Cambodia and Laos. In his next article next week, he will discuss how collaboration, a responsible and sustainable mindset, and winning the talent war will help us ensure our future.)

Extracted from an article first published in "Unlocking the Potential: Investing in the Future of the Muslim World", a World Islamic Economic Forum Special Commemorative Publication 2009. Any comments, please contact leadingtheway@th.pwc.com.