Oxford University Press has just released a new chapter from the forthcoming Oxford Handbook of Food, Water and Society: Integrating Multi-Capital Thinking in Business Decisions. The new chapter, contributed by Fronesys partner Jyoti Banerjee, explores how we need to change our understanding of value. Here is Jyoti’s account of what you can expect in this new publication.
We are in a tough place when it comes to water.
More than 2 billion people lack access to safe drinking water and more than double that number lack access to safe sanitation. With a rapidly growing global population, demand for water is expected to increase by nearly one-third by 2050.
In her acceptance speech for the 2009 TED Prize, the noted oceanographer Sylvia Earle described the rapid decline of the ocean in stark terms: our industrial fishing machine has consumed over 90 per cent of the big fish in the ocean, and the carbon emissions from our fossil fuel energy machines have acidified our oceans and bleached nearly half the coral reefs around the world. The Smithsonian Institute (2018) tells us that an icefree North Pole is now increasingly possible in our lifetime, and the resulting rises in sea level from the melting of glacial and polar ice by climate change will inundate land currently home to between 460 and 760 million coastal residents.
Crucial role played by business decisions
How did it come to this?
Given the key role that business has played in driving and enabling these planet-scale impacts, it is not unreasonable to ask how business makes its decisions. When an industrial trawler scrapes the ocean floor like a bulldozer, taking everything in its path, it might be easy to identify the business that is carrying out the trawling. However, the impacts we are dealing with stretch way beyond the workings of a few individual companies. They are the consequences of trillions of business decisions involving billions of humans. Individual finger-prints are not visible. For companies across the world, the gifts of nature are literally free gifts – whether it is air, water or the fish in the sea. They seem limitless, the assumption being that business decisions are not constrained in any way by the availability of natural resources.
We now know that this is not true. The free gifts of nature are not some kind of bonus assets sitting on an accounting ledger which we can use any way we want. We live in a resource-constrained world, and the billions of business decisions we make daily are changing and reshaping this world we live in.
The Oxford Handbook of Food, Water and Society, edited by Tony Allan, Brendan Bromwich, Martin Keulertz, and Anthony Colman, has at its core the idea that the relationship between the producer and the consumer is broken. My contribution to this book is a chapter which offers a different but complementary thesis: the fundamental organising principle of our global business system is the relationship between producer and investor, which is now acting in malign ways to distort decision-making in the system. The distortions are deeply consequential for the system, and for all the participants in the system – namely, humankind.
Role of corporate reporting
A key component in the relationship between companies and their investors is the corporate reporting system, which is the working together of “the individuals, organisations, institutions, rules and processes through which companies communicate their performance and activities.” Companies use corporate reporting to gather information about business decisions, performance and outcomes flows and to communicate to shareholders that they are doing everything they can to meet their (financial) expectations.
This chapter explores the flaws in the corporate reporting mechanism, and the role it plays in driving poor outcomes for the global business system as a whole. We need to be clear about this. Changing how corporate reporting works will not fix the global business system. However, we also need to be clear that no fix of the underlying system can proceed without deep changes in our understanding of the relationship between producers and their investors, including the ways in which information flows between the two.
This chapter also tells the story of how some businesses are rethinking how they understand value beyond mere financial success, and how they use Integrated Reporting, a new approach to corporate reporting to make better business decisions about water, air, nature, people and relationships – the things that really count. Fronesys partners played key roles in the development of integrated reporting, and so this chapter provides a history marked by their own experiences in seeing a global movement take shape.
Incorporating multi-capital integrated thinking into business decisions across the world will not solve our water crisis, but we cannot expect business to play a positive role in changing the situation without learning how to do so.