ALK professor, dr hab. Bolesław Rok: Accountability of leaders

Socially engaged business is a new dimension of capitalism. Where did this trend come from? Is business to fix the world?

Paradoxically, corporate social commitment is not something new at all, but rather a return to the roots. We can read many great stories about the pioneers of capitalism from 100 or 200 years ago, about their altruism, philanthropy, cooperation with the local community, social investment, co-governing with employees. In Poland, we also have a great, though somewhat forgotten, tradition of social business involvement, e.g. in the interwar period. Of course, the motives for such activity can be interpreted in various ways, ranging from vanity, through enlightened selfishness or even naive idealism, to religious mission. Capitalism of the late twentieth century forgot about these roots, focusing on maximizing profits, but above all on financial speculation detached from the real economy. As they say in the US: Wall Street has forgotten that Main Street exists. In Poland, we began to build selective capitalism, i.e. selecting from the rich achievements of this tradition only some ideas that fit the beliefs disseminated at that time. I think that only the last 10 years, maybe a little more, is the time of building a more modernly understood capitalism in Poland. We have a great generation of new entrepreneurs who have recently been developing great companies, also great in the social sense. Because business is also about fixing the world, and maybe even above all about it. Because who is able to fix something here on this planet: politicians, officials, social activists, scientists? And our world needs a solid repair.

SRI or socially responsible investing is a profit not at any cost. Do you think it’s a necessity or a fad? Does a socially committed company have a better chance of “seducing” the investor?

This question can be seen in the context of long-term investments, for example by pension funds. Then – and here most of the active players agree – it is worth excluding companies that do not include environmental responsibility in their strategies towards various stakeholder groups. It is simply a method of reducing your investment risk over the long term. Because if a company does not follow, for example, the principles of environmental protection recognized by leading entities in the industry, it is difficult to expect that it will build a competitive advantage and revenues in the long term. “Normal” investors, or at least the dominant part of them, do not feel about their social responsibilities and do not get seduced. However, they try to act rationally, also minimizing the investment risk as much as possible. This can be seen in the last letter to BlackRock investors. Larry Fink has been emphasizing for 2-3 years that they will require the companies they want to invest in detailed ESG indicators, elimination of fossil fuels, because the threats of a climate catastrophe are real. But at the same time, the vast majority of BlackRock’s assets – it is estimated that almost 89% – are still invested in companies related to the fuel sector. So I believe that responsible investing should be extremely important to our survival on the planet and to the survival of companies on the market, but it is still a whim for most of the investment industry. I hope that the taxonomy in the field of sustainable financing, currently introduced in the European Union countries, may slowly start to change this market and the attitude of investors.

What can entrepreneurs have on the life of local communities? Do companies have an obligation to improve the quality of life in their immediate surroundings?

I wouldn’t go that far here! You cannot impose such obligations on companies, especially in a country where business is tough and at a time when everyone expects it to be even more difficult. Sure, entrepreneurs have an impact on all of us, including local communities. I only expect the management team to have a certain level of impact awareness, that is, to clearly define goals in the scope of consistent reduction of negative impact, e.g. harmful emissions caused by poor quality machinery, unethical treatment of local workers; and increasing a positive impact – by collaborating at the local level, creating valuable jobs, supporting local suppliers, etc.

Poland is a country of small and micro companies. Is the reason for the low involvement of such companies in CSR activities due to the distrust characteristic of Poles? Or maybe it’s not yet this stage of development?

I think that persuading small companies in Poland that they absolutely must introduce “this CSR” is definitely harmful. More than 50 years ago, in the first CSR textbook used at American universities, it was emphasized that there is a so-called The “iron principle of responsibility” which states that corporate social responsibility should be proportional to their social impact. Small businesses tend to have little social impact, so don’t bother them with CSR. It is different when they begin to have an increasing impact, e.g. by being an important link in the supply chain of a brand with a global reach. Then they usually find that their big business partner requires not only low price and high quality, but also non-financial indicators in various areas of management. It is the market that expects them to be responsible and the market has to be subordinated to, or the business should be lost. A different approach is proposed by some startups who just do not want to be part of irresponsible business and immediately think in terms of entrepreneurship developed in order to change the world for the better and thus earn money. I am talking about startups with a positive impact, which I am trying to describe with my team in subsequent reports, because it is a very interesting phenomenon, recently visible everywhere in the world, not only in Poland.

Compliance with the rules of fair play in managing the organization is particularly important in times of crisis. Why is it worth being honest with employees and contractors? What should first and foremost be expected of leaders? Moral intelligence (MQ)?

I believe that in Poland last year there was a great social awakening of business, unfortunately related to the economic and human tragedy of the pandemic. There is a high probability that the business that has just noticed the society will not turn back from this path. I call it moral enlightenment. And on the horizon we probably have more, even more serious social and environmental crises that will strongly affect the existential foundations of business and will force us all to accelerate maturity. Fair play is needed, but it is no longer enough. Maximizing shareholder value is also a thing of the past, now it’s about stakeholder capitalism, as highlighted by speakers at this year’s Davos. This is a great challenge for leaders. They must take seriously this revolutionary, disruptive change that is expected of them not only by Gen Z.

The role of the leader is crucial in shaping a culture based on values. What kind of leadership do companies need now? Why do narrow economic criteria fail when it comes to tough decisions?

We live in extremely demanding times, especially when it comes to expectations of leaders. This applies to all spheres of activity, but perhaps the most interesting discussions and dilemmas concern business leadership. Regardless of all the terms used by leadership researchers, regardless of the various adjectives with which the term “leadership” is applied, it is worth becoming aware of the role of a leader for the organization inside and for fulfilling a certain social role by this organization. The latter is much less often described in Poland, while in the world, for example, regenerative leadership has been discussed particularly strongly in recent months. I am aware that there is still no good term in Polish. It is the pandemic that has forced business leaders to notice that there is a world outside their organization, and that this social and natural world has a significant – and rapidly growing – impact on what a given organization, led by even the most amazing leader, can achieve. Responsible innovations are needed at the level of models, processes and systems that will allow leaders not only to manage in a responsible and sustainable manner, not only to reduce the negative impact, but to start to renew, regenerate ecosystems. So that we can survive.

Efficient use of resources is the way to improve the quality of life for future generations. Responsible consumption and production, changing the awareness of suppliers, producers and consumers. How to transform single actions into systemic ones in order to achieve common success?

We know that the planet’s resources are finite, that biodiversity is rapidly declining, we feel that the air cannot be breathed anymore – at least in winter – that there is a shortage of water in many places. Conflicts over access to these dwindling resources will escalate. And this threatens not only our lives and the lives of other species, but also the survival of the business. Comprehensive strategies for closing the loop of raw materials and indicators to monitor their implementation are needed. In large companies, measurable commitments are already made to radically reduce the negative impact on the climate as part of their own market activity, and to reduce their carbon footprint. The climate neutrality of the economy is a great business opportunity, not just a moral obligation.

What is the educational responsibility of business as a change leader? What activities to popularize ecological attitudes are taken by companies and how can they help in building eco-habits of the whole society?

Finally, we come to the most important question. Managers often say that they would like to educate their customers environmentally and provide products and services that serve the environment, but cannot, because customers are not ready and will not buy. In turn, individual consumers often write that they would like to change their lifestyle to a more sustainable one, but they have no chance because companies do not provide such products and services. Here is the old dilemma, which should come first, egg or chicken? For many years I have heard this in various conversations. Only recently have new companies and alternative products emerged, such as plant food products, recycled clothing, etc. And suddenly, in the face of a shrinking market, large companies began actively introducing new organic brands and were surprised to see how quickly their sales grew. It is such an accelerated environmental education of all market participants. I hope that this will strengthen the balanced approach in the largest companies from various industries so much that soon products and services will appear on a much larger scale, as well as processes that are not only climate-friendly, but also delay the prospect of a climate catastrophe. Because consumers in Poland are ready for it. Now, climate leaders in business are needed.

Prof. ALK, dr hab. Bolesław Rok

Director of the Business Ethics and Social Innovation Center of Kozminski University. Associated with business for thirty years as an entrepreneur and advisor. Co-founder of the Responsible Business Forum, co-author of the annual Responsible Company ranking for the Dziennik Gazeta Prawna daily, coordinator of international projects on innovation for sustainable growth. Member of, among others, the Program Committee of the Institute of Innovative Economy, Jury of Polish National Sales Awards and the Marketing Director of the Year competition, Supervisory Board of mFundacja, Program Committee of United Nations Global Compact, and Ingenious Business Network.

Last Updated on April 13, 2021 by Karolina Ampulska