Lord Michael Hastings on improving corporate citizenship
This article first appeared in ICAS’ CA magazine.
Lord Michael Hastings tells Laurence Eastham how far business has come in recognising its responsibilities to society – but why the journey has really only just begun
Business has incorporated a new language. It’s one that gives values and purpose equal rank alongside revenue and profit. And it’s a shift that reflects a growing consensus that the priv09ate sector must exist to serve planet and society, rather than solely shareholders. Profit still carries critical importance, but it is no longer king.
This isn’t just about ‘do good’-ism and tree hugging – which is how people loved to categorise it in the 1970s and 80s – it’s about the innovative potential of business.
Lord Hastings has spent his professional life pursuing better ways of doing business. Following a career in front of the camera as a political correspondent and presenter, he joined the BBC corporate affairs division in 1996 and was appointed the broadcaster’s first Head of Corporate Social Responsibility in 2003. That was followed by a 13-year tenure as KPMG’s first Global Head of Citizenship from 2006-2019, in which he helped to drive the ongoing evolution of professional services. He became a crossbench peer in 2005.
“It’s beyond incredible,” says Hastings of changing business behaviours. “We saw this wonderful and monumental shift begin to take place in the early part of the 2000s. The first factor was an awareness that the environmental catastrophe that was closing in on the wider world was also closing in on business. And business executives were beginning to realise it was an area of innovation, product development and service development that was profitable. This isn’t just about ‘do good’-ism and tree hugging – which is how people loved to categorise it in the 1970s and 80s – it’s about the innovative potential of business.
“The second factor was that the business community began to consider the question: ‘Is there not a purposeful statement of authenticity that chief executives want to attach themselves to?’ This isn’t just a job with a pay packet – this is leadership. The third factor, the underbelly of it all, is the 2008 global financial crisis – great uncertainty, markets in turmoil, and people losing their jobs. I don’t think you’d find a chief executive now who would say ‘I don’t give a damn about those things’ – but you would have found them in the 1980s and 90s.”
As well as wider structural changes to the world around us, Hastings is a keen proponent of the influence of the World Economic Forum (WEF), founded by Klaus Schwab in 1971. He sees the organisation as a necessary platform for discourse and debate – giving politicians and business leaders space to tackle those big issues that transcend party politics and national borders. Hastings attended the WEF’s annual meeting in Davos for each of his 13 years with KPMG – he jokes about the effects of freezing outdoor temperatures and stuffy hotel rooms – and took up various posts at the organisation between 2009 and 2014.
“If there’s one organisation that did more than anyone to bring all this effort into focus, it’s the World Economic Forum,” he says. “Klaus Schwab wrote a seminal article in 2008 in which he talked about the role of companies as corporate citizens. Every business, every company, every commercial entity is a citizen of its community, let alone the stakeholder, wider-world community.”
Words and reputation
I do not believe CSR should ever be used again. ‘Corporate social responsibility’ just became a fad description for companies to do some outward activity.
In fact, business practice – and the language we use to describe business – has evolved so quickly that it has led to one of Hastings’ former job titles becoming outdated in his eyes. Hastings greatly prefers Schwab’s vision of corporate citizenship to corporate social responsibility (CSR) – a term he believes is too vague to encourage companies to really think about how they can best harness their expertise for social good and, at worst, can facilitate “purpose washing”.
“I do not believe CSR should ever be used again,” Hastings says. “‘Corporate social responsibility’ just became a fad description for companies to do some outward activity. When I was at the BBC, and at the beginning of my time at KPMG, I found multiple people using the term to mean ‘We spent a day caring for a school in the neighbourhood. We painted a fence. We cleaned up a local wood.’ Of course, those are valuable things, but they’re not the sum total of a company’s core intellectual or physical assets.
“If you take the vivid example of an organisation like KPMG, with thousands of highly skilled, smart, diligent professional accountants, is it best to spend their time painting fences or is it to help charities, schools and institutions not only improve their financial processes, but become more efficient and effective? In the UK, we have 333,000 not-for-profits, most of whom could not afford the services of these organisations. Society is about putting all skills to work more effectively.”
Hastings accepted the invitation to join the business with the agreement that corporate citizenship, not corporate responsibility, would be the driver.
“I was attracted to KPMG because it’s an institution on which 165 countries vitally rely for authenticated audits,” he explains. “That is fundamental to investment and securing the finances and futures of business.
“As the years went by, I got to do something unique – to aid the organisation all over the world to do its environmental duty and its philanthropic duty. But way beyond that, we got to look into the soul of companies and organisations that KPMG wanted to do services for.”
Hastings says this approach led to the company winning more than 30 pieces of work during his tenure. Chief among these was being awarded the audit of Unilever in 2013 – the UK’s eighth-largest audit contract at the time.
Together and apart
Hastings believes that purpose must be awoken at an individual level if it is to truly take root at organisations, powering improved financial and social outcomes. Every single person must feel they are part of something bigger than themselves – particularly in accountancy and professional services, where an employee’s work can have a significant butterfly effect across markets.
The imperative is that there are things that matter more than competition. And those things are getting as basic as survival for certain people where climate impact is savage.
“I was pushing hard to say to auditors, for example, that the work you do is intrinsic to confidence,” he says. “Don’t undermine the work you do on a day-to-day basis. It is absolutely essential to the sound working of the market – it provides for employment, it provides for investment, it provides for profitability, it provides for services. See what you do as a responsibility and an opportunity.”
A major challenge in activating purpose in this way, however, is when a disconnect has emerged between employee, product and user. Individuals are sometimes so far removed from the impact of their work that it is difficult to feel an integral part of the process. Hastings also places much responsibility with educators of decades past, who encouraged a narrow view of business that distinctly separated work and wider society.
“It would be fair to say that less than a majority of accountants, tax advisers and business service supporters got their wider purpose,” he explains. “A lot of people were schooled at a time when the function was only about profitability and financial duty. Every business school of a credible university, up until the 2000s, would have still promoted the traditional view that the executives of a business are primarily responsible for their shareholders’ interests and for the profitable increase of the business.”
Accountancy is also in the tricky position of continuing to integrate purpose at a time when other sectors are demanding leadership on its measurement, reporting and verification. Most pressing is the existential threat posed by climate change. Robust and comparable metrics on climate impact are not only needed to incentivise ethical decision-making, but also to reliably communicate the pursuit of purpose to all stakeholders. The solution to this chicken-and-egg dilemma, says Hastings, is unprecedented cross-firm collaboration in the industry.
“There is a huge amount of work to be done,” he says. “It needs the bosses of the Big Four, and the next four, to come into a common circle. This isn’t a competitive issue, although there is competitive advantage on the back of how these things are done. The imperative is that there are things that matter more than competition. And those things are getting as basic as survival for certain people where climate impact is savage. And we’ve seen the explosive impact of the loss of biodiversity and what it does to our natural environment.
“If we’ve seen all of that, we don’t want these companies to compete on who’s going to look better, but to combine their prospective informational services. We’re all in it. And if we’re all in it, it would be helpful to decide and define these society-impacting themes and find a common circle to do it together.”
Lord Hastings is taking part in the ICAS London Episode series.