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Media 22 Sep 2008

John Elkington interviewed by Valor Econômico

Download the attached PDF to read article in Portuguese.

Certain expressions frequently used in business circles in recent times can be traced back to the thinking of John Elkington. This English sociologist, who for the past 30 of his 58 years of age has concerned himself with issues of the environment and, more recently, sustainability, coined phrases such as “triple bottom line” (the idea that companies should measure the value they add, or destroy, not only at the economic level, but also the social and environmental levels) and its more popular version “PPP – people, planet and profit”.

Co-founder of the research and consulting firm SustainAbility, which enjoys a select and influential portfolio of clients, Elkington is one of the gurus of the global social responsibility and sustainability movement. He has published 17 books, among which the phenomenally successful Green Consumer Guide, which sold over a million copies. In February 2009 he will be visiting Brazil for the final ceremony of the Itaú Sustainable Finance Award, aimed at stimulating academic and journalistic writing on this theme, a project supported by SustainAbility.

Below are passages from the interview he gave Valor by telephone from London.

Valor: What kind of changes can you see in corporate attitudes since the introduction of the “triple bottom line” concept in 1994? Have companies made any progress in this respect?

John Elkington: Yes, I think they have made a lot of progress. I look at countries like Brazil and see a growing number of companies, businesses and entrepreneurs taking this path. There still remains, to be sure, much to be done.

Valor: _Why, in your opinion, do companies use the language of sustainability yet fail to incorporate it into their practices? _

Elkington: It is a very human characteristic that, whenever a new fashion or vocabulary comes on the scene, people play with it for a while. They wear some of the new clothes and try the new words out. I think the same happens with sustainability. When the concept was created, most of the leading companies in the field of corporate citizenship were focused on the environment. Some of them only thought in terms of how much they could save by reducing their energy consumption. They used the term Ecoefficiency, which was adopted by the World Business Council for Sustainable Development. Ecoefficiency is indeed important, but not only from the financial angle. There is also an economic angle to it, in the sense of structuring economies. And there is a social angle too. Many companies, especially in the US, have a difficulty with the social dimension of sustainable development or the “triple bottom line”. To give just one example, retailer Wal-Mart, one of the largest in the world, recently adopted a series of environmental measures and is talking about sustainability, but is not doing very much regarding the social angle.

Valor: What is the reason for that?

Elkington: 21 years ago, when the term sustainability was first introduced, we spent the first two or three years explaining how to spell the word, since no one had ever heard of it before. And now? Now Wal-Mart uses it, General Electric uses it and a host of the most diverse types of companies all over the world use it. I think there are many reasons for this besides just fashion. One reason is the seriousness and importance of the issues involved. Climate change is one of them. There is the whole issue of poverty, the challenge of providing people access to clean water and pharmaceutical products, of producing energy at a cost that people can afford. These are concerns not only for candidates, activitists or governments. There exists a general expectation, the result of globalization, that the corporate world should play a role regarding these issues. This is why I believe that companies are increasingly using the concept of sustainability to describe these challenges that in the past were the concern of governments and no concern of ours. They are beginning to acknowledge the existence of a corporate responsibility as well.

Valor: _What are the practical implications of the use of this language by corporations? _

Elkington: When we hear people using the language of sustainability we should always say: “It is wonderful that you are so committed to sustainability, but do you really understand what it means?” It is not just a question of cleaning up a factory or doing some philanthropic work. It is a global agenda. Not concerned just with protecting things or saving things. It is about economic change, political change. It is in this context that the “triple bottom line” concept can be useful.

Valor: Does this change include a new way of looking at profit?

Elkington: Unlikely. I do not think we will see any radical redefinition of the concept of profit over the next five years. I think that economies need to be able to measure and generate profits in order to be able to invest in the future. What happens is that people begin to perceive that the current economic and business models are frequently associated with some kind of social or environmental damage that the traditional way of measuring results or profits does not take into account. That is when we see the first leading corporations starting to treat social and environmental results as dividends.

Valor: How do you see this process developing?

Elkington: Certain social entrepreneurs and recently-established foundations have begun some very interesting work on the measurement of social returns and dividends. The real challenge is that, if companies start doing this on their own, financial markets over the long term will not permit companies to aim for social returns if no one is paying for them. There are plenty of arguments about how social returns help companies survive, help legitimize the business and so on, but financial markets do not appreciate this kind of talk. I think that, once again, we are going to need government help to design tomorrow’s markets and put prices on things like ecological systems, natural resources, healthy communities, whatever, in order to help markets understand that companies should look beyond market trends and needs. But I think that, in most parts of the world, we are still far from this stage and there is still a long way to go.

Valor: _But how do you see such change coming about, if the market has been king for so long? _

Elkington: It is hard to see. I think that market failures, like the problems the banking sector is going through at present, mean that in many countries governments will take action to regulate certain sectors of the economy. Many of them will seek to clean up problems from the past instead of innovating and creating new structures and values. I have gone to the meetings of the World Economic Forum for the past seven years now and it has been amazing to see how the big new environmental and social issues have made their way on to the agenda. Political and business leaders are being virtually forced to pay attention to this new kind of agenda. I imagine that progress will be somewhat checked by the recession, but that it will return even more forcefully in a few years. And financial markets are key to ensuring that capitalism responds in the right way.

Valor: How can the financial system and financial markets make an effective contribution?

Elkington: In Switzerland, one of the world’s largest re-insurance companies – Swiss Re – is extremely concerned with recent trends regarding natural disasters. What scares them more than anything is climate change. Most earthquakes, for example, occur where the population is not particularly affluent – it would be different if they occurred in Japan or California – so the insurance risk is not that great. But climate change is taking place in parts of the world where the population is indeed affluent and has taken out insurance and where the risk for companies like Swiss Re is growing by the day. They are beginning to write into their contracts the environmental standards that the companies they re-insure should practice. It is one way to try to bring about change. At the same time, Swiss Re is a major investor and, in view of climate change, is beginning to rethink its investment strategy. Other major financial institutions have committed to similarly broad agendas.

Valor: What are the practical consequences of this kind of commitment?

Elkington: _Today, the presidents and board members of these companies publicly defend this type of agenda. It is not just Greenpeace talking any more. Today’s business leaders have taken up the campaign. And recently they have started calling for action from political leaders. Three or four years ago this would have been unthinkable. Business leaders are waking up. Not everywhere in the world, but they are waking up. _

Valor: _What practical measures can large corporations take? _

Elkington: Large corporations are increasingly requiring that their suppliers, their value chain, adhere to minimum standards regarding the environment, efficiency, human rights and fair trading. If a politician tried to impose new standards, companies would immediately gang up to oppose them. But if Wal-Mart decides that six months from now it will only sell energy-efficient light bulbs, if it announces that it will no longer stock nor sell incandescent bulbs, there is not too much that suppliers can do about it. It is market dynamics that get things moving.

Valor: _Your latest book “The Power of Unreasonable People: How Social Entrepreneurs Create Markets that Change the World” is dedicated to social entrepreneurs that inspire new business models. Does that go for conventional companies as well? _

Elkington: Most people that work in large corporations are not particularly innovative and believe that the way business is conducted today is the way it is going to stay. They forget that individual and global economies go through periods of drastic change, which economists call creative destruction. I think we are going through one of such periods. Social entrepreneurs focus on areas where markets have failed, where they simply do not attend to people’s needs for drinking water, medicine for Aids, malaria, tuberculosis. Where the market is not functioning, they do social business. Companies should use social entrepreneurs as a magnifying glass, as a microscope, to spot future business opportunities.

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