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Last Updated: Sunday, 16 December 2007, 15:59 GMT
Should doing the right thing be voluntary?
By Anthony Reuben
Business reporter, BBC News, Cornwall

Tim Smit gets quite upset about people thinking small about sustainable enterprise.

Tim Smit, chief executive, Eden Project
Everybody talks about business as if the rules of business were handed down to Moses
Tim Smit, chief executive, Eden Project

"One of the problems is how do you control the language so that it doesn't get marginalised as being hippy, touchy-feely guys doing NGO (non-governmental organisation) type stuff," says the chief executive of the Eden Project in Cornwall.

"It's very nice but it's nut cutlets and it's open-toed sandals."

Sustainable enterprise refers to businesses that carry out their functions without damaging the environment, their employees or the population.

Pyramid selling

Having set up his extraordinary domed attraction in a steep-sided clay pit in Cornwall, Mr Smit is now using it to change the world.

The project's biomes attract high powered groups of business leaders and politicians to discuss environmental issues.

The way it is running is also setting an example.

The Eden Project is waste neutral, which means that for every tonne of waste it sends to landfill it buys an equal weight of recycled products.

When it first signed contracts with its 2,300 suppliers, it said that it would renew their contracts in 18 months if they themselves had become waste neutral by then.

The suppliers that had their contracts renewed were told that they would be renewed again in three years if they had managed to make all their own suppliers waste neutral by then.

Mr Smit describes it as an effective (and legal) form of pyramid selling.

But he says that the policy costs the project about 150,000 more per year than just sending everything to landfill.

And in the short term, the main beneficiary is the county of Cornwall.

'There to make money'

The Eden Project does not have shareholders, so justifying such sustainable policies is not a problem, but as long as they are voluntary it presents problems for public companies.

Mads Ovlisen, chief executive, Novo Nordisk
I rely on the people who protest against our use of animals not to blockade our places
Mads Ovlisen, chief executive, Novo Nordisk

"You have to remember that businesses are there to make money," says Simon Bishop from Shell's charity arm: the Shell Foundation.

"Their responsibility is to their shareholders and you have to balance it up.

"You can't have some utopian ideal that you can turn multinationals into this wonderful thing for society. I just think that's not going to happen."

James Smith, chairman of Shell UK, says you have to persuade shareholders to trust you.

"It boils down to a matter of belief. It's a bit like your strategy," he says.

"I can't prove my strategy - you believe in it but you can't run a controlled experiment. You do it and you succeed or you don't on the strength of that strategy and I think sustainable development is a bit like that."

'A lot of flack'

The world's largest voluntary initiative encouraging sustainable business is the United Nations (UN) Global Compact.

Shareholders is only one step in the process, according to Mads Ovlisen, chief executive of the Norwegian pharmaceuticals company and diabetes specialist Novo Nordisk and on Global Compact's board.

"We told them that it is in the long term interests of any shareholder that the company is doing well socially and environmentally," he says.

"I don't rely on my shareholders only for the company to do well. I rely on the people that want to become our employees. I rely on the people who protest against our use of animals not to blockade our places.

"People do not stop buying insulin because we do things wrong, but we get a lot of flack if we are not behaving properly. So the input of critical stakeholders is as important to us as the inflow of capital from shareholders and I think shareholders are starting to realise that."

Fish fingers

But is it good enough to let companies take the measures they consider necessary within the current system, or are changes needed to the system to force them to "do the right thing"?

There are good examples of big companies taking strong voluntary action, such as Unilever deciding to gradually move its Bird Eye fish fingers away from cod towards a more sustainable fish.

But Birds Eye has a dominant position in fish fingers - the situation is different in highly competitive sectors, where companies might even prefer regulation.

A biome at the Eden Project
Eden's biomes attract all sorts of groups discussing environmental issues

A company that wants to spend a little extra on cleaner technology, for example, might be very keen for new regulation that forces its competitors to use such technology as well so that everybody's costs rise equally.

But there are also dangers with new regulations.

"It is very clear we need standards, but I do not believe that today we have the infrastructure that would make regulation meaningful," says Mr Ovlisen.

He goes as far as to say that leaving such important questions to governments might be dangerous.

"Kofi Annan [former UN Secretary-General] once said that governments only get the courage and resources to do the right thing when businesses have taken the lead."

"I think there's a risk that if we rely on governments to set the stage that it will be too late and they may not really understand what the issues are."

Handed to Moses?

So how would you go about regulating for sustainability?

"Everybody talks about business as if the rules of business were handed down to Moses," Mr Smit says.

"We've developed them over 300 years - there's no reason why we can't change them."

If he was Gordon Brown, Mr Smit continues, he would insist that every limited company that wanted to trade in the British Isles would have to donate one golden share that would give the holder a proper say in the company.

"And the only say it would have would be that the auditors have to audit the company in question in terms of its shareholders total wider interest, which means an audit in terms of the impact on the country and the population of that country as well," he says.

But he says that there are many things that can be done without radically altering the system

"If we actually want social enterprises to be anything better than a knitting circle we have got to actually look at the world as it is, not with a strange idealism of a world that doesn't exist," he says.

"It's OK to make money."

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