Major businesses are finding it tougher to manage their relationships with society, but the risks of failing to do so are higher than ever before, according to former BP boss Lord Browne.
Delivering the annual Sheffield Management Lecture, organised by the city’s two universities, Lord Browne warned that companies that acted against society’s expectations would lose out, even if they were acting within the law and he urged business leaders to listen closely to their critics.
“The most important and most difficult thing a business can do… is to be open to criticism. More often than not, it is your critics, not your friends, that give you the early warning of what is actually going wrong,” said the former BP chief executive.
“The financial crisis was caused, in part, by the failure of some banks to act in the best interests of society. As a result, the banks have faced the anger of citizens, governments and regulators and the consequent restrictions on pay, tighter regulation and government intervention.”
Lord Browne said the development of the internet had empowered citizens and enabled them to hold businesses to account as never before, citing the BP disaster in the Gulf of Mexico, which occurred after he had left the company, as an example of how ordinary people could watch and comment on a company’s every move.
Businesses had to focus on three things if they were to manage their relationships with society. They had to engage with society, define their agenda and deepen their understanding of the risks and challenges they could be facing, communicate their strategy to their employees and then, most difficult of all, ensure the strategy was carried out.
Asked how business might justify operating in developing countries and areas of the world ruled by less democratic or authoritarian regimes, Lord Browne said companies had to identify the economic, social and environmental benefits for everyone involved.
They had to adopt the safety and environmental standards expected in the developed world and, whilst pay levels might be lower, they could be expected to be in the upper third of those paid in the host country.
“Exploiting citizens will always be punished,” said Lord Browne, who also urged businesses to invest more time and resources in understanding and developing relationships with governments and non-governmental organisations (NGOs).