In a wide-ranging interview with Critical Resource, Gillian Caldwell – CEO of the influential NGO Global Witness – calls on industry leaders to put long-term business models before quarterly profits and urges a trend towards personal liability for executives who violate the law.
Insatiable demands for quarterly profits prevent CEOs from thinking long term
“Right now companies are in a tough spot because the market has created an insatiable demand for quarterly profits at any price. It’s only the forward-thinking companies and the CEOs who aren’t at risk in terms of their position or authority who are prepared to be talking about the long-term viability of their companies. If you don’t deliver your quarterly profits, your head can roll even if it is because you are strategic and taking the long view. That’s the experience of so many CEOs today but it’s so short-sighted. They aren’t doing their companies any favours – we need to be thinking in longer-term ways.”
CEOs should prepare for a trend towards personal liability
“Company executives should prepare for a trend in the direction of personal accountability and liability. It’s unfortunate that it requires a sense of personal risk and insecurity to ensure compliance with fundamental expectations regarding the right to life, human dignity, human rights and environmental concerns, but sometimes it does. Without personal accountability and responsibility the buck stops nowhere.
While not an explicit focus for resource companies, we are seeing movement on this with regards to money laundering. We have successfully campaigned for a ground-breaking new law in the UK which will ensure senior level personal liability within banks for failure to comply with anti-money laundering regulations and the repercussions could be anything from loss of bonuses and suspension to personal fines and jail time.”
Showing leadership is challenging for companies but failing to do so is even riskier
“I have sympathy for companies that are trying to demonstrate leadership. The more you do that the more you subject yourself to scrutiny, and potentially to risk. However it should be obvious that in the end it’s the right thing to do, both from a business perspective and in terms of meeting responsibilities, whether legal or otherwise.
I think it’s important for industry leadership to be encouraged. That may not always be the place for Global Witness but in general we should be highlighting responsible behaviour and talking about what’s working well when it is. Look at our recent Digging for Transparency report, which looked at how Section 1502 of the US Dodd Frank Act has been implemented in the Democratic Republic of Congo. What our report revealed was that 80% of the 100 companies surveyed obligated to complete supply chain due diligence had failed to meet the minimum requirements – but 20% had been able to. I think it’s important to be hearing from those firms that have followed the law and have been able to do so without breaking the bank so that we can push others to jump in line.”
History is bending in the right direction but we’re not where we need to be
“The emergence of national and international mechanisms around human rights, business responsibility and environmental standards are all brand new terrain. CSR first emerged as a concept within companies’ communications departments before forward-thinking firms mainstreamed it as a priority. Companies are increasingly recognising that they need to be contemplating a triple bottom line and that if they continue with a ‘profit at any price’ mentality they will feel it, whether at the shareholder or consumer level.
So on the upside history is bending in the right direction, but on the downside we are still nowhere near where we need to be. Many companies continue to operate in illegal and sometimes outright murderous ways. 2014 was the deadliest year in history for earth and land rights defenders, with an estimated two people killed globally every week according to our most recent annual report on the matter. This should send a signal to investors as to where they can responsibly function. Honduras, for instance, is the most dangerous place in the world to operate as an earth and land rights defender and indeed last year’s Goldman Prize winner Berta Caceres was recently assassinated in cold blood for defending indigenous Lenca land against the Agua Zarca dam project in Río Blanco.”
The writing is on the wall for fossil fuel companies
“On climate change, the tide is turning and for fossil fuel companies the writing is on the wall. Now that we’ve got the Paris agreement, we’ve got to keep global warming within 1.5°-2°C. If you are an executive and don’t start paying attention to the long-term viability of your business model, you are in breach of your fiduciary obligations. We are pushing, as founders and former members of the board of the Extractive Industries Transparency Initiative (EITI), to require companies developing new fossil fuel projects to demonstrate their viability in a 1.5°C or 2°C constrained environment. I find it questionable whether ground will ever be broken on many fossil fuel projects given the forthcoming regulatory mechanisms and financial and environmental pressures to get off fossil fuels. The stranded assets that are on a lot of ledgers these days are simply irresponsible financial management.
We are going to start targeting fossil fuel subsidies. Such subsidies have no place in today’s environment given the catastrophic climate risk we are confronting. Governments which maintain them are distorting markets. If we level the playing field for renewable energy I think we will see it outperform expectations.”
Corruption is about more than money being passed under the table
“When we talk about corruption, we are not just talking about a paper bag of money being passed under the table, which is how people typically understand corruption. We are talking about the capture of the entire political and economic system by vested interests. What we have in too many places around the world is governments which are basically paid to deliver private gain rather than public good. And in the end, that’s a scenario that damages us all. If we don’t have governments that are functioning by and for the people while also recognising that we live in a symbiotic relationship with the environment, we will continue on this path in which the earth can’t sustain our current trajectory.
In the case of Myanmar, we recently uncovered that the country’s jade industry is worth an estimated $31bn annually and is controlled by former military dictator Than Shwe and a range of individuals subject to US sanctions. Very little of that money – which equates to more than 40% of the country’s GDP – is making its way into national coffers. At the local level we are seeing massive environmental destruction, drug addiction and impoverished living conditions. For a country that is in the process of a democratic transition that’s obviously not what we’d hope to be seeing. We have had conversations with Aung San Suu Kyi and we are pleased to hear that she’s committed to addressing these issues.”
True transparency is impossible without an end to anonymous companies
“Transparency is impossible to achieve in a world where beneficial ownership is entirely impervious to any public scrutiny, which is why we are campaigning to end anonymous companies. We’ve made significant headway on this in the UK and the EU, starting from a virtual standstill, when people thought this was pie in the sky, to making some really important progress. I think the trend is in the right direction. In the US it’s going to take longer due to political opposition, even though research shows that it is the easiest place in the world to set up an anonymous company.”
With regards to EITI, that initiative is incredibly important, but it’s facing a lot of internal challenges right now. Our concern is to ensure that EITI is all it promises to be, i.e. a mechanism which countries can join to access guidance and to ensure some degree of visibility and accountability regarding natural resource extraction within their boundaries. On EITI’s board there are different philosophies about the threshold to join the mechanism and what is required to sustain membership. We have our work cut out for us there in coming years.”
Global Witness is uniquely positioned to provide behind-the-scenes guidance
“We are engaged in a very hands-on way in policy development at the governmental level and inter-governmental level, and with companies. We have a reputation for speaking truth to power and pulling no punches. But the truth is that because of the depth of our supply chain due diligence expertise – whether in metals, oil and gas, semi-precious stones, palm oil, timber or rubber – we are being invited to provide guidance. We are in a unique position to have a behind-the-scenes look at companies that are really serious about managing their risks and assuming their responsibilities. They’re recognising that it’s critical to good business practice and to ensuring the long-term viability and sustainability of their operations and forward thinking companies and governments value our expertise and recommendations. What we assiduously avoid is any undue influence, especially with a company which in turn could require us to look the other way or avoid an exposé.”