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Lately, a lot of chief executives
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have promised to shift
their business model.
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They pledge to serve all stakeholders,
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not just shareholders.
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Investment return, they say,
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will no longer take precedence
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over the health and welfare of employees,
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suppliers,
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even planet Earth.
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Not just in a crisis,
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but every day.
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This is a change that business
absolutely needs to make,
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but that does not mean
it is going to be easy.
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It's like going from being a young couple
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to having kids.
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When you're trying to make decisions
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with just one other person
in the relationship,
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it's pretty straightforward.
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Where should we have Sunday lunch?
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What should we watch for the movie?
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But when you add one child,
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a second child,
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new decision makers,
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life gets complicated.
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And each one has their own unique needs
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and individual perspective.
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We all know that you're not supposed
to have a favorite child,
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and that being fair
doesn't always mean being equal.
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It's one of the biggest
challenges in parenting,
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and in stakeholder capitalism.
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Employees need to earn a living wage.
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How else can they be confident
that they can feed their families?
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Pension fund investors
need to earn a positive return.
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Only then can they be sure
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that they are managing
the savings and retirement
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of their investors responsibly.
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Consumers want and deserve
products and services
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that are both affordable and safe.
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And we all want a society and planet
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that lets us breathe.
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I have spent my career
helping companies and their leaders
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improve their performance,
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particularly at times of transition.
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We've all gone digital.
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We've responded
to new health care regulations.
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We've improved their productivity,
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made them more diverse and inclusive.
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It took us a while to learn
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that you can't actually
make a company more digital
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by appointing a chief digital officer,
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or that a chief diversity officer
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could not single-handedly
make a company's culture more inclusive.
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So we already know that we cannot
just appoint a chief stakeholder officer
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if we really want to serve
all stakeholders.
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Instead, we need to reset.
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If we really want to serve
stakeholder needs,
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we need to get everyone involved.
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There are no quick fixes,
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but I do have a few ideas.
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Let's start at the top: the boardroom.
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This is where a company's strategy
is set and governed,
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and if all stakeholder needs
aren't accounted for here,
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really, nothing's changing.
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By definition,
a board can stand in the way
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of serving all stakeholders.
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Why?
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Because often, a board
is elected by shareholders.
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It represents their interests.
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It's there to act on their behalf.
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That's not just a dictionary definition.
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It's enshrined in law in the US,
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and this can really limit
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how much change a CEO or board can effect
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if they want to serve the needs
of more stakeholders.
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For years, if we're honest,
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we've been ticking boxes:
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ethnicity, age, gender.
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We've been looking for people
who look different,
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but boards still do the same thing.
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They look after the interests
of shareholders.
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We don't need tokens.
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We need people who truly
understand the experience
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and represent the diversity
of our stakeholders.
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Corporate boards can learn a thing or two
from the nonprofit world.
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I chair a charity, Teach First.
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It's an educational charity
that produces outstanding teachers
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and schools.
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Our board includes a wide range of skills:
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former civil servants,
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activists, teachers, ambassadors,
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technologists.
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Some of them on paper have very little
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that's an obvious fit
for an educational charity.
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But they each have real experience
with our stakeholders.
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Every board is different.
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Imagine a world where corporate governance
was very different than today:
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community leaders sitting
on the boards of their local bank;
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moral philosophers
advising social media companies;
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environmental activists
as directors of global energy companies.
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CEOs keep making pledges.
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They keep talking about social purpose,
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but real change won't happen
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until we change who governs
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and for what purpose.
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We have to change the laws
of incorporation that limit us,
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and remember who we really serve.
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Next, let's talk about the big E,
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the environment.
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Sustainability goals have been written
into annual reports all over the world.
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The goals are very lofty,
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and very, very long-term,
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and none of them will be accomplished
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if they don't have
real steps along the way.
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It's like saying,
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"I'm going to run a marathon,
or a 5k, sometime in the future."
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No one is going to believe you
until they see you get off the couch,
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start training,
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putting in the miles every single day.
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CEOs need the same thing.
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They need concrete,
achievable, measurable goals,
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and they need to share the data
and progress along the way.
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Being green is good
for the bottom line in the long run,
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but it requires investments,
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and those have to be shared.
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Brazil-based Natura is the world's
fourth largest cosmetics company.
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They've got the usual
profit and loss statements
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for the investors and the executive,
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but it's their other two P and Ls
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that make them a little bit special.
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One measures how well
they do for the environment.
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The other looks
at their impact on society.
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They measure everything:
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seeds planted,
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jobs created,
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rubbish thrown in the bin.
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Shell, the Anglo-Dutch energy company,
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is another example.
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They figured out
what many of us already knew;
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it's not good enough
just to look after your own emissions.
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In fact, their emissions
accounted for about 15 percent
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of their system emissions.
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So they changed.
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Working with activists and pension funds,
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they set three-year rolling goals
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with progress markers year by year.
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By 2050, they hope to reduce
their net carbon footprint
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by almost two thirds.
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That is a major reduction.
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Initially, these targets
are linked to the bonuses
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of their top 150 decision makers,
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and over time the pay
of nearly 17,000 employees
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could be linked in part
to how they treat Mother Earth.
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It's still early days for this industry
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and many of these initiatives.
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Success will depend
on how well we stay the course
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when the investments
become more significant,
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when stakeholders disagree,
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or when competitors start catching up.
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Let's spend a little bit of time
on a stakeholder
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who is sometimes hidden,
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and those are our suppliers.
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They are the connective tissue
underneath many companies:
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Uber drivers, widget makers,
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service employees.
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They're like an invisible life force
that power our economy,
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and one thing we know for sure
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is that the success
or failure of your business
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depends on your suppliers
and partnerships.
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It's a painful lesson that many hospitals,
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including in the US and UK,
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will take from COVID-19.
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In pandemics, robust, agile supply chains
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deliver the masks, ventilators,
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testing kits and vaccines
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that we all need.
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It saves lives,
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and it helps to reopen our economy.
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Suppliers don't just matter
when we're in a crisis.
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If you really want to scale
your positive impact,
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you have to look beyond
the walls of your company.
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BHP Billiton,
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the Australian mining company,
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did just that when it made a commitment
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to end gender imbalance
in its workforce by 2025.
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It decided to encourage, or kind of nudge,
its suppliers into also participating
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by providing training and technology.
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In Chile, Kal Tire
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helps to change the enormous tires
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on BHP's trucks.
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It is a very physical,
demanding, dangerous job,
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and to be honest with you,
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not that many women
were even interested in the job.
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The two companies change that.
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First, they developed a mechanical arm.
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And then they proactively encouraged
women to apply for the job.
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Now, Kal Tire is just one company.
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It's an example.
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BHP Billiton has thousands of suppliers,
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and if you really want to engage
your supplier network,
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you can use incentives
to get them engaged.
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Today, Kal Tire illustrates
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how well that can be done,
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and across BHP's supplier networks,
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women are now 15 percent
more likely to get the job
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than they were even a year ago today.
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Suppliers and partnerships
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will make or break your business.
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In good times, they're the key
to your success,
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scaling it worldwide,
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and in bad times,
they're the key to your survival.
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If suppliers are a hidden stakeholder,
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then customers are probably
the most visible.
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But when shareholders rule supreme,
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some companies may have an incentive
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to focus on customers' short-term desires
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rather than their long-term needs.
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Consumption of processed food
has taken off around the world,
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and with it,
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global obesity rates have increased.
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That's why the Access to Nutrition
Foundation now tracks the salt, fat, sugar
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that global food and drink companies
include in their products.
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They also track whether
they market them responsibly.
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I think it's like measuring
the calories consumed
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for every dollar these companies earn.
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Companies that have been
paying attention to this
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have begun to make changes,
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including ingredients and formulations.
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Nestle reduced the sugar
in its breakfast cereal.
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Unilever reduced the volume
and calories in its ice cream.
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Now, I'm not sure that's a good idea,
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but I can tell you it takes creativity
and a little bit of investment.
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We know that consumer needs
change over time,
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but companies that make
these investments proactively
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can be better positioned
in the long term, even for shareholders.
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As we all have tried
to improve our eating habits,
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tried to eat less ice cream,
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these companies were well-positioned
to capture that market.
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They were ahead, more competitive,
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and able to be more relevant.
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It also aligns with governments,
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many of whom have looked
at nutrition labeling,
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exercise programs, or even sugar taxes
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to encourage healthier eating.
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If customers are stakeholders,
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then they should not be harmed
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by the goods, services
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and products we produce.
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It's that simple.
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For stakeholder capitalism to really work,
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we all need to see ourselves
as chief executive officers.
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If we really want change,
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we have to be willing
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to bear the backlash.
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We're not always going to get it right,
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and that's OK.
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Real, substantive change takes time.
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The right answer keeps changing.
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But we have to try to do better.
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There's a quote that I love
that really captures
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the essence of this moment.
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It's by the American poet
Gwendolyn Brooks.
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"We are each other's harvest.
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We are each other's business.
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We are each other's magnitude and bond."
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Business is a set
of ever-changing human bonds
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through which we plant and grow and reap.
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Our harvest is our lives and livelihoods,
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our civil liberties,
our skills and communities.
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Business is what we make of it.
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Let's hit reset
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and serve all stakeholders.
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Thank you.