1. KEYNOTE SPEECH
By: Herman Mulder
FOR EY CORPORATE ADVISORY (EYCA)
San Jose, Costa Rica, 17 November, 2016
LADIES AND GENTLEMEN,
2017: A YEAR OF CONSEQUENCES
The year 2015 was in many respects a memorable year: with the adoption of, inter alia,
the Sustainable Development Goals, the Paris Climate Agreement, supported by the Addis Action Agenda, the pace was set for
breakthroughs in the period 2015-2030on addressing a number of key societal issues.
However, the year 2016 has shown a number of electoral outcomes in notably UK and USA which may challenge the momentum
of international collective action; further plebiscites in the EU in 2017 may offer further clarity abou t direction and momentum
maintained (or lost).
PREPARE FOR THE UNEXPECTED
Business leadership is ever more tested in our challenging, rapidly changing times: it wants to make its offenses work while at the
same time ne ends to have effective defence-lines in place. Even more than before it needs to read the environment it is operating
in well, but also be prepared for unexpected societal, political and technological developments and risks: " si vis pacem, para
bellum". Business should recognise that "nothing is impossible, particularly when it is inevitable", so read the trends and take
anticipative action.
Public affairs and information technology (media, data) have become business cases in their own right. But risks are also
competitive opportunities.
“10 COMMANDMENTS”
To steer through testing times, following "10 commandments" may offer a useful framework for business governance, policy and
practice. If adopted you know who you are, why you are here, what you stand for, how you do it; you are taking well-informed
decisions, balancing diverse and often conflicting interests and be open about it. When challenged by competitors or society, you
are reasonably prepared.
1. Define Purpose: in corporate governance papers and codes the purpose of a corporation is increasingly addressed as follows:
creating long term value for all relevant direct stakeholders ( notably customers, employees, investors), without adverse impacts
on indirect stakeholders and society-at-large, and considering the (inter-)national policy agenda ( such as the SDGs, including
climate change);
2. Create a Values' based internal Culture: by realizing such Purpose, the corporation must define its corporate values and
have its policies and commitments on key issues relevant for stakeholders and society-at-large; it must also create an internal
culture (through training, KPIs, compensation) to bring this into practice;
3. Adhere to Societal Baseline Norms: the most relevant, comprehensive, international norms are the OECD Guidelines for
Multi-National Enterprises(2011) andthe UN Guiding Principles for Business & Human Rights(2011), which both are addressing
"do no harm" in the value chain; they make reference to a number of other frameworks ( such as ILO Conventions, GRI Guidelines
for sustainability reporting); both frameworks are voluntary for business, yet not non-committal, as there is no "free-law zone";
governments may attribute sanctions if companies do not adhere. Since the emergence of progressive business-only led codes of
conduct (such as the Equator Principles, UN Global Compact, Principles for Responsible Investment, Global Reporting
Initiative/GRI, ISO26000 in the period 2002-2004), the emergence of "soft law" by the mentioned OECD Guidelines andUN
Guiding Principles (2011), recently selective legislative initiatives are taken: on corporate non-financial reporting EU Directive
2014/95 andthe 2016 UK Modern Slavery Act should be mentioned; also proposals for mandatory due diligence by companies
should be mentioned; business-led multi-stakeholder, industry sector specific accords are being negotiated in the Netherlands,
with the textile and banking sectors having concluded the first accord, all based on the OECD Guidelines andthe UN Guiding
Principles;
4. Embrace the high level Societal Agenda: the 2030 Sustainable Development Goals are a worldwide adopted, comprehensive,
universal set of Goals, Targets and Indicators to convert " the tragedy of our commons" into a "strategy for the commons"; agreed
by 196 countries, it is recognized that these Goals are the key proxy for doing the rights things ( "doing good") and they cannot be
realized without a major contribution of the private sector, business in particular; the catalytic effect of the SDGs offer clear
direction and, hence, opportunities for business;
5. Perform Risk-based, impact-sensitive Due Diligence: initial and on-going scanning of own risks, dependencies from and
impacts on third parties will reinforce "sustainabilising and stabilizing the business value chain" and "doing well" by being
prepared for new opportunities and problems;
6. Scope the Entire Value Chain: business may be in various ways associated with , and held accountable for adverse impacts on
stakeholders or society-at-large; in this context three levels may be differentiated: causing, contributing (including benefiting
from), "directly linked" through a business relationship (including investee); the costs of conflict and the emergence of new
liabilities due to changes in regulations and even un-codifiedsocial norms, are often underestimated;
7. Internalize and monetize all material Externalities: product prices do not reflect the non-compliance with international
standards or cost or damages not (yet) recognized in such agreements or elsewhere, as these are simply off-loaded on society; the
same is true for the Profit & Loss ( and hence the valuation) of companies; methodologies are being developed towards true price,
true value, true costs. It took GRI less than 15 years to become from an idea for a complex issue (sustainability reporting) a widely
applied de facto standard for non-financial reporting, supported by its multi-stakeholder governance and due process. Integrated
pricing or company valuation may not take so long to become good industry practice. The big absentee in our journey is the
consumer; while reaffirming his=our) right of choice, he should be made aware, eg by true pricing, of the intrinsic societal value of
a product;
8. Conduct Active Stakeholder Engagement: the corporation should not only actively engage with share- and other rights-
holders, but also with all its direct stakeholders and other interest-holders, including trade unions, NGO's; these organizations are

2. more than challengers-only: they often offer different perspectives, and even solutions for better business; the materiality matrix(
what matters for the company, the stakeholders, society) is a good way to deepen this conversation;
9. Consider Transparency as the new Normal: in our "flat world" with no place or time to hide, bad news travels in whatever
form travels fast and minor issues or perceptions easily become big issues for a company; structured, continuous disclosure of
issues which matter to the company or its stakeholders is creating brand value and trust; we are moving from a world in which
anything you report may be used against you, to a world in which anything (potentially)material to any direct or indirect
stakeholder will held against you. As reflected in EU Directive 2014/95, non-financial reporting must become mandatory, next to
traditional financial reporting, the combination or, even better, the integration hereof offering the public a better "reason able
assurance" of the financial position of a company;
10. Be Humble and seek Partners: nobody is perfect, a complaint is an opportunity, FAILing is the first lesson in learning;
listening to the challengers and the "canaries in the coal mine", reading the signs on the wall, integrated thinking (away from
traditional silos), preparedness to question yourself (or being questioned by others), "we cannot walk alone, if we go together we
get farther": all are essential ingredients for successful, lasting leadership.
As increasingly in our faster and more intense society, with the death of distance and time ("perceptions are driving realities"),
authenticity, honesty, creativity are among the new key drivers for lasting success. Also, we should be active learners, adap ters:
"from accidental pain the value chain to systemic gain"!
MAKING MARKETS FIT FOR PURPOSE
Yet, apart from our own intentions, business is not operating in a vacuum: in needs efficient and effective markets. And markets
today are not: information is asymmetric or one-dimensional and hence misleading, the law and regulations are deficient,
internally conflicting or not enforced. "Making markets fit for responsible and sustainable purpose", eg as defined by the above
"do no harm-" frameworks and the "doing good-"aspirations of the SDGs needs further study and (collective) action. SDG#17 calls
for public-private partnerships: business and civil society organizations should not wait for the government to act: a collective,
grounded "we are ready" to support the implementation , with ambition, of the SDGs would be a major catalytic step for the
private sector to serve a public interest, as well as its own!
RECOMMENDATIONS
My recommendations to you are twofold:
1. Stay the course on "responsible and sustainable" business, notwithstanding possible headwinds inthe next few years: we are
right on our journey; remember: no planet, no people: no profit!
2. Embrace as private sector (business, academia, civil society organizations) the SDGs and the OECD Guidelines as compasses for
practice, and ensure that the government invites you to be at the table in crafting coherent, pro-SDG policies and supporting
practices.
Thank you!