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Interview with Pavan Sukhdev: What will the companies of the future look like?

Pavan Sukhdev is a former top manager at Deutsche Bank and author of the book "Corporation 2020 - Why we need to rethink the economy". In an interview with Marcus Franken, editor-in-chief of zeo2 magazine, he emphasizes that the pure fixation on profit is a relatively new invention of the economy. There are enough role models for a change to a “good company”. But, warns the ex-banker, if politics doesn't change the framework and doesn't slow down the fatal effects of advertising, there won't be enough imitators.

Marcus Franken: Don't be evil - Google went public in 2004 with this slogan. Can a corporation be successful and avoid becoming an ecological and social monster at the same time?

Pavan Sukhdev: That is difficult. For almost a hundred years, companies have been geared exclusively to increasing the capital of their investors. If you stick to it as a CEO, as a boss, then public goods such as the environment and social issues become unimportant. Then the focus is solely on maximizing profits for shareholders and financiers.

For many business leaders, profit maximization is a requirement in the employment contract. In private, they can be very nice people.

Many people act much more unscrupulously for their company than privately. Even if they have a sense of fairness, they ruthlessly enforce the interests of their company. A manager may actually be a caring type, but as a hiring manager he cuts salaries and fires employees. At home he separates glass and paper, and his company produces hazardous waste. A corporate ego can be the opposite of the private ego. But if you constantly have to act against your inner conviction, it is an enormous psychological burden. And sometimes people implode under this psychological pressure and turn to the public.

Whistleblowing is something new. Is the pressure getting bigger?

The pressure may be increasing, but whistleblowing is not new. It has been around for a long time that employees make public what their company is doing.

And the people with the least internal ethics work in advertising and marketing from your point of view. Then they literally prostitute themselves.

They are for sale and proud of it. Investment bankers - I was one myself - don't have the best reputation. But if you ask them about their personal ethics, they name high standards and point out that banking depends on trust. Only in the advertising industry does one completely submit to the customer, where the following applies: "We are here to implement customer wishes and to sell what customers want to sell." Advertisers pride themselves on being ethical neutrals. There is no other profession.

Doesn't that make people sick?

Nice. And there are also people in advertising who think that this has to be changed. Ultimately, however, it is the responsibility of the companies that target the public with their advertising. In the future, advertising must inspire customers much more for sustainability and seek more and more dialogue between customers and companies. This is no longer a one-way street of great promises. Customers want to know what's behind a company. One of the first large companies to make their environmental impact public was Puma under their then boss Jochen Zeitz. Puma has had good experiences with it.

Are we globally beyond the point where it's all about profits? Are we moving towards sustainability?

There are entrepreneurs who are leading the way here. And there are managers who would like to. But: Let's add up the big companies with ambitious ecological goals: WalMart with annual sales of $ 470 billion; Puma with 15 billion, Unilever with 65, the Indian Infosys with 7 billion and so on. Even if we calculate that liberally, we don't get more than $ 700 billion in annual sales. That is less than one percent of the world's national product. Even if we take their suppliers with us, we will remain below five percent of global economic output. We have no problem with the role models. There are too few imitators.

Profit maximization - isn't that the natural law of the economy, against which there is no cure anyway?

No, on the contrary. It's a fairly new phenomenon.

So young that you don't know anything else?

You have to look back a little. In the beginning, companies only operated on behalf of states. They were temporary units with a limited mission: to build roads and buildings, to collect taxes or to wage wars. If something went wrong, the state had to be fully liable. That changed only from 1820 in the USA and from 1850 in England. Companies were only allowed to be liable with the capital that investors had made available to them - that is the birth of the limited liability company. And it was not until 1870 that companies were allowed to operate in all conceivable fields in the USA. Since then, companies have been allowed to do whatever they want, where they want and for how long they want. That made companies very, very flexible and successful.

But even then, business success was the only criterion.

No, it wasn't nearly that one-sided. Industrialists like Henry Ford had other interests. Ford wanted every American farmer to be able to afford his famous "Model T". The car was supposed to be so cheap that his own employees could buy the car. That is why he foregone profits and used the money to build new factories all the time. So he lowered the prices through mass production, from $ 850 to $ 500. And, by the way, he has always attached great importance to recycling in his factories. Even if that reduced the profit.

Aside from recycling, it's just a strategy to grow sales.

In his old days, Ford began to think in other dimensions and became more of a statesman than a businessman: he wanted his company to serve society and people. Instead of amassing profits, he continued to raise the wages of his workers, even though he could find far cheaper labor in the market.

That still sounds a lot like Ford PR.

In 1920 Ford was sued by two brothers named Dodge who owned ten percent of the Ford Motor Company. These two minority shareholders demanded that Henry Ford pay higher dividends to his shareholders. Ford promptly told the court that he did not and did not want to do so in the future. The court unfortunately found the Dodge brothers right and passed a far-reaching verdict in "Dodge versus Ford": The purpose of a company is solely to pursue its own interests. Ford, which owned more than half of the company, had to pay dividends to its shareholders.

And that starts from your point of view ...

... the era in which companies only focus on maximizing the profits of their financiers and everything else becomes unimportant.

This tunnel vision is what makes the "company" construct so successful?

If entrepreneurs want success at all costs, use aggressive marketing and play with people's fears, convert fears into wishes and wishes into demand, then they are very likely to be very successful.

As an entrepreneur, however, I can also lose everything. Success is the reward for those who risk something - at least that's what economists always say.

That is a transfigured perspective. The dominant companies today are corporations. These are limited liability companies that have very little risk. Because the investors are only liable with the money that they have made available to the company as a loan or in the form of shares. With this money you can do aggressive marketing and shape the market environment. Since the Second World War, the markets have been massively deregulated under pressure from multinational companies. Today companies around the world can choose from where the price-performance ratio is best: raw materials in Africa; Processing in China and India, where wages are low and factories are even subsidized; Packaging in Japan and sales in Europe, Japan and North America, where customers want high quality and can pay for it. A global company juggles the global price differences. This is the model of success of our time.

How are you going to slow that down?

An important step is to control the outside capital in the company. When corporations no longer expand with their own money but with borrowed money, they often take extremely high risks, far beyond their own company value. If they fail, their demise threatens many people outside of these companies and they must be saved by politics. We're even talking about bailing out hedge funds. These are not animals that are threatened with extinction. They are monsters! You have to control the borrowing of big companies just as you do now with banks.

Good companies ”for you are companies like Patagonia outdoor clothing, the software company Infosys and Natura, a Brazilian cosmetics manufacturer. What is good about them?

A company can pose as a grasshopper that ruthlessly scours the earth. Or run your business as a trustee of nature. Patagonia wants to make the best sports gear in the world without doing it at the expense of nature. Companies like Infosys create education, they care about improving human capital. Other companies organize themselves as communities: Natura Cosmeticos in Brazil wants to be sustainable and sells its products through a network of 1.2 million housewives, everyone benefits. Such companies not only generate profit for themselves, but are also a benefit for the environment and society. You are doubly successful. For me, this is “Corporation 2020”, from my point of view the corporate model of the future.

The companies you are talking about work in market niches where customers sometimes pay more for their products because of the environment? Is it transferable?

As a role model, that certainly cannot be applied to all industries. Take energy, for example: We have a massively increasing demand for energy around the world and we all know the external costs of coal, oil and gas. But we are not doing anything about it globally and have so far failed to reduce energy consumption. It doesn't help to tell BP, "Stop it, the consequences are terrible."

Eleven of the 15 largest companies in the world in terms of sales are oil and coal companies such as BP, Shell and Rosneft. If you take climate protection seriously, they are doomed to extinction, so they defend themselves against every bit of environmental protection.

They don't want to change and they can't change either. That is why they put all their power in lobbying against change. Corporations are like species in the animal kingdom that evolve according to their environmental conditions. The ecological conditions are determined by politics, prices and institutions. And these framework conditions are still very favorable for fossil fuels. The oil companies adhere to this and everything they do remains greenwashing. See BP: They propagated the slogan “Beyond Petroleum” with a few billion dollars and nothing happened. Politics, prices, institutions - all wrong.

How can sustainability get sexy?

The current state of affairs is: First, the old institutions do not function in an ecological sense. The national governments cannot solve the challenges because they are dependent on the old companies, their economic growth, high employment and tax revenues. Second, power lies in the economic sectors. It makes little sense to change the energy supply in Germany alone. Or only in India or only in China. An international company then shifts its activities. It's like with the sausage: if you press on one side, the sausage moves to the other end.

And do you want to get the whole sausage?

We need new political formats, a kind of G20 meeting of the most important company bosses. Let's stay with energy: The CEOs of the companies, which together have 80 or 90 percent market share, and the five most important heads of government in the world have to sit down at a table and decide on a common path for climate protection towards the 2-degree target. Only that would have a chance of success.

Do you no longer believe in the UN climate process?

The frame is too big. Take a look at the UN's forest protection program Redd +: In 2010 there was a relatively small group of maybe 13 countries in Bali from two groups, one of which owns rainforest and the other wants to protect the climate. This relatively small group was determined and ready to act, that would have worked - I saw it myself. But then within three years the group grew to more than a hundred states - and at that point all momentum was gone.

But why should China, of all people, give up its blockade in a small circle?

China is extremely dependent on cheap coal, so there is no easy solution. But it is the only way to get China and India to invest heavily in renewable energies. Not just in today's forms of wind power and solar power. But also in new forms such as hot submarine springs, offshore wind and large solar systems in the desert. These could then also be areas in which the large oil and coal companies are involved and open up new areas of business for the future. It is crucial to weaken their resistance to change.

In their home country India, too, the middle class is currently growing up to become the consumers and emitters of tomorrow. How can you change that?

Consumerism works in India in the same way as it does in the West and is growing stronger, especially in the cities - in the countryside it is something else. Advertising plays with people's fears, creates wishes and turns wishes into consumer demand. This is being promoted primarily by the multinational corporations. In the west, their profit rates are falling because people there are buying less. That is why they are now trying to open up new markets. It's time to control and limit advertising.


* The full interview appears in the special economic section of zeo2, a joint production with "UnternehmensGrün". From December 10th at the station kiosk.

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