Year: 2009

Deepening Luxury in Delhi

jembendell2 Comments

Im just about to leave India after an amazing month. The International Herald Tribune conference last week was inspiring, and for me very affirming. Feedback from Christian Blanckaert, Laurent Claquin, Suzy Menkes and Anna Zegna, among others, about the impact of the report Deeper Luxury on their own work was wonderful to hear. Theyre all doing what they can to promote sustainable luxury. The transcript of my presentation follows. I was taking a bit of a risk, a Britisher going to India and leading an audience in a group reflection/meditation, but the reaction was positive (or those with a negative reaction were too polite to tell me!).

To follow up I wrote a piece in the local business paper, and an article in NYT and IHT mentions the talk.

Deeper Luxury, Presentation by Jem Bendell at the International Herald Tribune conference on Sustainable Luxury, Imperial Hotel, Delhi, India, March 26th 2009.

“Despite the difficulties, the choice of India and of sustainable luxury as the conference theme now has a feeling of serendipity about it, doesn’t it?

Since the IHT made their bold choice, we have seen dramatic events, both here and abroad. What does an economic collapse and a terrorist attack have to do with sustainable luxury? If sustainability is about how we live our lives and what we work for, then they are very relevant, because we must employ our best talents to make our world a better place, whatever our line of work.

India is probably the richest country in the world, in the truest sense of the word rich. Yet it is one beset by massive social and environmental challenges. Coming here to collectively imagine what luxury and sustainability might offer each other, is as important now as it ever was. So thank you IHT for organising what could be a watershed in the luxury industry, and perhaps, if we make it so, an important moment in the sustainability movement.

I’m here because of a report I produced in 2007 for the environmental group WWF. In Deeper Luxury, we mapped out the sustainability challenge and the reasons why luxury brands could do a lot more, ranked companies and provided some examples and tips, as well as a charter for responsible brand endorsement by celebrities. The report took off around the world. I even ended up in Tatler; a dubious indicator of success for an environmentalist. But today I wont go into the report. Instead I’ll say some things about the heart and the head of sustainable luxury management in light of rapid changes. I hope to allay any lingering doubts you may have about sustainability being the future of luxury, rather than just a passing fad.

At its most basic sustainability is about people being in harmony with nature, eachother and ourselves. As our societies have developed, our work and ways of living have had both a positive and negative impact on that harmony. You have likely heard that before. But right now I’d like us to take a moment to sense what restoring that harmony could feel like. You may find it helpful if you close your eyes for the next few moments.

So, now with you eyes shut, try to recall a moment when you think you won an argument, or clinched a deal, or got promoted. Think of how it felt.

Next, try to recall a moment when you were in nature, perhaps looking at a sunset, or where you completely lost yourself in the moment of something you enjoy doing. Try to taste that feeling.

Now contrast it with the first – the feeling generated within you when you won out on something.

Consider whether that first feeling is one of self-promotion – a worldly feeling, while the second feeling comes from your soul.

This is a reflection recommended to us by Anthony De Mello, a Jesuit priest who hailed from Mumbai, and integrated Eastern and Western philosophies.

He says the worldly feelings are not really natural. I quote “they were invented by your society and your culture to make you productive and to make you controllable. These feelings do not produce the nourishment and happiness that is produced when one contemplates nature or enjoys the company of one’s friends or one’s work. They were meant to provide thrills, excitement – and emptiness.”

He suggests we are weighed down by these worldly motivations for approval, popularity, and power. He is suggesting that, actually, less can be more, and “I” can become “we”. That is also a sustainability message. Because sustainability is not so much a challenge out there, but in here. It comes down to how conscious we are in our work. A sustainable luxury industry will flow from a sustainable luxury profession of people inspired by creating things and experiences that generate well-being for everyone involved, and restoring the biological diversity and balance of our planet.

Fear often holds us back from living and working in full consciousness. In our work on corporate responsibility in the luxury sector, there is a nagging fear that there is something fundamentally contradictory between luxury and sustainability. Some fear that we cant do that much, particularly given the current economic situation and the limited awareness of consumers in key growth markets.

One way to calm that fear, is to realise how greater social and environmental responsibility can often be a cost saver and a driver of innovation. That is what we sought to do in the WWF report. This morning I want to go further, and address four conundrums facing the industry that can hold us back from engaging fully, soulfully, in sustainability. So far I’ve only heard them expressed in quiet conversation by people who are aware of the challenge but not sure of how this sector can really deliver.

In hearing reassurances about the financial sustainability of brands and luxury groups we have been reminded of the strength of the Asian market. Their economies are still growing, middle classes expanding, and fashion consciousness rising. The difficulty I’ve been told about by some executives is that such consumers are not aware of social and environmental aspects of brands and don’t really care. In the past year, new market research points to a wave of environmental awareness sweeping through Asia.

Research done by some WPP agencies, found that Chinese consumers now see the environment as a higher priority than do their US and UK counterparts. 69 percent of the Chinese respondents said that they expected to spend more on environmentally friendly products in the coming year.

The graph on the screen is from the French agency IFOP, showing levels of concern assessed in June last year. It also shows emerging market consumers concerns are higher in Brazil, China and India. More unpacking and interrogating of the nature of this concern is required to gauge its relevance for corporate strategy, but it shows the awareness is now there.

Consumer awareness takes time to translate into consumer behaviour, because we cant chose what doesn’t exist, or behave differently when we are unclear about our options. As the connections are made between what we buy and the environment we live in, the commercial implications are huge. So it is time to empower the consumer with the right information and better choices. So the first conundrum is not so real.

At a global level some analysts say the world has lost almost half its wealth since September. The crisis is real and scary. As someone running a small consultancy, we have lost one major client already. My company also works on sustainable finance, and worked on a project which consulted with finance professionals in over dozen countries. The insight from this is that the current crisis is not something that will be “got through” before a return to “normal”. Instead, it marks a major shift in global power. At root it is a Western financial crisis. The impacts will not only be financial, but also cultural, impacting on the status of the West, and on consumer culture. The implications for luxury are therefore deeper than our immediate concerns about profit and loss.

Many of us here work in enterprises that are the very best at what we do, whether that’s watch making, boat building, resort management, and so on. The crafts themselves may be excellent, and the sincerity and quality discussed yesterday morning very real. But what groups us together in this room as “luxury” is not so much that excellence, but consumer perceptions of what “luxury” means and our need to understand how to continue to appeal to the consumer of “luxury” as much as the consumer of our particular product or service. If there ever was such a thing as a luxury industry, then it is now endangered, because of the economic situation. More people are thinking twice about any discretionary spending. They are questioning the true value of what they buy, and how it appears to others at a time of increasing hardship. The ability and motivation to buy what is, to some, unnecessarily expensive, will therefore decline. In such a context, luxury must become something meaningful and lasting, providing the most enduring products and experiences to consumers.

Therefore the economic crisis is ushering in a fundamental change in world power and consumer values that moves social and environmental excellence from an option to a category-defining dimension of luxury brands.

The social legitimacy of luxury becomes more challenging in situations of extreme inequality and absolute poverty. Within sustainability there is a principle of fairness and social equity. Some people consider that luxury involves excess, so it could never be moral while there is poverty. That’s quite a conundrum.

If you visit the Taj Mahal this weekend you will not be that far from the border with Madhya Pradesh. If you travel on, UNICEF says that in some villages 6 out of every 10 children you will see are malnourished, like these children, pictured a few months ago.

It’s natural to block out this other reality as we enjoy our own privilege. Because many of us dont know what to do about it.

The two world’s collided last week when the two Slumdog child actors from Mumbai’s slums fronted a fashion show. The success and subject matter of the Slumdog film has raised debates about poverty and child protection, and the role and responsibility of the creative industries, like film. One response to this situation is charity. Designers Ashima and Leena announced last week that a new Jai Ho Foundation will support children like Rubina and Azahruddin.

If done well, charity can help. But it rarely addresses root causes. In my 10 years as a consultant to the UN on development issues I have been constantly reminded of one thing. People with low incomes do not want our charity, but their dignity and opportunity – which basically means good education, a safe environment and decent work. Just like ourselves, no one appreciates pity. But solidarity and support is always welcome.

The economy of Madyha Pradesh has been booming but it doesnt trickle down well unless you have responsible businesses buying from responsible businesses. Therefore the best way to reduce inequality and poverty is for the products and services we make to provide decent work throughout the value chain.

To illustrate I’ll mention one breakthrough British luxury brand. For several years jeweller and anthropologist Pippa Small has been designing jewellery made by fair trade groups. Her range for Nicole Fahri’s store in New Bond Street is produced by a group of slum-dwellers in Nairobi using discarded brass and recycled glass. The product line is helping ensure the workers’ children go to school, has funded a crèche, is teaching them computing skills, and shows them how to run a business. Pippa believes the reason the Farhi range sells so well is, I quote, “because people feel good wearing jewellery that is doing some good, as opposed to exploiting people”. But she also notes that, I quote again, “buyers in big stores often don’t get it. They think that jewellery made in slums equals something horrible and dirty, rather than seeing that giving people skills offers them an opportunity to get out of there.”

I was pleased to find out last night that there are some similar innovations occuring in the high end fashion sector here in India. The brand Bombay Electric are working with WomenWeave, to source materials from women working in villages, so that high end fashion can promote social development.

So we need not ignore. We need not feel guilty. Neither actually helps. Instead, the conundrum can be resolved if luxury comes to embody a fullness of our ability to live in solidarity with everyone we influence. Its ambitious. But are luxury brands not always ambitious?

The last conundrum I’ll explore here is sustainable consumption. Luxury brands are promoting consumerism in countries at a time when we need to reduce consumption in order to avert a climate catastrophe.

We only have one planet don’t we. Yet some aspire to live as if we have 5. If everyone lived like Americans we would need 5 planets of biological resources to support us. But it’s not simply a Western binge. Estimates put Malaysia at 4 planet lifestyles, Dubai at 10. Some research suggests the Indian middle classes now have a carbon footprint higher than the average Briton. The impacts are profound. For thousands of years the river Ganges has been revered. The Himalayan glacier that feeds it is shrinking by 40 meters a year, meaning it could disappear altogether in 20 years, and with it the Ganges in the dry season. Water is precious, to some it can be sacred. The shirts on our backs each took a few thousand litres of water to create. If we cherished them more, we would use less water. As well as less energy and other resources. To cut carbon emissions we have to reduce our consumption of resources. We only have about 10 years to transform our development so we don’t tip the world into catastrophic climate change. If you don’t believe it, you’ve been living in a bubble, and need to read your Herald Tribune.

Some of us are here to work out how better to sell Western brands into this highly complex market. Key to that is promoting a consumer fashion culture in a country where style traditions are centuries old and slow to change. Yet we know our world can’t cope with another billion embracing unbridled consumerism and a throwaway society. It would be an epic tragedy for some of our brightest minds to work on that, at a time when we need their talent to create a sustainable future.

What’s the answer? Become the best. Offer the best environmental option. Luxury brands have the margin and mandate to create the most environmentally friendly products and services. Yesterday Anna Zegna gave you some real examples, as will Stella in a moment. The great thing about luxury brands is that the way consumers relate to them actually prefigures the way we need consumers to relate to all their products. To look after them, to repair them, to see them as becoming vintage not garbage.

So let’s not be pale green, seeking to reduce our environmental impact a little to protect our reputation. That would be understandable, but it wouldn’t be real luxury. Instead, lets seek to create products and services that are actually environmentally restorative. So that by buying them people help the environment. One example is the UN’s Biotrade initiative, which is working with brands to develop skins and other products that create new revenues to pay for the conservation of species and their ecosystems.

Once we have created environmentally restorative products and services, then lets integrate that into the marketing and advertising of them in new markets, to help guide that wave of environmental awareness into more beneficial environmental behaviours. We have the power to shape aspirations and can use it wisely.

My intention in addressing these issues has been to release possible blockages to you being in flow in your your work and life. Because sustainability must start with us.

I am here because I believe that luxury can lead, not lag, in the transition to a fair and sustainable world. Its designers, entrepreneurs and executives can become part of what I term in my new book, The Corporate Responsibility Movement – A movement that is pursuing a transition to a fair and sustainable economy through new approaches to enterprise.

Together with the luxury brands Timothy Han and EcoBoudoir, as well as the UN Biotrade initiative, and luxury marketing expert Marco Bevolo, we are creating an association to support this transition. The Authentic Luxury Association gives you the opportunity to become an expert in the strategic importance of social and environmental excellence, as well as its operational implications. Already over 200 luxury professionals have joined our online network, which you can find at authenticluxury.net

We need not be confounded by this time of global stress, but work towards a new form of luxury that embodies what is personally, socially and environmentally the best of human creativity. The reflection from the late Anthony de Mello helps us see that at this time of strife, our world needs from us simply what we need for ourselves: o be authentic, soulful and purposeful. So thank you, for being, simply, you.”

IF YOU WOULD LIKE TO DISCUSS THE IDEAS HERE, OR ENGAGE, PLEASE VISIT WWW.AUTHENTICLUXURY.NET

Links to the video of the talk will be posted there.

Loose Change We Can Believe In? Why Salary Caps Won’t Do

jembendell5 Comments

Barack Obama has made international news announcing a salary cap for the heads of companies that are being bailed out by government. Other governments are expected to follow suit. Billions have been lost, and trillions pumped in to keep these companies afloat. Compared to that, these salary caps are loose change, not the ‘change we can believe in’ people hoped for.

That bankers are being bailed out, while home owners struggle, and people are laid off, is galling to many. Robert Borosage, president of the Institute for America’s Future, has said that “many homeowners were misled by predatory lenders to taking mortgages that they didn’t understand and couldn’t afford. It would be simply obscene to help the predators and not those that they preyed on.” Some also question the revolving door between bankers and regulators, and whether people like former Treasury Secretary Hank Paulson, who became super-rich from working in one of the firms whose practices had helped create the crisis, should have been deciding how to hand out billions to the same sector. News that the bankruptcy courts released $2.5bn to secure Lehman Brothers bonus payments at a time when savers were losing out, is just one example of a situation that seems to many like a systemic abuse of power by a professional elite of regulators, judiciary and bankers. Then Merryll Lynch giving out more millions to its staff as the crisis really crunched is not just obsence, as time may tell, it is likely criminal.

The bail-outs are defended by the fact that a financial institution is “too big” or “too interconnected” to fail and that its failure would cause a systemic risk. If governments and regulators have let financial institutions become so big that they cannot be allowed to collapse, shouldn’t they be encouraging more competition and more diversity? This is at least the view of trade unions. UNI Finance, the global trade union for finance workers, has repeatedly called for a diverse finance market that includes not only private banks and insurance companies but also public banks, savings banks and insurances, co-operative banks, mutual insurance companies and foundations. However, this does not seem to be the view of governments and regulators who are pushing failing institutions into the arms of healthier ones (e.g. acquisition of Merrill Lynch by of Bank of America in the United States or the takeover of HBOS by Lloyd’s TBS in the United Kingdom). As Lina Saigol, a Financial Times columnist, has argued, this “new generation of gargantuan institutions [will have] the power to dictate the next financial boom and bust.” With the new injection of funds from governments, many banks have since turned their attention to attempts at buying each other out, and thus compounding the problems associated with market domination by too few players, rather than quickly getting back to the business of lending money to people in the business of making things for others.

In many cases the bailouts have became part nationalisations of the banks involved. This gives governments some additional influence over their practices, yet most politicians are currently cautious about what influence they exert, and act on issues like future executive pay, as the new announcement from the US illustrates. The irony of increasing government ownership of the banks, is that the tax payer may face a double whammy of their own. Not only have they bought up bad debts, but they have bought into potentially massive legal liabilities. In a comment in The Guardian, Nick Leeson, the trader who brought down Barings Bank in 1995, said: “For my role in the collapse of Barings I was pursued around the world, and ended up being sentenced to six and half years in a Singaporean jail. Who is going to go after the reckless individuals responsible for the financial catastrophe? Apparently no one”. However, there appears to be growing pressure to hold companies as well as individuals responsible for the global financial crisis. Regulators have announced the broadening of the investigations into the collapse of the subprime mortgage market to include Fannie Mae, Freddie Mac, Lehman Brothers and AIG. In addition, many observers expect a sharp rise in shareholder lawsuits against investment banks and other financial institutions following the millions of dollars of losses they made by gambling money in asset-backed securities and the like. Law suits are emerging from Hong Kong to Paris to Rekjavik.

These actions slam the legal door after the capital horse has bolted. Rather than punishing the individuals who profited from using other people’s money to buy derivatives they did not fully understand, but knew could turn a profit in time for their next bonus, this legal action will cost the companies’ new owners, including the tax payer. First the bankers, then the lawyers, will have bled the collective purse. The sick irony of this is that many ex-bankers are getting in on the game: they are helping fund the lawyers to pursue claims against financial institutions for those who have lost their money. In doing so they aim to make a nice commission. They screwed the public purse once, and now will do it again, through taking a slice of payments paid out by their old employers. As this situation becomes visible to the general public, calls for the people who made millions from speculating with their money to replenish their depleted pension funds may grow. There could be investigation into whether there was abuse of fiduciary duty by those who received large bonuses through creating, investing, rating or trading in mortgage backed securities or credit-default swaps since the deregulation of those markets in 1999. Given the mobility of capital, such processes would require international cooperation, to freeze assets of those being investigated. If this happened, it would remind us of Interface CEO Ray Anderson, who said that people like him would in future be regarded as criminals for doing things that at the time they considered normal business. Letting bankers live as millionaires, some as billionaires, from creating a crisis that has emptied the pensions funds and now the coffers of government, would sadly stand as a testament to systemic injustices of contemporary societies. However, it is unlikely that governments will want to see such a wave of litigation. As such there may be growing calls for some form of ‘financial truth and reconciliation’ commission, to explore how this crisis developed, where fault lies, and how to repatriate some savings.

Those calls will grow louder in the coming months, with major activist mobilisations planned to call for financial justice before the G20 meeting in London. Obama was expecting a hero’s welcome at his first big meet up in London. But saving a few million in salaries in return for the trillions thrown at the financial sector, while millions of people lose their jobs? Salary caps aren’t the loose Change We Can Believe in. He will have to do more. Far more. As will the rest of the G20. They can start by endorsing a more legitimate and inclusive process to develop principles and rules for a new financial order, and coordinating a process to repatriate some funds from the pockets of the irresponsible bankers, some of whom now seek to even profit from the coming litigation.

– More analysis of the future of the financial system will appear in the next Lifeworth.com Annual Review of Responsible Enterprise, released at the end of the month.

– For a discussion of the corporate responsibility movement’s contribution to the future of capitalism see my new book http://www.greenleaf-publishing.com/productdetail.kmod?productid=2767

Naked in Davos

jembendell4 Comments

Davos kicks off again this week, with its head Klaus Schwab saying he wants to help shape the new rules for global finance, with the World Economic Forum (WEF) playing a similar role to the Bretton Woods meetings at the end of World War II. Given that his organisation praised and promoted the very actors whose greed and pride combined to ruin so many people’s lives, some might ask “does he have no shame?” Before the Forum can play a useful role in convening dialogue to generate any useful insights into what we need to do internationally in face of the crisis, its management could benefit from some ancient truths about how we understand our world.

“We see things as we are, not as they are” it says in The Talmud. If I am someone who wants to benefit from society’s resources and respect, and therefore associate with the people, organisations and ideas ‘in power’, how will I see “things”? Will I see them in a way that accepts, even praises, the status quo, and scoff at ideas which seem to challenge power? Most likely.

Since the beginning of recorded history there have always been people willing to sell their intellectual prowess to those in power. “The exceptions seem so rare that they are talked about for centuries afterwards. The most famous being Socrates. More typical are those who come up with reasons that the status quo is the appropriate organization of society and that those in power are the perfect persons to be running things” explains Robert Feinmann.(1) Until the 18th Century religious leaders played a key role in providing justifications for power, such as the “divine right of kings”. Their influence waned with the Age of Enlightenment and modern science. “What is needed is a “scientific” rationale for the organization of society” says Feinmann. “This role has now been taken over by economists. Using statistics and mathematical theories they have been able to produce whatever justification was desired by those employing them. Proof of their intellectual dishonesty is easily found. For every economist who can “prove” the effectiveness of, say, trickle down economics there is another who can demonstrate that such policies are a complete failure,” he notes.

In the field of academia called “business studies” this approach is often taken to the extreme, as an academic’s concept finds its validity in being adopted by a famous CEO. As a result business academics have often been seen as the intellectual rentboys of corporate elites. The alternative should not be a retreat to the libraries, but to be clear about the type of business and business person a business school seeks to inform. For the difference between a management guru and a management geek is not only the style of communication and the reach of their ideas, but also how they see a wider context and serve a higher purpose.

Organisers of the World Economic Forum like to think it is the leading intellectual forum on the world of business. It is the leading forum in terms of size and power, but intellectually? As the financial system has unraveled, their minor mea culpas mixed with “told you so” (due to passing mentions of house price bubbles in their reports) have been particularly revealing. In interviews with Bloomberg, leading staff at the WEF said “chief executive officers who gathered in Davos, Switzerland, over the last five years didn’t listen to warnings from their peers. Davos organizers also say they failed to play tough with the financial-industry bosses, opting to accept their funding and let them turn Davos into a rave-up for Wall Street excesses.” (2). Leaders of the Forum have been putting their failure down to excess, rather than principle. “We let it get out of control, and attention was taken away from the speed and complexity of how the world’s challenges built up,” said Schwab. If not so much money had been taken from Wall Street speakers at Davos, would the WEF really have been much smarter? Hardly. The lesson for us must be that an institution that pays its bills by convening the world’s largest companies to entertain them at high-powered meetings will be beset by systemic sycophancy.

Some Forum staff complained that delegates did not seriously listen to helpful sessions on emerging bubbles. But what do they expect when you are in the Alps and Angelina Jolie might be at the bar? The hubris of some involved in the Forum is that they are an emerging power in global governance as significant as the UN. Yet, despite any good intentions, would it not be a fascist planet if the world’s largest corporations would be able to set the agenda for policies across the world?

A Davos delegate for seven years warned finance bosses “about global risk and the abusive nature of their actions, but they had no incentive to change.” The World Bank Director of Governance and Anti-Corruption, Daniel Kaufmann continued “why should they have listened to us? I see it with my 10- year-old daughter, who scolds me because I don’t put the garbage in the correct bin. Let’s not delude ourselves. It’s impossible to teach old dogs and investment bankers new tricks unless you change the incentive structure.” (2)

This story implies that if one is truly committed to improving the state of the world then one must reach out beyond the old dogs and fat cats. More than that you must seek to be accountable to others. Perhaps if the WEF had listened to the protesters outside the luxury hotels, rather than only their handpicked NGO leaders, might they have developed a better sense of the state of the world? Mamy WEF staff mistakenly thought such protests were about specific social and environmental concerns, which they could then effectively incorporate into the agenda with some new initiatives. A bit of glam philanthropy to warm hearts in the Alps. Other staff realised that the criticisms were of an economic kind, particularly as the counter World Social Forum developed. However, their disagreement is not merely on economic theories of how to encourage social development, but on the legitimacy of WEF delegates to decide for others.

The ambitions of this year’s Forum suggests that message has not sunk in. To seek to shape the future of global finance, and thus the global economy, and hence the lives of all peoples on Earth,  in their current elitist and unaccountable form, will cause concern from across civil society. The World Economic Forum might soon find that not only were they some of the highest praisers of the Emperor’s new clothes: they were those clothes. If the Forum wishes to become more than an insubstantial adornment to power, and play a positive role in the future of the world, the organisers  must recognise the role of power and pride in shaping what we are able to truly “know” and embrace greater accountability and diversity. Otherwise, if the delegates remain intellectually naked in Davos, our world may catch their cold.

If interested in NGO accountability, check out my UN report on the topic at:

Click to access NGO_Accountability.pdf

If interested in a concept for a new form of democratic capitalism, check out my new book at:
http://www.greenleaf-publishing.com/productdetail.kmod?productid=2767

Refs
(1) http://robertdfeinman.com/society/whores.html
(2) Copetas. A. Craig, `Out of Control’ CEOs Spurned Davos Warnings on Risk, Oct. 24, Bloomberg.