Former Dutch prime minister and EY partner Jan Peter Balkenende was the keynote speaker at the conference launching this year’s EY Attractiveness Survey. Vanessa Macdonald asked him to share his wide-ranging insight.
What advantages and disadvantages does a small country have when it comes to attracting investors?
Investors always take into account issues like social and political stability, a favourable tax climate, a well-educated population with an open mindset to international trade, economic opportunities and an attractive cultural environment.
This counts for countries of all sizes. Malta is a great island with a lot of opportunities. Of course, it has the disadvantage of being small, but at the same moment it has so much to offer: a rich history, an interesting geographical position, a well -educated population, an increasingly competitive economy and social stability.
Since 2011, Malta has climbed 10 points up the World Economic Forum Global Competitiveness Index, from 51 to 41. Malta’s smallness offers flexibility that is sometimes required to attract companies, a flexibility that larger countries find difficult to offer. A good example is the educational programme that was put in place for the aviation maintenance sector.
On a personal note, since 1997, I visited Malta many times. Malta is my family’s favourite holiday destination.
Is there a link between increased competitiveness and innovation?
The 21st century must be an age of responsibility
Absolutely. Today’s and tomorrow’s business success rests on three pillars: entrepreneurship, innovation and sustainability. Innovation is the key to economic success as can be seen in many parts of the world. In my country, The Netherlands, we noticed that innovation can help change companies and economic sectors. Agriculture always played an important role in my country. Today, the Netherlands is the second largest exporter of agricultural products in the world, the US being the first.
Friesland Campina is building a new Research & Development Centre on the campus of Wageningen UR (University & Research Centre). The centre will be a completely new building with research facilities, laboratories, pilot plant and offices. Sustainability plays an important role in the development of the new building. For example, there will be a heat exchanger and the possibility of generating solar energy using solar panels will be investigated.
Is innovation more effective when it is driven by the private sector, its public counterpart or both?
Innovation does not follow a black and white scheme: private or public. We learned that successful innovation can be realised on the basis of excellent cooperation between government, businesses, NGOs and knowledge centres such as universities. This is called the “golden square”.
In the Netherlands we can see this development, for example, in the Eindhoven area: cooperation between companies like Philips and others, the Technical University, other institutions and provincial and local government authorities.
One should never underestimate the role of governments, as has been pointed out by Mariana Mazzucato in her book The Entrepreneurial State.
You have been an EY partner since 2011. Apart from international affairs and public-private issues, you also focus on corporate responsibility. Is it up to a firm like EY to preach about the public good to its clients?
EY describes its business philosophy and strategy as ‘Building a better working world’. This naturally links to, among others, our ambition to stimulate sustainable growth. Sustainability includes taking care of climate change and environmental issues, energy efficiency and renewables, human rights, good relationships between companies and their employees, clients and society at large, integrity and transparency. A company like EY has both a responsibility and opportunity to stimulate corporate responsibility with its clients.
Auditors are increasingly involved in Integrated Reporting, meaning that a company reports about both financial and non-financial performance (such as environmental and social value creation). Tax advisers have to talk about issues connected to fair taxation.
Our people in the advisory and transaction advisory services are delivering new sustainability services, too. In the Netherlands, EY took over Beco, a niche consultancy company with a lot of sustainability specialists. It is absolutely necessary to be aware of the fact that changes in business strategies and business models are needed. With nine billion people in 2050, scarcity of natural resources and the unsustainable character of current production and consumption styles, business strategies and models have to change.
Is there any client behaviour towards which EY has zero tolerance?
There might be circumstances which make it impossible for my company to accept clients. For example, an EY Country Practice may not accept as a client an entity in the gaming industry unless the operations of the client are subject to regulatory or government oversight.
Can smaller companies with a limited client base afford to adopt such a judgmental approach?
Let me be clear: EY does not make judgements. We have a positive and constructive approach and mainly want to stimulate our clients to explore both the responsibility and opportunity to do business sustainably. This also applies to smaller companies. In the Netherlands we can see that SMEs are engaged in turning sustainability into a business opportunity.
A lot of family businesses are involved in societal or ecological issues and this is understandable. The DNA of family businesses is modeled on long-term thinking: It is about creating the conditions under which future generations can keep the business going. It is in the interest of smaller companies to have a real entrepreneurial spirit, to try to get involved in sustainable innovation.
The DSGC (Dutch Sustainable Growth Coalition) includes some of the top Dutch companies – but some often find themselves in the media subjected to bad press because of human error and individual greed, in spite of clearly stated official policy. Can declarations of ‘sustainable growth’ be enforced?
The DSGC is a coalition of eight Dutch multinationals – AkzoNobel, DSM, Friesland Campina, Heineken, KLM, Philips, Shell and Unilever – which have integrated sustainability into their business models.
This coalition aims to ‘shape’ knowledge around the embedding of sustainable growth business models, and to ‘share’ the knowledge with other companies domestically and abroad. Finally, it aims to ‘stimulate’ the domestic and global debate.
Successful enforcement of codes of conduct and policies is determined by the companies themselves. It can help to organise stakeholder dialogues. But there is more than that. In different countries, governmental regulation of the social and environmental costs created by companies is increasing. In addition, (social) media is increasingly monitoring the private sector.
I am convinced that companies will be confronted with big risks if they do not act in a sustainable way. So, enforcement is a matter of internal and external transparency and reporting, stakeholders’ dialogue, the role of governments and the role of media and social media.
The primary goals set at Davos are ‘People, Planet, Profit’. Have you come up with a fourth ‘P’?
Next to the three Ps, People, Planet, Profit, I believe there are three key Ps to make them happen: Professionalism, Passion and Purpose. Without passion you will not convince your employees or colleagues, your clients and society.
Companies need a professional and creative attitude when doing business in a sustainable way. Last but not least, Purpose needs to remain high on the agenda of an organisation’s corporate responsibility.
The socio-economic organisation of the Netherlands has been characterised as a Poldermodel. Polders are pieces of reclaimed land that had to be protected by the dikes. The coast of our country is below sea level. From centuries ago, people realised that keeping these dikes intact was a common responsibility of farmers and others in these areas.
Nobody could ignore his or her responsibility. In the 19th century, we did not have the level of class struggle witnessed in several other European countries. This had to do with the conviction that labour and capital should work together. If there’s no willingness to agree with others or when these agreements are too ‘soft’, other approaches are, of course, necessary.
A recent example of cooperation was the energy agreement, in which the government, the Social and Economic Council, companies and environmental organisations – Greenpeace was one of them – worked together.
In fact, we are living in a world of new alliances. On a global scale, we can see that high-sustainability companies are working together with NGOs, universities and governments. The 21st century must be an age of responsibility. Problem-solving capacity and consensus building should be part of it.