Back to the Future………. A Social Licence to Operate
Hoggett Bowers was delighted to host, once again in the setting of the Law Society in central London, their first in-person CEO lunch for over 2 years. Until the onset of the pandemic and the social distancing guidelines that followed, Hoggett Bowers regularly organised Chair and Non-Executive Director, CEO and CFO lunches.
The lunch was well attended by CEOs from across Energy, Transport, Financial Services and Consumer sectors.
In the build-up, we asked our guests to consider the following topic and to postulate on a response to the question posed:
The past 20 months have been a baptism of fire for all of us. During this time, there has been a growing theme for Boards and Executive teams to focus on the ‘four Cs’ (Climate, Covid, Culture and Cyber). We now want to look ahead into 2022 and beyond. The Davos World Economic Forum in January next year will be focusing on ‘Working Together, Restoring Trust’. Therefore, what do you see as the major trends impacting on your business going forward?
Opening the discussion, a CEO from the high-speed rail sector, drew light to some of the structural changes in passenger behaviour which is affecting their outlook for the future. Citing that, at the time of our event, only 50% of commuters and 85% of leisure travellers had returned when compared to 2019 figures.
The consequence of this being the potential significant impact this will have on long-term planning and scheduling with new peak times and days emerging. Furthermore, such changes in passenger travel patterns may well have an impact on the repairs and maintenance scheduling. This may lead to a complete overhaul of how the networks operate.
“The eternal question of Cost vs Value“
Echoing these challenges, the CEO of a regional rail operator, believes it will come down to where the Government sees most value in the cost of operating these services, particularly when it comes to selecting which routes to modernise. It is a well-known fact that significant subsidies were paid out to all the rail operators to keep key services running during the pandemic, which equated to approximately £1m per hour during the lockdown.
Given the current situation and the Omicron impact (not to mention the challenges that future Covid-19 variants could bring) this has reduced passenger numbers as we are all encouraged, once again, to work from home. Overall, this means that the Government will need to decide on cost vs value, as the rail operators will not make any money in the current climate.
Modernisation and remodelling of transport networks will be pivotal for many industries, shared a CEO from a UK port operator. The pandemic has impacted the global supply chains and freight networks, both in availability and cost. However, he cautioned that remodelling of any network needs to look to the future.
“Look to the future“
For example, it was suggested that in 10 years’ time, that many of our modes of transport will be a long way down the decarbonisation route and ditching fossil fuels for batteries. In 20 years’, it was speculated that the world will witness greater levels of automation, AI, and driverless vehicles. This will impact on our relationship with vehicles, particularly when and how we travel, potentially driving less resulting in the need to not own a car. The decisions we start to take now and, in the future, will have a perverse impact on the supply chain, infrastructure and manufacturing long term.
Sustainable modes of transport and/or energy is at the top of many corporate agendas driven by ESG and the current volatility in the energy market, commented the founder of an energy trading software firm. Suggesting that these priorities are key to investors, customers, employees, and the public at large. ESG and sustainable attributes are no longer a nice to have in organisations but are viewed as essential credentials to own and to improve upon. He went on to share the importance that data and technology, in the future, will have to enable high energy users and producers to reduce their carbon footprint in transitioning to a lower/zero carbon renewable sources.
“ESG Driving the corporate agenda“
The transition and availability of renewable forms of energy are key for many organisations to reach their ESG goals, commented a CEO from the consumer sector. She shared that the availability to attain green energy was impacting on businesses given that a high proportion of the electricity produced in the UK is still generated by fossil fuels.
A CEO from an energy network provider shared that it is clear many of their corporate customers want to gain the trust of the customer community and transition to Net Zero. However, many of their direct consumers are buying into the theory of Net Zero without knowing the full cost of doing so. The reality is that they are not yet ready to pay a premium. So, who pays and how do we meet with the costs of achieving the UK’s Net Zero target by 2050?
“Who pays for the costs of achieving the UK’s Net Zero target by 2050?“
A CEO who represented a trade association aligned with the deployment of carbon capture technology, called for improved standards and thereby increased auditability of ‘Net Zero Brands’.
She believed it is critical for brands to build trust with consumers and/or customers if they expected them to pay a premium for Net Zero services or products. To build this trust will require much more transparency and visibility on the standards which need to be achieved by organisations. Equally, how do we ensure that these standards are comparable and fair when benchmarked against respective peer groups?
“Businesses need a social license to operate“
It was suggested that by engaging with all parts of the supply chain (Scope 3) and leveraging the expertise which exists within smaller and more nimble players, organisations are likely to unlock value as they establish their priorities for their businesses. Similarly, customers, communities, employers and providers must face the hard truth of how much it will cost to have permanent structural change across all areas.
It was also highlighted that organisations will have to ensure their purpose is driving the organisation and within that the importance they place on engagement and development of their people.
In the ‘war for talent,’ people are being more selective and open about their priorities, be that in the context of ways of working, their personal development or the societal impact of the business they choose to work for. Social media provides increasingly more pernicious means by which these views can be shared.
The social licence to operate is becoming more complex as the range of critical stakeholders grows.
However, the opportunity for agile businesses to evolve with the pace of change thereby accelerating their growth curve even further, is a moment not to be missed.
“The impact of geopolitics“
One CEO cited the prevalence geopolitics will continue to have on us all as we move into 2022 and how this will impact in different ways on organisations and the sectors that they operate in. For example, commodity prices, Covid, international relations all of which will have a bearing on how organisations plan for, and perform in, the future.
Business continues to change as organisations adapt on an ongoing basis to the new world order, be it covering the ‘Four Cs’ (Climate, Covid, Culture and Cyber) or taking the opportunity to strip back to develop a real sense of organisational purpose and associated licence to thrive.
ESG remains front of mind for many CEOs and no doubt this will crystallise further once standardised reporting metrics become the norm in the coming years. Affordability of implementation remains a real issue for many, and companies will need to prioritise what is right for their business.
At the same time, even with all the world’s current complexity and uncertainty, much of it being driven by geopolitical differences, there is a real sense of opportunity to develop new markets, innovative partnerships and yet, unknown, competitive advantages. These may even combine the needs of the Planet, People and Profit.
We look to the future with pragmatic optimism.
Hoggett Bowers are very grateful to all our guests and a special thank you to: