A lot of businesses have done bad things in their past. Andre Hoffman, Roche’s Vicechair and heir to the founding family, has a book, written with Peter Vanham, on a better approach to business. Amongst other things he notes how bad businesses can get better. (I doubt he would say that Roche was at the bad end of businesses to begin with, but he certainly admits that the company had moments that were not ideal). Hoffman is one of a team of very senior business types who see a new way for business to be run. Some of the new ways go back to earlier principles but we have better information about impact so we can do better now. Unlike many 19th century entrepreneurs, we know about the negative impacts of greenhouse gases. We also know now that women want to be treated fairly at work. (Who could have guessed?)
ESG And Better Business
Hoffman is involved in his company which is helpful as he isn’t just a passive investor. He knows that external reporting, while it has value, isn’t a panacea. External ESG reports, which suck up much of the attention in the sustainability space, don’t help managers manage better. (To be fair, they aren’t mean to).
… although ESG reports solve for an accounting challenge, they are not in and of themselves a management decision tool.
Hoffman and Vanham (2024) page 108
Single Or Double Impact
Hoffman also isn’t convinced that his friend running the ISSB (International Sustainability Standards Board) is going far enough. (Yes, having tons of money and a major family firm does help in knowing the right people to influence business. Hoffman is definitely super-privileged and occasionally the name-dropping can grate a little bit but, to be fair, at least Hoffman seems to be trying to use his connections for a positive influence).
An argument going on in the external reporting world related to sustainability is that some want to focus accounting reports on the threat to the company from environmental changes. This is known as single or financial materiality reporting.
Others want more expansive reporting including how the company is negatively impacting the world — double materiality or impact reporting. Hoffman is in the later camp which works well with his Swiss company being EU-adjacent given the EU is pushing strongly for such impact reporting.
Blaming Darwin
There are a number of interesting tangents in the book. One tangent seemed to be attacking Darwin. I always feel a bit sorry for Charles Darwin when people blame him for ills in the modern world. I am pretty sure that people were occasionally really quite awful even before Darwin got writing. I’m not convinced that, as Hoffman seems to imply (page 198), that everyone was being lovely and friendly and then Darwin gave them the idea to compete.
Let Sustainability Be More Fun
Hoffman also shares an anecdote about how they changed their headquarters setup. The overall plan as described seems to make sense. They would bring people together in a modern environmentally sustainable building. That said, I was a bit disappointed with their solution. They originally planned a cool building looking like a DNA helix. Was it a bit of an eyesore? Sure probably, but it was cool and different. They changed the new building into something dull; a predictably HQ building that is a bit more illuminati pyramid than medical headquarters.
The first option of a DNA helix was a lot more fun which brings up an important point. Let’s try and ensure that sustainability is exciting. Rich people do all sorts of terrible things with their money, e.g., Jeff Bezos’ wedding in Venice. Can’t we have at least some cool, slightly over-the-top buildings from rich people to compensate for having to put up with the ultra wealthy’s whims?
Bad Businesses Can Get Better
Ultimately, Hoffman’s vision is of a business that contributes to making the world better. I’m with him on this. What is the point of business making the world worse? Why would we bother having business then? The case study of Schneider Electric is great. A dirty business can become a force for improvement given effort to make it happen. Bad businesses can get better.
Hoffman shows off his European roots by arguing for the benefits that unions bring. A sustainable business treats its employees well so, logically, should be able to get on well with its unions. I am always a bit cynical of American business leaders who claim to be wonderful for their employees but equate unions with the devil (Agreeing And Disagreeing At The Same Time). Sure, union leaders can exploit their power occasionally but the idea that the business leaders themselves would never exploit their power is pretty laughable.
Long-Term Thinking
Hoffman makes the standard, but important, sustainable business point, that getting better takes time. To this end he thinks that business managers should be given time to show how well they can do. He makes the analogy to football (soccer) managers who never seem to be given enough time. (Don’t cry for them though, their payoffs upon being sacked seem to be where they earn their real money). I’m with him that football managers should be given time. Although even I couldn’t understand why Julen Lopetegui at West Ham was given half a season when a couple of games should have been enough to show he was completely clueless.
For more on better business in history see Business Ideas Change, Regulation And Business Responsibility, and Owners Often Care About Beer, Housing, God, And National Identity
Read: Andre Hoffmann and Peter Vanham (2024) The New Nature of Business: The Path to Prosperity and Sustainability, Wiley
