Q&A with Stephan Schmidheiny

Swiss industrialist Stephan Schmidheiny is among a small elite of world business leaders who have successfully integrated corporate social responsibility (CSR) and philanthropy into their overall business strategy. The chairman of GrupoNueva, a Latin American holding company. Mr. Schmidheiny has been a trailblazer for CSR since the mid-1980s when he launched the FUNDES Foundation to encourage small- and medium-sized companies in Ibero-America. In 1990, he established the World Business Council for Sustainable Development (www.wbcsd.ch), a business activist coalition which today comprises 160 international corporations and provides leadership in the advance toward sustainable development. He was also active in representing business and industry interests in preparations for the 1992 Rio Conference on Environment and Development.

Mr. Schmidheiny is founder and president of the AVINA Foundation (www.avina.net), which cooperates with Latin American business and civil society in promoting CSR. More recently, with AVINA as a donor, Mr. Schmidheiny has been a major supporter of Endeavor (www.endeavor.org), a New York-based non-profit that nurtures innovative young entrepreneurs in Latin America.

Mr. Schmidheiny has served on the board of a number of companies, including ABB, Leica Industries, Nestlé, and Swatch. As a recipient of a Doctor of Humane Letters from Yale, he was honored for helping "to create an attainable vision of a global economy based on sustainable, ecologically sound development" -- a perfect description of the work done by this important thinker, leader and activist.

In this interview, Mr. Schmidheiny shares with Global Giving Matters his thoughts on philanthropy today, and its direction in the future.

Global Giving Matters: How do you define philanthropy? Has this definition changed for you?

Stephan Schmidheiny: I am not so much interested in defining philanthropy as in redefining it. I have not wanted to be thought of as "a philanthropist" ever since I read its definition in Ambrose Bierce's The Devil's Dictionary: "Philanthropist: A rich (and usually bald) old gentleman who has trained himself to grin while his conscience picks his pocket."

I have certainly changed my approaches to philanthropy. When I started conceptualizing the AVINA Foundation soon after the Rio Summit of 1992, I thought in terms of "giving money to the poor." I sent a colleague to Latin America to look for possibilities. She reported back: "Sorry, but there are too many poor for your money to do any good." So we now see ourselves as partnering with leaders of civil society and the business sector in their initiatives towards sustainable development in Ibero-America. This way we seek more bang for the buck by investing in social change through change-makers.

GGM: Who are your role models, past and present?

Schmidheiny: I am very much a product of my family, being the fourth generation of a commercially successful Swiss-German clan who all believed in a responsibility toward society. They believed that society had given them resources, and therefore they should reinvest in society; society had given them leadership positions they should use for the bettering society. It was, I suppose, a sort of noblesse oblige, but it always seemed to me to have a more human touch than that.

At present? Most of the leaders we work with in Latin America are young, certainly younger than I. They are energetic, innovative, brave -- not afraid to "speak truth to power." I suppose these are my role models.

GGM: What inspired you to create AVINA and the World Business Council for Sustainable Development?

Schmidheiny: Let's take them all in order. I first created a small foundation called FUNDES to help improve the lot of small entrepreneurs in some Latin American countries; it mainly provided access to credit, but has evolved into a training and consulting organization that also seeks to improve framework conditions for small and medium companies. I liked this very business-like approach to philanthropy.

Then in 1990, Maurice Strong, secretary-general of the Rio Summit, appointed me his principal advisor for business and industry. I decided to spread the responsibility -- and any blame -- by bringing in other CEOs. I signed up about 50 members, promised I would pay expenses as we did not have time to negotiate dues, and promised that we would disband after Rio. After their experience at the Summit, most of the members felt that the council had a role to play in guiding the planet towards sustainable development and decided not to disband. So now there exists the World Business Council for Sustainable Development (WBCSD), with 160 of the world's most important companies as dues-paying members.

In the quiet after Rio, when I had finally created a sort of order out of my business holdings, I began to think of my family tradition of "giving back." I chose Latin America because my family has done business there for many decades and because I admire its human and natural resources. I admire the zest of the young leaders with which we partner.

GGM: Of what accomplishments in philanthropy are you proudest?

Schmidheiny: I am not sure I really think that way. The Business Council (Was it philanthropy? I am not sure.) pioneered a business role in participating in governmental negotiations and consciously advocating paths for society. The book we wrote then, Changing Course, has been successful and influential. I like what the Council is doing now. I am proud of AVINA, though it remains very much a work in progress.

GGM: In what areas do you feel you could have done better? How are you addressing these concerns? Has the WBCSD accomplished its goals?

Schmidheiny: Hindsight tells me I could have done better in all areas. If I had been smarter I might have brought AVINA to where it is today much faster. I have recently decentralized decision-making in the foundation into an executive board or Council, each member of which has responsibility for a piece of Latin America. This decentralization ought to help us collect "best practices" and find good partners faster. As for the Business Council, since the only goals I envisioned for it were to report to Rio and spread the word about sustainable development throughout business, then the answer must be yes: It accomplished the goals I envisioned. Today it has launched a number of "sectoral projects", by which I mean: mobility companies are trying to figure out what "sustainable mobility" might be, mining companies are trying to define sustainable mining. These working groups are helped by powerful organizations like MIT that are staking their reputations on the examinations being valid and rigorous.

GGM: What do you think are the most pressing current needs that venture philanthropists should address?

Schmidheiny: Of course one need is to define "venture philanthropy." I am drawn to the concept, but am not sure that I or anyone else really knows what it means. In a sense, AVINA is trying to define it. We "accompany" our partners rather than merely fund them. We even have long-term partnerships with some leaders we do not fund. We have recently begun to focus on building bridges between business and civil society organizations in Latin America. One way we do this is by offering challenge grants to our partners, to be claimed if they can raise a certain amount from companies or individuals. Thus our partners not only get more funding, but they also learn from companies' business techniques for managing money and staff, and for planning. Companies learn what worries society -- and may discover some business opportunities. Thus not only do we build a powerful coalition between business and civil society, but we go some way toward making our partners more sustainable and self-sufficient. This begins to answer the "exit strategy" question that the concept of venture philanthropy has not yet answered.

GGM: What's "wrong" with current philanthropic practices?

Schmidheiny: I do not intend to criticize anyone in this difficult "business" of philanthropy. But some general issues occur. Foundations are very poor at cooperating, at taking a systemic approach to change. In fact, foundations as change-making bodies are only just beginning to exist outside the United States. I am disappointed that few foundations seem to take a genuine interest in, and a hard look at, the true and lasting impact that is achieved by the grants they give. And I am frustrated that the wealthy philanthropists in the United States are willing to spend so little of their money in poorer countries outside the United States, where it could be more effective. If I ever get the time, I may try to interest my fellow philanthropists in opportunities outside the US.

GGM: What's "right" with current philanthropic practices?

Schmidheiny: I think we are going through a period of new energy and innovation. The young rich want to do things differently. The study of philanthropy is improving, as is its reporting in the media. We might be on the way to breakthroughs that combine the best of business and the best of the foundation world.

GGM: Are you working on any books at the moment?

Schmidheiny: The World Summit on Sustainable Development begins in August in Johannesburg. Given that the WBCSD was born in the Rio Summit, we felt it appropriate to produce a book for this next summit. We call it Walking the Talk: the Business Case for Sustainable Development. The title does not mean to suggest that business necessarily is "walking" its sometimes grandiloquent talk about sustainable development. But we try to look at what we are doing well and badly and where we need to work more closely with civil society and even governments. One key message is that markets are powerful tools, but they are tools constructed by humans, and right now we need to construct a global market offering more opportunities to poor people and poor nations. My co-authors are Chad Holliday, CEO of DuPont and former WBCSD chairman, and Phil Watts, CEO of Shell and current Council chair.

GGM: How would you describe the type of leadership you see emerging from Endeavor and similar organizations? What makes the new generation of leaders different?

Schmidheiny: I like Harvard Professor Howard Gardner's definition of a leader as one who tells a new story and gains followers for that story. Some leaders, such as politicians, tell new stories for the purpose of gaining followers. Others -- a Picasso or an Einstein -- almost unconsciously produce new narratives or styles that command attention and imitation. The most exciting new story told by today's leaders is of a whole new profession or area of operations often called social entrepreneurship. Endeavor is not a business; yet it uses businesslike methods to make young business entrepreneurs both more successful and more of a force for sustainability. This sort of leverage is new in history: Ashoka in Brazil shares offices with McKinsey. This generation's leaders, like their predecessors, are no respecters of traditional boundaries.

GGM: What makes you optimistic about the future? Is there anything that makes you pessimistic?

Schmidheiny: I am optimistic because we have much of the technology and much of the grassroots leadership we need to change towards more sustainable paths of progress. I am worried at national governments' inability to be an effective force for this change. It is often said that governments are too much in the control of business. The problem is more that they are too much in the control of "bad business" -- of companies that are uncompetitive: need a subsidy, a tax break, an inside track at policy-making. The "good companies" are off being competitive and successful; they are not talking to governments. So listening to squeaky wheels, the governments of the richest countries are persuaded to erect tariffs and other trade barriers against the products of the poorer countries. Or they call upon the poorer countries to lead the way in combating climate change. We need to hear more from good business and to build and strengthen alliances between forward-looking companies and citizens' groups.

GGM: What's the next step after venture philanthropy?

Schmidheiny: Let me describe my own next step. I am the main owner of a group of companies in Latin America [GrupoNueva] that works in water systems, construction materials, and forestry and farm products. It strives to be profitable -- while helping improve the society around it. The AVINA Foundation works to improve society by investing in partnerships with leaders. So I want to link the company and the foundation so that the company profits fund the foundation's investments. This is not just an attempt to create an old-style corporate foundation -- separate entities with separate managements. I want to find ways to capture the real synergies between the two while also honoring the real differences. I imagine a tough, efficient, businesslike foundation, and I imagine a company that really does feel and practice a solidarity with the society in which it works. And I imagine these two bodies linked throughout their organizational structures.

We call the project VIVA -- a combination of vision and values. Will it work? Obviously, I do not yet know; watch and see. I am driven by an image of a world creating unprecedented amounts of capital and unprecedented amounts of poor people at the same time. For capitalism to help create sustainable forms of human progress, we need billions more capitalists. For the market to be the tool for sustainable development I am convinced it can be, we need to build a market more replete with opportunities for all. Surely it behooves a man like myself, part of that unprecedented accumulation of capital, to seek to recycle it in ways that help to improve this increasingly global market and help the poor make the most of their resources. This recycling must be done not in the slow drips of charity but in industrial-strength amounts and with the entrepreneurial creativity, efficiency, and added value that transfers to governments do not accomplish. I hope that the VIVA experiment shows one possible way in this direction.