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Swedish government raises the ambition level for sustainable business practices

The Swedish government’s work on sustainability in state-owned companies was systematised in 2007. As the first country in the world, Sweden decided then that state-owned companies were to report their sustainability efforts using the widely accepted standard, Global Reporting Initiative (GRI). This created awareness and a solid basis for ongoing sustainability efforts in these companies. It is now time to take the next step.

The recent turbulence concerning TeliaSonera’s activities in countries where democracy is fragile or non-existent has illustrated the importance of sustainable business practices. Enterprises that are wholly or partly owned by the state are expected to set an example. We will take measures to ensure we avoid ending up in a new situation akin to that of TeliaSonera. The Government is therefore now strengthening conditions for enterprises to play an active role in this area, which covers environment, human rights, working conditions, anti-corruption, business ethics, gender equality and diversity. The Government’s next step involves each company formulating its own sustainability goals. While the companies’ goals will differ, they will all be concrete and relevant to their own activities.

As we recently witnessed in the TeliaSonera case, shortcomings in sustainability efforts come with considerable business risks. Poor management of privacy and freedom of expression in countries where democracy is fragile or non-existent resulted in massive criticism from investors and customers alike. For example, major shareholders Swedbank Robur and Nordea Fonder sold off their shares in TeliaSonera for substantial amounts. In addition, the City of Stockholm, which has more than 40 000 subscriptions for employees, alerted their concerns.

State-owned companies represent vast sums, close to SEK 600 billion combined and are among the country’s largest employers. The Government is instructed by the Parliament to manage the companies, but ultimately, it is the people of Sweden who jointly own these companies. Each Swede owns the equivalent of about SEK 61 000 in these state-owned companies. These sums are to be managed well. The companies are to conduct their business activities so that conditions for long-term value are created and secured.

As owners, we see an obvious link between value creation and sustainable business practices, which is about more than complying with the laws of a country. Compliance with the laws is a given starting point, but by aiming higher, companies can contribute to a better society. Gender equality is one example where legislation leaves room for companies to assume their own responsibility for an even distribution between men and women. A more even distribution of wages, influence and career opportunities can strengthen gender equality and contribute to greater overall productivity in society. Companies can, and should, shoulder more responsibility here.

In countries where democracy is fragile or non-existent, legislation in the individual country is a poor guiding principle; by acting as role models, companies can contribute to positive development. It is even more important that companies operating in such countries set their own standards of conduct and follow their own ethical compass.

The state’s annual board seminar, to which all the board members and managing directors of the companies have been invited, will be held tomorrow. My message to them is that we as owners are now raising our ambition levels to ensure that the companies are good examples of sustainable business practices.

The boards will be tasked with establishing relevant sustainability goals and strategies to achieve these goals. The sustainability goals are to be ambitious and relevant to the business activities. It is also imperative that the goals are clear and easy to communicate so that people outside the company understand them and can evaluate the work of the company. Which sustainability issues are most relevant for each individual company will vary. For LKAB – a company with high energy consumption – environmental issues are front and centre. TeliaSonera, on the other hand, must address issues such as privacy and freedom of expression.

That the state as owner is now more clearly integrating sustainable business practices into its ownership policy and our current corporate governance means that this and other issues, including financial goals, will now be regularly evaluated. In my opinion, this is one element of modern and active corporate governance.

At the same time, it is gratifying to note that some of the state-owned companies have already taken initiatives to establish relevant sustainability goals. LKAB’s determined efforts to cut its electricity consumption (which accounts for 1.5 per cent of Sweden’s total electricity consumption) is one of several examples.

We are now requiring the boards to enforce, implement and embed sustainability efforts internally. While we understand that this will take time, it is essential that efforts progress at a reasonable pace. We will therefore conduct regular dialogues with all companies on how they manage risks and opportunities linked to sustainable business practices.

In addition to this, I will have a special follow-up meeting with TeliaSonera. The Government reacted instantaneously to the new disclosures in SVT’s television programme, Uppdrag granskning. I summoned the chairman of the board to a meeting where I asked questions about the board’s actions. I also invited representatives of other major shareholders to the meeting to discuss our views on TeliaSonera and sustainable business practices, as well as how we as owners can support the company in this area in the future. As a result of the criticism the owners directed at the company, TeliaSonera has now initiated an action plan to manage issues regarding privacy and freedom of expression in countries where democracy is fragile or non-existent. We consider this as a step in the right direction, but it is paramount that the recommended measures are put into action and clearly permeate the business activities of the company as a whole. We will therefore continue the dialogue with the chairman to support the company’s critical sustainability efforts.

State-owned companies are to set a good example, particularly in terms of sustainable business practices. The younger generation, in particular, is extremely committed to these issues. They want to work for and do business with companies that strive to use the Earth’s resources responsibly and that respect human rights. To survive, and to secure strong long-term value growth, companies are compelled to prioritise sustainability issues.

Peter Norman

Swedish Minister for Financial Markets

(Source: CSR Sweden)

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08 June 2012