Ron Popper – Business Voice
Due diligence – The business case
ABB’s sustainability journey has been going on for nearly 20 years now. It started with a focus on environmental issues, moved on through social, health and safety issues and policies, ethics and governance policies and issues. From the mid-2000s onwards we added the focus on human rights.
Human rights is a particularly challenging issue and potentially a very rewarding issue for ABB. We need to measure our impacts – positive and negative – in the projects in the 100 countries where we operate. We are well capable of having positive impacts through our work but there is always the risk of negative impacts as well. The following illustrates examples of positive impacts and potentially negative impacts on the same kind of project.
ABB is involved in the retransmission and distribution of electrical energy from where it is produced to where it is used – for example, at a hydro power plant we will take the energy away from where it is produced and transmit it over long cable lines in an appropriate form to wherever it is going to be used. Sometimes these lines can be 2000km long. There is plenty of controversy about dams. We know that hydroelectric power is cleaner than fossil fuel power on the positive side, but we also know that dams have some negative impacts – environmental and sometimes social as well. Within ABB we are faced with the issue of whether we are a force for good (by providing transmitted power) and the answer is ‘yes’ because electrical energy is a catalyst for the achievement of key human rights such as education, healthcare and housing. But also we are part of a project where there may be negative impacts such as the displacement of people, and whether they have been adequately compensated or not is sometimes an open issue, particularly in societies where governance is weak. We have to weigh up the pros and cons very carefully. On one occasion in particular that I can think where due diligence was not done sufficiently early, we were later caught in a maelstrom of criticism and accusations when the social impacts of that particular project came to be felt.
Looking at another example where we did our due diligence early and got it right, it can save not only time and reputational damage, but it saved the company an enormous amount of money as well. To give an example, in a dam project in the Middle East, which ABB would have bid on, we decided not to after examining the social, environmental and human rights impacts of that particular dam project. It became very clear to us at an early stage that the human rights and environmental impacts in particular would have been very very negative indeed. We backed away from it. Other companies went for it, but financing for the project was eventually withdrawn and we saved ourselves a lot of money by not being involved in that project at an early stage, or at all in fact. Proper due diligence won the day. Proper due diligence showed us that it was a bad project to be involved in. This is what we mean by doing your due diligence early, getting it right, or failing to do so and paying the price.
Extract revised for written version from audio file recorded in June 2010.