Business has a new responsibility to lead consumers in a sustainable direction.

Question: What is WPP’s outlook on sustainability and how has it evolved?

Martin Sorrell: So actually it’s become good business for our clients, good business for us because it’s good business with our clients and because it’s good business with our people. It’s a way of differentiating WPP and its constituent parts from the competition. We know from all the data we get from the companies like Millwood Brown and Research International and TNS, our research companies, that consumers admire and respect companies that invest in these areas – that respect these areas. And we also know that people coming out of universities or art schools or design schools or thinking about switching from one company to another in our industry or adjoining industry, or even thinking about doing other thing within our own company, they’re held and attracted by commitment to these areas. If you’re in business for the long-term, this is something that you should do because it’s good business.

Question: Is it the responsibility of business to lead consumers in a sustainable direction?

Martin Sorrell: I think business has no choice in that sense. To live longer, you’re going to have to live a healthier life; you’re going to have to consume healthier foods. So, if you just take the food area, for example, I think companies that embrace this area; a) will be more successful economically, so it’s another business argument, b) they will be more attractive to consumers; we know that already from the research evidence as I’ve referred to before. And c) will be more attractive destinations for talent. And the war for talent is going to be so difficult because of some of these things that we are talking about.

The supply of talent given birth rates are falling, giving divorce rates are rising, given people are getting married later, having fewer children, the rise of women in the workforce. All of those things are going to reduce the supply of talent and that’s where the shortage is going to be for companies like, not just like our own, which are in professional services, but if you’re running an oil refinery, there’ll be a shortage of people to even run that. So, the war for talent will become of increasing importance. And so, this is just good business, again, from a people point of view. If you embrace these areas, which I think from a consumer point of view, are necessary. From a social point of view are necessary. From an environmental point of view are necessary. But that NGO’s applaud, that governments applaud, if you embrace those areas the people that are either inside your company or could potentially become inside your company will applaud too. So, I think it all fits neatly together in the context of what’s happening. The big question is whether we’re going to move rapidly enough, whether people are going to have taken this seriously enough, whether they’re prepared to engage because it’s a bit like the threat of the internet, or the opportunity of the internet. If you run a legacy company in the media area, if you’re a media owner, or running an agency – an advertising agency, or indeed a client and had been used to traditional media. And along comes a new media which is a totally different profit model, a totally different operating mode, and you have to run a legacy business at the same time you are trying to embrace these new areas. Well the same thing is true about sustainability. Sustainability means that you will probably have to run your business in a very different way. And what was profitable before, if you’re in the car business, for example. If you’ve got factories and people who are committed to building cars and trucks in a certain way, and you have to alter the way you do it. You have to build new factories, you have to design new products, new models, it takes time to do that; anywhere up to three, four, five, it used to take five years. Probably now it takes about three years. So, there’s a process. But you’ve also got these legacy factors which are committed to working in the old way, which makes it very difficult.

So, it’s the white sheet of paper companies, as I call them. So, in the media area, those companies that start without newspapers factories, or plants, that fell trees and distribute news print, they have an advantage. Similarly in the sustainability area. If you’re starting from scratch, you’re funded by that venture capital or private equity, you’ve got a remarkable advantage over somebody who is running a legacy company, or who has to worry about dealing with the legacy issues and plants already established, I think one of the really good things is that if you really look at what’s happening in the Silicon Valley. If you talk to the venture capitalists and the private equity people on the west coast of America, they are amazed at the extent of the commitment of the net capital backing new ideas in the green areas of sustainability.

Recorded on February 16, 2010