Continuous pursuit of growth is not possible with our limited resources. Boards must start engaging with the truth.
Ray Anderson – the founder of Interface Inc and one of our most sustainable and inspirational business leaders to date – famously declared that he had “never seen the business case for unsustainable”. While this may seem self-evident, we often allow ourselves to get drawn into justifying the sustainability business case, within the conventional expectations of a business-as-usual mindset. Sustainability is either desired or tolerated, based on how it may support the conventional aims of the business – enhancing reputation, supporting growth, or improving the bottom line. Mostly, this means a focus on eco-efficiency savings, so long as any modest levels of investment meet the usual criteria for return-on-investment and payback. Some may view this as good business discipline, but is it? Are we really serving our stakeholders well if we don’t help them see the bigger picture and we end up doing the wrong things, albeit a little more efficiently? Or, is it time to turn this challenge on its head, and help the board to discover the real business case for sustainability?
Balancing strategic risk and opportunity
The problem is that the fundamental implications of the sustainability agenda tend to challenge our conventional approaches in business. Deep down we know that in a world of real physical limits, the continuous pursuit of growth and consumption will not be possible, let alone desirable; that some of our products and activities are inherently unsustainable, no matter how efficient we may get. We know there is a real danger that we could become a stranded asset tending towards zero value, and that our obsession with short-term results is driving the wrong behaviours and ill-informed decisions. And while our focus on short-term savings may be well intended, and may help to build confidence, it is not a long-term strategy that can work. We simply do not have long enough for eco-efficiency to get us out of trouble. Most organisations will experience diminishing returns and getting to zero harm, or net positive, may take several hundred years. We need to view the business case from a strategic, rather than a tactical or incremental perspective. And this needs to be based on a deep consideration of the challenges, risks, and opportunities facing the business. We need to ask how long we can continue to deliver acceptable returns, on our current strategic course. How long will we stay in business? What is the shelf life of our business? Are we building up large liabilities that will one day render our business model un-profitable? And when are we likely to reach this tipping point?
There is little to be gained in focusing on a 3.8% annualised saving in energy costs if we could go out of business within five years. And this could be a real possibility, looking at the emerging work of the Global Sustainability Institute; these issues could start to bite sooner than we may think. Not many boards are open to such inconvenient truths, as the 2008 financial crisis has shown. According to McKinsey, only around 30% of executives say their companies actively seek opportunities to invest in sustainability, or embed it in their business practices. And how may of these are really engaging with the strategic issues? While nobody likes bad news, forewarned is forearmed. The impact will be far less severe if we can start to engage with the real issues before they really start to bite. Of course it’s not all about downside risk; we may also have a sense of the real opportunities available for the business, by making a genuine transformation – to be a resilient and well-functioning part of a sustainable economy.
Empowered to act?
But perhaps, like the actuaries in the recent Global Sustainability Institute Report, we may feel powerless to take real action? Or perhaps it is fear, that is holding us back? We need to avoid the trap of just perpetuating incremental change, at a time when it’s not fit for purpose. Should we not help the board, therefore, to aspire to be more? Sure, we can give them some eco-efficiency in meaningful areas, but we should also put this in perspective. Big change is coming, whether we wish it or not. If we know this, we have to act. This requires us to bring the board to greater awareness, to articulate the challenge, and also to share a vision what the business could become.
Turning the tables
We can make conscious choices. We don’t have to allow ourselves to be diverted into the conventional business case trap. And we need to stop thinking that short-term financial performance trumps all – it doesn’t; without a sustainable planet and economy, there is no business. The real magic comes in being able to put the risky stuff in run-off and ramp up the more sustainable approaches. This is not an impossible task. Dong Energy, one of Europe’s leading energy groups, is managing its transition away from fossil fuels, towards 85% renewables by 2040. And if a fossil fuel company can do it, anyone can. Perhaps we should take real ownership of the problem; find our inner strength and turn this challenge back to the board
Reframe the game
It is time for all businesses – large and small – to re-evaluate their strategies, and consider the real business case by focusing on what the business needs to survive and genuinely prosper. The challenge is not with the CSO to justify his or her position, but with the board to justify its stance to shareholders and all other stakeholders. And this is a shared challenge, for the whole board. It is perhaps time to reframe the role of the CSO too. How much time is spent on data collection, reporting, communications and compliance? And how much of it is spent on the strategic challenges, making the board and senior managers more aware and supporting them in developing resilient business strategies? It is time to put the horse well and truly back in front of the cart. First, do the right thing, then quantify the benefit. It’s time to be BOLD.
This article was originally published on the Guardian website
Michael Townsend is the Founder and CEO of Earthshine Solutions. He is passionate about promoting the benefits of sustainable business, and author of The Rough Guide to Sustainable Business (forthcoming). Michael is an engineering graduate and MBA: a business transformation leader with over twenty-five years experience in a range of sectors. Michael has developed “best in class” performance for a range of organizations, including Norwich Union (Aviva) Insurance, BAA, British Airways, Mace, The Home Office and Gazeley, amongst others.