Businesses Need To Understand Sustainability. Here’s how.

Just Root
Just Root
Aug 29, 2018 · 5 min read

On a Saturday night in Chicago, I pounded my hands on our corner table. The wine shook as I punctuated each idea with a slap on the white tablecloth. He called me naive for thinking sustainability was relevant to his business. I was making a point.

Well, I was trying to make an important point. After day drinking at a Cubs game, my passion was louder than the points I wanted to make.

A week later, I came across this story: Reebok launches sustainable sneaker made from cotton and corn — and I shook my head. Here’s yet another example of a big business pursuing innovation through the lens of sustainability, but I’m naive to embrace these principles? I didn’t understand how he could say that. Unless he misunderstood the significance of sustainability.

In my wine-induced rush to explain sustainability, I didn’t get my points across, so now I want to make sure I’m clear.

Sustainability is associated with green — because green is the color of money.

Big businesses are making big money by aligning sustainable thinking with their core business strategy and operations. They are not embracing sustainability for consumer-facing reasons. They’re embracing sustainability for a competitive advantage and long-term profit potential.

  • Researchers at Harvard and London School of Business found that, over an 18-year period, “high-sustainability” companies outperformed “low-sustainability companies by an average of 4.8%. [The Guardian, 2012]
  • Goldman Sachs proved that companies that are leaders in environmental, social and good governance (ESG) policy have 25% higher stock value. [GS Sustain Focus List, Goldman Sachs Group, 2012]
  • 80% of sources analyzed in a meta-analysis of ESG data showed that the stock price performance of companies is positively influenced by good sustainability practices. [GS Sustain Focus List, Goldman Sachs Group, 2012]
  • 90% of consumers around the world want the brands they do business with to share their core values. [Edelman Brandshare Survey, 2014]
  • The prominence of purpose as a purchase trigger has risen globally by 26% since 2008. [Edelman Brandshare Survey, 2014]

“The fact is, it’s unsustainable to have 15% of the world’s population using 50% of the resources,” said Paul Polman, Unilever CEO.

Former P&G and Nestle Foods executive, Paul Polman took over as CEO of Unilever on January 1, 2009. Their market cap at the time was more than $100 billion. Polman immediately announced a pivot towards sustainability and eliminated quarterly reporting. The stock fell 20% over the next few months.

In 2010, Polman announced his sustainability strategy, Unilever Sustainable Living Plan, with the aim of doubling the size of the business while reducing environmental footprint and generating a positive social impact. Wall Street hated this idea, but by the end of 2011, operating profits were up 26%. Another year later, in 2012, the price of the stock was more than 50% above where it had been when Polman started. Unilever outperformed P&G by 3.5% over the next 5 years and emerged as a leader in sustainable business.

Sustainability isn’t hippy shit with a green label. Sustainability is strategy.

A lot of people are making decisions with an antiquated view of sustainability. In the 70s, Milton Friedman instigated the situation by framing sustainability as an enemy of capitalism. In the 90s, the primary culprit harming sustainability was the Green Marketing wave. The hole tearing open in the ozone inspired marketing hacks to greenwash their brands. They ushered in more expensive products with inferior quality made of anything that wasn’t plastic. Whole Foods, among other retailers, cashed in to by selling these products. The Green Marketing movement didn’t have legs because there was no mass appeal. Only a small segment of altruistic consumers will spend more for less quality, so they can say they’re doing the right thing.

Twenty years later — and you still see relics of this thinking at Expo West — these “green” products are wrongfully associated with sustainable design. A product is inherently not sustainable if it’s not appealing to a wide consumer base. Who’s going to keep buying it? A truly sustainable product or service provides better quality at a fair, or even lower, price point made with more eco-effective materials and processes.

The future won’t depend on technology. The future depends on innovations in sustainability.

I went to Cuba seeking a better understanding of life in a communist country — not to mention, the amazing cigars. The trip highlighted the distinction between necessities and conveniences. Everyone in Cuba had access to the necessities, but only a small minority experienced conveniences like air conditioning. We don’t realize how many conveniences we confuse for necessities in this country.

I’m a technophile. Technology offers important tools for productivity, but all the sensationalism about technology as the future of innovation reminds me of my trip to Cuba. There is a misconception that companies are innovative because they create new technology. Technology is a convenience. If Uber goes bankrupt tomorrow, the disappearance of all their innovation won’t stop me from getting around town. It won’t be as pleasant of an experience without their technology, but Uber is not essential. Sustainability is essential. Innovation in the form of sustainability is a necessity. The problem is too big for us to ignore. We must embrace this thinking and practice these principles. Our physical environment is the only known boundary to capitalism. If we don’t innovate with sustainability, we will shrink these boundaries as we harm where consumers live and where businesses operate.

Sustainability is not policing your business; it’s how an organization practices businesses.

There are a lot of similarities between a shrewd capitalist and a sustainable innovator. Both emphasize a Jack-Welsh-like focus on efficiency and reducing costs. Both rely on quantifying operations and benchmarking KPI. Both are dedicated to protecting and growing the future of their company. The timeline for informing decisions is where they may disagree.

Sustainable innovators prioritize patiences and the longview. They are willing to make concessions in the short term in order to reap more market share and larger gains in the long term. The shrewd capitalist may have a preference for larger returns in a more immediate time frame. They need to work together to achieve the right balance, but they can find plenty to agree about.

Our 17-year-old consumers tell us they want a better world. They don’t call it sustainability,” said Hannah Jones, Chief Sustainability Officer Nike

Businesses should not recognize sustainability as true innovation for their consumers. They should sustainability innovate to invent new products, enhance operational efficiency, develop more IP and improve their environmental and social impact.

There is a consumer-facing benefit to sustainability. You can reduce your impact on the environment while increasing your impact to top-line sales.

  • 87% of consumers around the world want more meaningful relationship with brands
  • 87% believe that business needs to place at least equal weight on society’s interest as on business interest [Edelman Good Purpose Study, 2012]

Aspirationals offer marketers a reason to be excited about sustainability. This segment of consumers represents a third of the global population. Aspirationals are characterized by their loving of shopping (93%), their desire for responsible consumption (95%), and their trust in brands to act in the best interest of society (50%).” Aspirationals not only vote with their dollars and spend money with businesses they trust, but they also influence their peers. Ninety percent of Aspirationals say they encourage other to buy from socially and environmentally responsible companies

Now is the time to embrace sustainability. Perfection should not prohibit progress.

One of was naive at that table, but now, I’m not sure it was me. 😘

Originally published at Justin Root.

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