Sustainability: from liability to asset
I grew up in the 80s in The Netherlands, when smoking was still fashionable, the enemy was politically as well as geographically well defined and the biggest environmental threats were acid rain and the hole in the ozone layer. Sustainability was something that did not exist, or maybe only in academic circles.
Today, smoking is uncool, the enemy is geographically dispersed and ethereal and climate change completely out competed acid rain and the supposed hole in the ozone layer.
But something else has changed. In the 80s, environmental issues hardly left the activist and political arena. Today the environmental is taking over Fast Moving Consumer Goods industries by storm.
Sustainability starts in the supermarket
Look at the supermarket. In the 80s, we could choose two kinds of peanut butter: the budget brand of the supermarket and the A-brand that we knew from TV-commercials. Peanut butter was a nutritious, but very neutral, a-political, product.
Today I can choose from at least 10 kinds of peanut butter. The two latter options are still available but look what has entered the shelves: bio-versions of the budget and brand options and new brands that are either focused on local products or sustainability. Or both. On top of that, most food products in the supermarket have some kind of label related to sustainability, for example: UTZ / RA or Fairtrade. The same trend can be seen in the fashion industry.
Why and how did this happen? What does that mean for other industries? And where will this take us?
Let’s have a look at the concept of pace layers, proposed by Steward Brand in his book The Clock of the Long Now, to see if that sheds light on the advance of sustainability from the activist, via the political to the economic domain.
Pace layers as a model to analyse trends & impact cycles
The pace layer concept states that time moves at different paces in different layers. Each layer has its own turnover speed and horizon. Fashion, for example, moves at a seasonal pace. Each season has its own fashion. Commerce moves more or less at yearly pace. Profit-loss is calculated on a yearly basis, therefore the strategy and vision of most commercial enterprises follows this cycle. Infrastructure moves at a 1–10 year pace, governance works in 4–15 year cycles, culture in decades and nature in century cycles.
There are feedback loops between layers which is why it takes some time for nature or culture to inform fashion and commerce. And that’s why it takes some time before the effects of commercial and governance activities show up in the culture and nature layers.
The industrial boomerang
If we would analyse the drivers and effects of the industrial revolution using the model, we can begin to understand why it took some time for nature to phone home.
The industrial revolution started in the mid 19th century and was mainly driven by commercial enterprises. Seeing the success of this revolution, the government picked this up and started policies to support industrial expansion. Only decades later, around the early 20th century, worker movements started to arise to counter the negative cultural effects of the industrial revolution (the exploitation of workers, child labour). It took decades for the effects of the industrial revolution to have an effect on awareness and change opinions in the cultural layer. Over a century later the effects of the industrial revolution started to show up in the natural layer. That is what happened in the late 20th century and that is what is since then trickling down into the cultural, political, commercial and fashion layers.
People began to care about the environment in the late 20th century. It started with individual activists, turned into organised activism and then into political parties. Those political parties played a key role in changing the public opinion. On the one hand, they forced all parties to have a sustainability policy by putting sustainability on the political agenda. On the other hand they influenced the public opinion on sustainability and thus, indirectly, the commercial and fashion layers.
That is where we are now. People don’t want to wear clothes anymore that are produced with slave labour. People don’t want to sprinkle their morning toast with guilt. This is why we have certifications and labels like UTZ / RA or Fairtrade. This is why the UN came up with their Sustainable Development Goals and this is why there are industry initiatives like the RoundTable for Sustainable Palm Oil (RSPO), Cocoa initiative and b-corp and why captains of industry and global brands are publicly advocating sustainability as a key ingredient to move forward.
Hurrah. We understand why companies are going a long way to polish their sustainability image. But a lot of this is still PR and marketing. An insurance against, or to mitigate bad publicity. Many companies still see sustainability as a liability. Could it be possible that that attitude would change? That companies will come to see and use sustainability as part of their core business?
What’s beyond the supermarket?
To answer that question we can again turn to the pace layer model and look at what is happening in the fashion layer at this moment. Apart from that we could have a look at how Information Technology (IT) moved from being a liability to an asset in the 1990s and 2000s.
Fashion leads the way
Fashion adapted sustainability as a PR and marketing tool before other commercial sectors like the food industry. Nowadays, most major fashion brands have some kind of sustainability paragraph or policy. But also a change can be observed where there are companies based completely on sustainable input, ethics and transparency . Examples are Veja, the sneaker brand and the Dutch fashion outlet Nukuhiva. Since the fashion layer has the highest pace of all layers and is usually the first to pick up trends, this might be an indication that other industries will follow.
Concrete trials can be seen in the food industry. More traditional industries like the financial sector are still in the exploration phase.
Sustainability is the new IT
Apart from looking at what is currently happening in fast moving layers, we can look at past adoption processes of new concepts in industry. For example, IT. In the early days, companies saw adopting IT as a way of automating human tasks and thus as a cost saving measure. An IT department was needed for maintenance of the IT systems but this department was seen as a liability on the balance sheet.
In the late 90s however, it was realised that “every business is an information business” (Evans & Wurster). IT played a key role in managing that information. That moment can be seen as the pivotal moment where IT moved from a liability to being an asset. Banks used to be a building full of bankers with an IT department in the basement. Nowadays, banks are an all-out IT organisation with some bankers in the basement.
The same adoption process is now happening for sustainability. For example, replace the term ‘social goals’ with ‘IT’ in the following headline from a recent HBR article:
“How Companies Can Balance Social Impact and Financial Goals”
versus
“How Companies Can Balance IT and Financial Goals”
The latter article would have been a hit among 80s and 90s consumer good company CEOs but would hardly attract any attention now; every serious company has a CTO or CIO. I wouldn’t be surprised if in a few decades every company will have a Chief Sustainability Officer.
Wrapping up
These two trends show that there is at least potential for sustainability to become part of the core business of companies. Not as a liability, where it is used to prevent companies losing money but as an asset, where it is used to make money.
I believe economic viability is a pre-condition for sustainability. To be economically viable, sustainability should therefore be embraced as a valuable asset. I think the first signs are there that this is happening. Looking forward to see what the future brings.