In the third and final part of Sustainability & Business the impacts of changing economies and societal norms on the competitiveness of businesses is examined, from a sustainability lens. Part III also explains a 5 stage spectrum demarcating corporate resistance to regulation on one end and acceptance of innovation on the other–a spectrum that every company is defined by. Lastly, organizations that are helping businesses reach their sustainability pinnacle are introduced and compared.
The only thing that’s certain, is change.
As societies change, so do economies. And as economies change, so too do the intrinsic and organic actions and inactions of the mechanisms (i.e. businesses, governments, consumers and organizations) that operate within. Why is this?
The biophysical history of our planet has illustrated that the complexity of the organisms and the geospatial success of their species expands over time if conditions are conducive and if their ability to adapt and evolve continues unabated as ecological and spatial circumstances change.
The anthropocentric systems we have created operate in a very similar manner; where economies are the overarching biophysical determinants and businesses the organisms competing for survival.
As scientific consensus continues to ascertain that we are now entering into the Anthropocene, an epoch where human activity becomes the dominant influence on climate and the environment, our economies begin to enter into a new era themselves. An era of corporate responsibility (and accountability) and stakeholder-driven markets emphasizing not only economic, but social and environmental responsibility.
While this era will come of age in different areas of the world at different times, the organizations that are first to identify the gradual shifts in their economies and adapt accordingly will enjoy the spoils of effective and timely evolution. Not all involved will realize, believe, or feel threatened by the changing circumstances, yet this unfortunate reality will only escalate the natural rhythm of change as the old die out and the new thrive.
The evolving business wins the race.
The current ‘sustainability imperative’ that is pushing companies to implement practices that are more responsible to people and planet is a result of the positive impacts it is having on their current and forecasted profits (Lovins & Cohen, 2011). In 2010 Nick Robbins predicted that by 2020 annual capital investment in the green economy will grow from an annualized 460 billion in 2010 to at least 1.5 trillion. In 2017, Unilever claimed that the market for sustainable goods was currently at 2.65 trillion dollars. Lastly, Nielsen (2015) found that sales of consumer goods from brands with a demonstrated commitment to sustainability have grown more than 4% globally while those without grew less than 1%.
So the question remains: if the sustainability math seems to be adding up, why is the corporate integration of sustainability principles still occurring at a relatively sluggish, uninspired pace?
“Socialism collapsed because it did not allow the market to tell the economic truth. Capitalism may collapse because it doesn’t allow the market to tell the ecological truth.” — Øystein Dahle
The misaligned mentality, perspective and knowledge base of some senior-management officials and shareholders combined with the inability of market mechanisms to not only signal the exacerbation of social and environmental externalities but also the value of avoiding them altogether has played a significant role.
Entrenched business perspectives that regard social and environmental responsibility as a cost rather than an opportunity has also played a large role. As Harvard Business School Professor Michael Porter once stated,
“Managers must start to recognize environmental improvement as an economic and competitive opportunity. It is time to build on the underlying economic logic that links the environment, resource productivity, innovation and competitiveness.”
Identifying the realities (i.e. opportunities) that exist when economic, social and environmental systems interact before economic incentives emerge is crucial for a business to:
- disrupt markets and bypass competition
- lower risks and costs associated with internal and external processes
- expand market share, partnerships and brand loyalty
- improve retention and attraction of top talent
- widen investment opportunities and provide healthier, more stable returns
- ensure brand viability into the future as economies and global licenses-to-operate shift towards more holistic business requirements.
From resisting regulation to embracing innovation.
In economies with some semblance of social or environmental regulation, all businesses can expect to exist at one of five stages demarcating corporate resistance to regulation versus acceptance of innovation.
Former IBM executive, Bob Willard, developed a spectrum for portraying the linear progression businesses may experience as they shift from regarding sustainability as a cost, to a realistic opportunity that enhances innovation and performance. Summarized below, it illustrates the logical development a business will undergo in reaction to regulation, evolving societal norms, and changing brand objectives.
Stage 1: Pre compliance
At this stage a company has no obligation to focus on anything other than generating profits. The venture is purely financial at all costs.
Stage 2: Compliance
Here, a company is obeying regulations set by the state. These companies will think themselves as responsible corporate citizens, yet many will still oppose progressive forms of regulation like climate protection, believing it to be costly and unjustly.
Stage 3: Beyond compliance
The company understands that investing in their local community and engaging in authentic social and/or environmental branding minimizes uncertainty, enhances reputation and improves shareholder value. Despite this, corporate initiatives are assigned to narrow internal departments and viewed as low priority “green housekeeping.”
Stage 4: Integrated strategy
The firm is rebranding and committed to climate protection and implements key business strategies. The business captures value by integrating innovative initiatives that provide value to all stakeholders. It also understands that improving sustainability performance is the path to profitable investments and opportunities.
Stage 5: Purpose and passion-driven companies
The company is governed by a value-based commitment to improving the well-being of the business, society and the environment. The company is using its product, services, networks and/or processes to build a better world because it is the right thing to do.
Cultivating purpose-driven companies.
Until approximately the last 20 years, the majority of companies existed entirely in the first, second or third stages. It is only in the last two decades that a growing number of corporations have successfully operated at the fourth stage–successfully throwing their brand behind progressive corporate goals and implementing breakthrough strategies to achieve them.
Despite this progression, very few companies are guided by an entrenched value-based ideology that integrates social, environmental and financial objectives into the core of the business (i.e. Stage 5). While rare, these inspirational companies and altruistic business owners are beginning to understand that using business as a tool for positive impact is not only more personally fulfilling, but provides unimaginable opportunities for business.
Fortunately, there are currently a number of organizations working to help companies improve their sustainability performance and generation of positive social and environmental impacts. Here is a brief breakdown of organizations working to help improve private-sector sustainability performance.
- Global Reporting Initiative: GRI helps businesses and governments worldwide understand and communicate their impact on critical sustainability issues such as climate change, human rights, governance and social well-being. How it works: it provides a step-by-step process for businesses to measure and report various economic, social, and environmental impacts, providing the public (i.e. stakeholders) with valuable information regarding their sustainability performance.
- PUR Project: works with companies to regenerate ecosystems and climate impacts. It does so by: empowering local communities to operate long-term socio-environmental projects, helping companies strengthen their supply chains through agroforestry, land restoration and sustainable agricultural practices.
- B Lab: the B Corp certification is a holistic sustainability certification for businesses that works to support businesses that meet the highest standards of verified social and environmental performance, public transparency, and legal accountability to balance profit and purpose. How it works: A business will undertake the B Corp assessment and if they pass the minimum score (80/200), they will receive the certification after a round of data verifications.
- 1% for the Planet: 1% helps businesses provide positive and measurable on-the-ground impacts by partnering them with non-profits. How it works: to partner with 1%, a company must donate 1% of its total revenue every year, which is then transferred to the company’s chosen organization. They offer flexibility with how the 1% is provided (i.e. balanced between advertising, in-kind donations, paid employee volunteer hours, and capital).
- Cordillera Institute: The newest and most ambitious program to date, CI has been designed to transform the world’s private sector into the world’s largest sustainable stakeholder and its largest impact generator. How it works: CI has designed a comprehensive sustainability certification for businesses that not only requires a successful assessment score, but also the donation of at least 1% of yearly revenue to a partnered organization. In this way, CI helps businesses improve their own internal sustainability performance while generating immediate and measurable “on-the-ground” impacts. To enhance their support of certified Cordillera Corps®, CI also utilizes the information collected in the assessment to provide tailored consulting services that help their members identify and address opportunities, risks, and challenges. Combined with genuine efforts to support activism campaigns and grassroots efforts to improve environmental awareness CI is intent on expanding its action-oriented raison d’être.
Here is a simplistic breakdown for international options to help your business improve its sustainability impacts:
The options for companies looking to improve their sustainability performance are beginning to become more readily available, more impactful, but also more confusing as they become more numerous. Depending on a business’ desired financial commitment, level of impact, employee engagement, networking opportunities, and amount of brand notoriety, there is a right choice for everyone. These organizations are working hard to make sustainability a valid and easy option for businesses–who now have little to no excuse to not improve their impacts and performance.
Thank you for reading.
Lovins, L. H., & Cohen, B. (2011). Climate Capitalism. New York, New York: Hill and Wang.
Nielsen, (2015). The sustainability imperative: New insights on consumer expectations. Retrieved from https://www.nielsen.com/ca/en/insights/reports/2015/the-sustainability-imperative.html#
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Miguel is the founder of the Cordillera Institute. He is dedicated to transforming the private sector into the world’s sustainability leader as well as the largest and most effective provider of positive socio-environmental impacts.