My case for doing business more sustainably
Alex Watson, On Purpose Fellow, writes about the potential of companies, that put purpose before profit, to create social or environmental benefits and at the same time generate enough revenue to be financially sustainable.
“We have four superpowers” said James Perry, former CEO of COOK, referring to the different ways we can affect not only the people who we spend our time with, but the world around us. “We can decide where we spend our money, where we work; some of us can decide where we put our savings, and we can vote.”
I’m going to try to shine some light on what we can do with the first two of these. One reason for picking those is because the transformations we are seeing in the private sector — only 10% of the companies listed on the Fortune 500 in 1955 are still there today — while not necessarily unprecedented, do remind me that the market has the power to tackle the problems we face with rising inequality, climate change and an ageing society.
I’m not talking about the relatively small corporate give-aways that have characterised what people have called ‘corporate social responsibility’ over the last few decades. What I’m talking about is companies doing things that are good for the planet and society, while making money. Just in case it wasn’t clear, these organisations are not relying on state funding.
First of all, the hippies can achieve a lot.
Let’s take climate change. And let’s take at a big consumer product. I’ll pick one close to my heart: beer. The New Belgium Brewing Company adopted its own internal electricity tax — charging itself 2.4 cents for every kilowatt-hour of power generated from fossil fuels that it consumes. This creates a powerful incentive for the company to use clean energy: the firm generates much of its energy onsite, and all purchased power comes from wind. This isn’t a marginal company. In 2015 it was the eighth-largest overall brewery in the United States. Many “craft” beer companies have adopted a variety of measures to have a better impact on planet and people and are growing rapidly. But how can these measures be good for business if there are cheaper ways of doing things?
This stuff makes business sense for two main reasons. First of all, they acquire and retain the best talent. Deloitte’s 2015 Millennials survey showed that 60% of the 2,800 millennials interviewed stated they joined their current employer because of the organisation’s “sense of purpose.” Then they retain that talent: PWC report that millennials are 5 times more likely to stay with employers when they feel a strong connection with their employer’s purpose.
The second reason is that they get free marketing. Tesla is perhaps the best example of this. By the time it first delivered its product, it had already secured over US$325 million in customer deposits, even though customers knew it would not ship until late 2017. They don’t have a marketing department. People go the extra mile.
This isn’t just for hippies, it’s for suits as well. You can argue all day about what motivates people (money, status, caring about others) but even if you don’t want to improve society and the environment — there is money to be made. And that’s a good thing!
The best estimate I’ve come across on how big an opportunity this is comes from management consultants SystemiQ (vested interest alert! they are a customer of my employer) who looked at the business opportunities that exist in delivering the Sustainable Development Goals. They looked at four big chunks of the economy: food and agriculture, cities, energy and materials, and health and well-being which today comprise 60% of the global economy. Businesses can earn $12tn opportunity per year by 2030 by tackling the social and environmental problems. That’s 10% of our total global economy. That’s why they claim “Sustainability will become as big and disruptive in every sector as digital technologies have become over the past 15.”
The bottom line is that because these drivers affect the bottom line of business, it’s worth taking note.
