Sustainability: The Other ‘Value’ Paradigm!

Doing 'good' is being redefined, as that which makes employees, suppliers, customers and the environment happy, and alongside, makes a profit

At ‘The Business Roundtable’, a group of top 200 major US corporation CEOs issued a statement in Aug 2019 on the ‘purpose of a corporation’. The longstanding view of serving the shareholders and maximising profits had to give in to a new paradigm.

Employee engagement, customer delight, supplier ethical practices and supporting outside communities were conceded to be at the vanguard of the new American business goals. The signatories of the statement, amongst others, included Amazon's Jeff Bezos and Apple's Tim Cook.

An epoch-worthy moment reflecting the times that we live in.

Doing more with less is here. And real.

Side-lines to the mainstream

Businesses impact the environment and society both. Sustainability addresses this impact. If businesses fail to do so, what results is environmental degradation, inequality or perhaps social injustice.

The need for responsible behaviour traverses all aspects of a business, from strategy to execution.

China’s securities regulator plans to get publicly listed companies to disclose environmental data to investors from next year. Sustainability is beyond just being a buzzword today with investors using ESG (Environmental, Social and Governance) metrics while studying such factors as a company’s carbon footprint, water usage, community development efforts, advancing renewable energy, reuse and recycling, and board diversity. Brands with higher ESG ratings are more financially successful and have more public support, as per Mckinsey.

The CEO imperative

As per CDP, $2.1 trillion is the aggregate financial impact of climate-related business opportunities recently identified by 225 of the world’s largest companies.

The story of business in the 21st century is the story of sustainability. The reason is the risks posed by climate change and other environmental threats, ironically owing to global capitalism that ruled the roost in the 20th century.

The ‘tragedy of the commons’ as an economic theory describes how people often use natural resources to their advantage without considering the good of a group or society as a whole. Mindset change, with collective action—at the individual and institutional level both—therefore is what may lead us to conserve not deplete. From finite to renewables.

Such a simple change from light bulbs to LEDs lends reduced energy use and lasts 10-20 times longer.

Companies like Apple and Ikea are going even beyond governmental regulations with Apple committing to using green energy to power its manufacturing plants, and Ikea using ocean-bound plastics to make its products. Boeing is using waste heat from a new Seattle sewer trunk line facility. Facebook offers employees $10k or more if they move within 10 miles of Silicon Valley campus. Nestlé aims to eliminate all greenhouse gas emissions by 2050. Making Amazon’s net-zero carbon emissions a 2040 goal is Jeff Bezos’s latest announcement.

The other ‘value’ paradigm

The definition of good is up for a change. Good is not what makes a profit.

Good is what makes employees, suppliers, customers and the environment happy first and alongside makes a profit. The good old sustainable competitive advantage of companies needs a marriage with sustainability—the new imperative on the block.

Businesses have to create social value alongside business value.

Extreme times of hyper-change have led to systems being stressed like never before. And in the process, the social contract—existing formally or otherwise in the firms of yesteryears—got thrown to the wind. Systems thinking and systemic change on the issue of sustainability is the need of the hour.

The green awakening

“The climate crisis is caused by us, and the solutions must come from us,” UN Secretary-General António Guterres said last month at the UN Climate Action Summit in New York. “There is a cost to everything, but the biggest cost is doing nothing.”

The Intergovernmental Panel on Climate Change (IPCC) warned in its report earlier this year that without “rapid and far-reaching” changes on current practices of managing land, energy, industry, buildings, transport, and cities, the harm to our planet could be irrevocable.

“I never worry about action, only inaction,” said Winston Churchill.

Choosing action over otherwise is the need of the hour for governments, businesses and individuals alike…worldwide.

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Note: Article as originally published in and reproduced from Forbes India, Oct 2019.

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