[I posted this last month for my sustainability column for MIT Sloan Management Review. I was honestly a bit nervous about it. Was it just kvetching, or productive (or both)? One colleague said to me “omg, you sound fed up.” Most responses have been very positive, but I’m eager to hear your take.]
The battle to get companies interested in sustainability is basically over. No large company seriously debates whether environmental and social issues affect the company’s bottom line. At the very least, executives recognize that key stakeholders, like their customers and employees, do care about these issues. So, sustainability is on the strategic agenda to stay.
How close are we to seeing mainstream business leaders take sustainability seriously as a critical driver of profit and resilience? How much do executives really buy it?
I’d say we live in a bifurcated world. There are clear leaders in the vanguard who are aligning with global targets like the United Nations’ Sustainable Development Goalsand exploring their purpose. But at the same time, there are still many fence-sitters. I’ve seen the basic question “What’s the business case for sustainability?” come roaring back over the last couple of years. I hear it both within companies and from the business press.
Let me share with you a representative version of conversations I’ve had across the world with audience members, executives, and business journalists of all stripes. Here’s my own personal “Groundhog Day” experience.
A Typical Discussion (Is This Mic On?)
“So, why should CEOs care about sustainability when they have to worry about profits?” Here’s where I launch into a general riff on the business benefits of understanding and navigating the world’s biggest trends and challenges, most of which are centered on environmental and social issues.
First, companies have little choice. The world’s megatrends — like climate change, resource pressures, the rise of clean technology and renewable energy, radical transparency, and generational shifts in expectations of business — are already affecting business directly. Extreme weather threatens supply chains and operations. Global action on climate change is shifting regulatory landscapes and markets. Rising expectations from customers (especially millennials) require companies to tell a better story about their products and services. And with new technologies creating radical transparency, companies had better back up their stories with data.
Those are the “sticks.” The “carrots,” or benefits from sustainability, are also compelling. Companies operating more sustainably slash costs, manage risks better, drive innovation, and build brand value. They’re more profitable. And on the specific issue of carbon footprint, the rapid and dramatic improvement in the economics of clean technology means companies can reduce their emissions and energy use, and make money doing it. In short, sustainability isn’t remotely at odds with profits.
“Why should businesses make the change?” For some listeners, the megatrends or sustainability view on business feels counterintuitive compared with the short-term profit maximization we’ve all been taught, so I am almost always asked to review the “why” arguments repeatedly. So, I try another angle on it.
Well, it’s good for business. Viewing your business through a sustainability lens helps create a better company — one that’s resilient and responsive to employees, customers, and society in general. People want to work for an organization that shares their values. Companies that innovate to solve environmental and social challenges create products and services that customers want and feel good about. None of what I’m talking about is philanthropic — it’s all about business value.
“Yeah, but since green and sustainable things always cost money, isn’t it hard to get business leaders to go along?” This question about costs and investments is critical, and it usually surfaces.
It’s a good question. But it’s a strange myth that managing environmental or social issues always, or even mostly, costs money. Many initiatives under the banner of “sustainability” save money quickly — for example, projects that improve efficiency, save energy, or reduce waste. Of course, some changes, such as sourcing sustainability or improving the lives and wages of workers in the supply chain, might cost more. But these initiatives, whether offering a quick payback or longer-term value, are investments, not costs. They’re no different than the investment choices we make in marketing, R&D, or other areas of the business that require strategic thinking.
“So, is there business value in all of this?” And I try again.
Yes, sustainability creates business value. Some things we do will pay back more quickly than others, but yes, it’s about business value — lower costs and risks, more innovation and enhanced brand value. It’s about building better companies.
“And so, finally, why should CEOs or CFOs care?” You’re messing with me now, right?
I don’t say that last thought out loud, but maybe I should. I’m finding the repetitiveness surreal given how tangible the changes in the world are already, along with the enormous shifts that are on their way — artificial intelligence, for example. The world is only getting more complicated for executives. So, it would be helpful if we could move past some of the basics and get to tackling those more complex issues.
And Yet, Repetition Has Value
In my experience, it’s clear that we still have a long way to go to make sustainability the kind of core focus of business it needs to be. But I can put a positive spin on all of this.
The latest resurgence of the question “What’s the business case?” has its roots in an encouraging and important development: We’re having the same conversations, but with new people. Inside companies, after years of saying, “Oh, the sustainability guys are taking care of that,” CFOs and financial execs in particular are at the table for real. In the past, only a small number of CFOs have gone public with a positive take on sustainability as a driver of business value (Kurt Kuehn, former CFO of UPS, comes to mind). But the discussion has gotten more intense lately.
As EY has reported, the walls and silos between those running the numbers and those handling the “softer” issues around sustainability “are crumbling.” Financial execs are now answering questions from investors (such as BlackRock and Vanguard), both of which are becoming more fluent in sustainability themselves, and those investors want to know, for example, how companies are handling their climate risks. Financial execs need to catch up. So perhaps people ask to hear the explanation in five different ways to hear as many angles into this topic as it takes to truly buy it.
As an advocate for a new, better way of doing business, I know that repetition is how norms change. We’ll keep pounding home the message. In the process, I hope, we’ll be able to move to some deeper conversation about truly pivoting business to build a thriving world.
(This post first appeared on MIT SMR’s site )
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