This week we celebrated Earth Day! Over the 43 years of Earth Day’s existence, the term “sustainability” has moved from the margins, to being part of mainstream business rhetoric on not only the environmental challenges facing our global society, but also our social/socioeconomic challenges. However, despite this marked increase in the adoption of the term, ambiguity still surrounds conversations about sustainability in the business world. Depending on who you are speaking to and in what context, the term can be understood – or misunderstood – in very different ways. Anyone who has ever been part of a dialogue around (business) sustainability with different groups stakeholders can probably relate to the frustrations of circular conversations with little consensus, simply because of different interpretations of the term.
So what does sustainability mean?
Sustainability is essentially an approach to how you do business and make decisions, rather than something that can be limited to a group of business issues, such as reducing your carbon footprint or community investment programmes. Therefore, rather than offering a precise definition of sustainability (there are many of these already), thinking about the core principles that underpin sustainability in business is perhaps a more valuable way of understanding the term and how it relates to whatever business issue may be of concern. At the heart of sustainability are two core premises: sustainability requires a holistic approach and adopting a long-term outlook.
First, let’s explore what it means to have a holistic approach to business. This is about recognising the interconnections and interdependencies amongst the systems that make up the world businesses operate in, and indeed the world we all live in. Throughout the 20th century, business leaders and management gurus focused on optimising functions within business (human resources, marketing, quality management, etc.). Whilst this was very effective from a narrow point of view, it rarely took into account how these individual functions or programmes connected to a larger interconnected system. This has often led to efficiency in one area at the expense of progress somewhere else. For example, a company’s values may for call the customer’s needs to be put first, but their incentive structure encourages and rewards people for pursuing short term sales rather than building relationships based on mutual benefit. Looking at a system as a whole, helps avoid such situations and enables people and functions to work in a more aligned and cohesively way towards a common purpose, not a new idea by any means. Applying ‘systems thinking’ more broadly to our society means understanding that we cannot optimise our economic success without simultaneously optimising the social and environmental systems to which it is intrinsically linked.
The second core premise of sustainability, having a long term outlook, builds on the first by ensuring the resilience and success of the interconnected systems on which businesses depend, both now and in for the future. Understanding sustainability in this way presents a clear case for why embedding sustainability into how you do business is not at odds with thriving as a company. In fact, sustainable business is how companies are adapting to the changing dynamics of the 21st century, whether that is reacting to increasing stakeholder demands or the finite nature resources. Being a successful company today, that is resilient for tomorrow, means rethinking how you operate in a more sustainable way.
Below are two well publicised examples of companies taking a more holistic and long term approach to running a sustainable business:
Marks & Spencer’s Plan A includes 180 commitments to achieve by 2015, which cover everything from trading ethically, to combating climate change and helping their customers live healthier lifestyles. Through Plan A, the company has launched new closed loop business models for clothing with itsShwopping partnership with Oxfam, built secure and sustainable partnerships with its suppliers and importantly, engaged its customers through these processes. The Net benefit generated by Plan A in 2011 -2012 was £105m (which is approximately US$160m). Plan A may have started out about being the right thing to do, but it is now an essential part of the company’s growth and success going forward.
Unilever’s Sustainable Living Plan is one of the broadest and most ambitious strategies incorporating sustainability. Beyond addressing their direct impacts, they are looking holistically at the entire product life cycles. Upstream, Unilever plan to source 100% of their agricultural raw materials sustainably by 2020 and this is underpinned by their Sustainable Agriculture Code. Downstream, Unilever products touch the lives of over 2 billion people every day and this is where the main impact of their products lie. The company aims to influence consumer behaviour change through their Five Levers for Change, which is a key part of the company’s plan to achieve the their other two goals for 2020 - to halve the environmental footprint of their products and to help one billion people take action to improve their health and well-being.
Marks & Spencer and Unilever provide useful examples of how companies are rethinking how they do business to create holistic and sustainable value. Whilst these leaders are blazing a train for others to follow, becoming more sustainable is a journey and a journey by its very nature is curvilinear, with peaks and troughs. There will inevitably be challenges and risks, but those who can successfully progress on this journey will need to understand the basic premises behind sustainability and take a holistic approach, with a long term outlook, to how they create and sustain value.