In a recent article in Rotman Management (Spring 2018), David Kiron et al. outline five principles that corporations can follow to build a sustainable business. They developed these principles following an eight-year study and, while they identify examples of progress in line with ESG (environmental, social, governance) goals, they worry that the global increase in populist and anti-regulatory leaders seriously threatens further development.
1. Focus on issues that are material to your business.
While encouraging employees to car-pool or ride their bicycles to work might sound like a positive social and environmental initiative, it is outside the core business of the organization and will have no impact on the sustainability of the organization. Instead, businesses need to engage in activities that directly impact their processes and products: reducing paper usage, recycling waste water, increasing product life, incorporating recycled materials into their manufacturing, and so on.
2. Innovate your business model.
Too many corporations view sustainability primarily as a function of risk reduction, regulatory compliance, and building their reputation as good corporate citizens. A more effective means is to look for ways to increase market share, develop efficiencies, and take advantage of competitive advantages. For example, Kraft found that even though one of their new package designs used 28 per cent less material and required 50 per cent less energy to produce, it was the overall design that appealed to customers, leading to increased market share and enhanced customer satisfaction.
3. Build a clear business case.
The main argument here is that even when you have people within an organization tasked with identifying and implementing environmental and social initiatives, all of which may look good in a corporate CSR report, unless these initiatives create value for the organization they are a waste of resources. However, the business case does not need to come first. Many times, it takes an internal entrepreneur to identify and act upon an opportunity that may or may not in the end produce results consistent with sustainability goals.
4. Develop a compelling value creation story for investors.
In many businesses and community-based organizations and associations, it can quite difficult for stakeholders to recognize benefit from activities centered on sustainability. It is incumbent of managers and those tasked with communicating with interested parties to learn how to package the sustainability message into their more traditional performance-oriented reportage. Assuming that stakeholders will understand the importance of sustainability in remaining competitive or providing an acceptable level of service is a huge mistake.
5. Embrace collaboration within your ecosystem.
No organization at any level operates independently. Genuine sustainability can only be accomplished through collaboration across a supply chain or value chain that can include entities spanning a broad range of industries and services, as well as be geographically diverse. Successful implementation of this principle requires the clear definition of roles and responsibilities, the establishment of effective channels for communication as well as expectations around reporting, and developing an overarching system of governance for partnerships.
What part, if any, does leadership play in developing or implementing initiatives consistent with these principles? Where in the corporation/enterprise/community should/could such leadership emerge and from whom?