The systemic business case for sustainability

The notion of “the business case” for sustainability has been bothering me for some time, and it wasn’t till right before Christmas that I was able to put my own finger on why: Traditional attempts at identifying the business case for sustainability are doomed to fail, because they focus by and large on short-term, (relatively) tangible value created for the company. But sustainability initiatives intrinsically create value beyond the walls of the company, for the long-term, and thus outside the measuring capabilities of traditional financial accounting.

The limits of the 'business case' for sustainability

The limits of the "business case" for sustainability

What’s needed is a broader notion of business case. So, not the usual sort of business case like the opportunities to make money from environmental efficiencies / manage risks / capture new market demand, but the systemic, big-picture business case, which is that business is a part of society and the environment and therefore the sustainability of business depends critically on the sustainability of both. (For example, SustainAbility’s working vision for the food sector is that it deliver safe, nutritious, accessible and affordable food in such a way that the two resources on which the food sector depends – the environment and the farmers – can sustain themselves.)

It may seem obvious, but I do feel that with so much of the wider sustainability advocacy discourse still placing business in opposition to society and to the environment, it is critical to:

  • spell out the argument that environmental and social sustainability are a necessary condition for the long-term sustainability of business, and
  • be really clear about why the old ways of doing business no longer work for businesses.

Luckily, if there ever were a time when business was ready to hear that, that time could be now. Alan Greenspan: I was wrong.

There is certainly opposition and tension, but not between business and society/environment so much as between different mindsets:

  • the short-term at the expense of the longer-term,
  • the pure self-interest at the expense of relationships,
  • the narrow competitiveness and secrecy at the expense of ultimately more value-creating collaboration and transparency, the “more for just me” versus “enough for everyone”,
  • the stubborn fetishization of deregulation versus an approach that understands that individual decision-makers (and hence the market) cannot always know best – an approach that understands that human rationality has its limits.

Thinking of it in this way, it becomes clear that these are all tensions that are not unique to business activities, although that is where they are most powerfully expressed. Rather they are very human and appear in all areas of human activity and are rooted in the way we think and relate to the world and this is why they’re so hard to address… this is why we have had to have some form of the Golden Rule embedded in all religions going as far back as we’ve existed.

And our task becomes sharply and simply a task of shifting mindsets, both at a strategic level through all the various arguments and persuasions we have at our disposal, and at an implementation level through helping businesses to develop new vocabularies and tools to operationalize this way of thinking.

Of course there was a reason why the old way of thinking has thrived, and part of our work needs to be to understand this at a deeper level – it worked well in our old world where (a) natural resources appeared unlimited and (b) people and regions and individual businesses weren’t so connected as they are now.

When natural resources are abundant it’s easier to dismiss the tragedy of the commons because there are always new commons to exploit. But we’re now bumping up against the limit. (I can’t help but think of the last scene in The Truman Show where Truman is in a boat trying to escape and hits the tarp sky enclosing the aquarium that his seaside hometown is set in.)

Similarly, in a world of interconnections so deeply woven that we can’t know the full extent of global interdependency, it becomes clear that offloading risk to another party (as seems to have been the single aim of financial innovation over the last decade) doesn’t make the risk go away, it just hides it… as recent events have made rampantly clear. This interconnectedness has also made it clear that the prevailing “portfolio approach” to managing transactions – an approach that assumes that markets and events are independent – is ultimately flawed.

In an independent world you can reduce investment risk simply by diversifying your portfolio because if one stock goes down another will go up, and you can squeeze your suppliers because there will always be another one waiting for your business. But this is a world where a slowdown in the US retail sector causes Chinese toy factories to lay off workers, and where the collapse of the Icelandic banking system puts the supply of ready meals in the UK at risk, and where foreign gov’ts hold 25% of Fannie and Freddie’s agency debt….

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