WHAT’S IN A NAME? Doing business responsibly and sustainably
EDIE blog readers will be very familiar with the classic definition of sustainable development as formulated by the Brundtland Commission in 1987: "development that meets the needs of the present without compromising the ability of future generations to meet their own needs." Today, we might more immediately define sustainable development as how 9-10 billion people will live at least reasonably well, within the constraints of One Planet, by mid-century.
For a more detailed understanding of what the international community: Governments, business, Civil Society, now understand by sustainable development, it is worth examining the Sustainable Development Goals (SDGs), formally adopted by the UN General Assembly in September 2015. The 17 SDGs to end poverty, protect the planet, and ensure prosperity for all, are inextricably interlinked. There has to be progress on them all: quality education; gender equality; clean water & sanitation; responsible consumption & production; peace, justice & strong institutions and so on. The SDGs speak to the interlocking three pillars of sustainability, identified by Brundtland: the Social, Environmental and Economic (SEE).
Without education, without access to sustainable jobs and economic development, we can’t be surprised, for example, if impoverished people cut down precious rainforests for energy and livelihoods, and thereby exacerbate Climate Change. Without respect for human rights, there is less understanding and commitment to our stewardship responsibilities for the planet.
In recent years, there has been an unhealthy and ultimately unsustainable emphasis on the economic: on un- or under-regulated markets, and a misguided theory of Maximising Shareholder-Value as the purpose of business – when actually, optimising value over the medium to long-term for all stakeholders, should be the consequence but not the purpose of a well-run business. Otherwise, it is like saying breathing is the purpose of life.
Today, mainstream investors like Blackrock – the world’s largest institutional investor – now recognise that sustainable value-creation, requires organisations to identify and manage proactively their SEE impacts. In economic terms, this is about managing the externalities. A mature approach to corporate sustainability understands that all three SEE pillars matter and need to be aligned.
Taking responsibility for SEE impacts requires a business first of all, to minimise negative SEE impacts. This year’s influential Edelman Trust Barometer (an annual global survey of general and informed publics and their trust or otherwise in governments, business, NGOs and the media), for example, specifically identifies several risk areas, which businesses must avoid. These include not transferring profits around the world to aggressively avoid tax; not getting executive remuneration too out of line with the average worker in the organisation; not moving jobs aggressively to the other side of the world; not compromising on product or service quality through reducing jobs; and not bribing or being party to corruption.
To be clear: this is the “do no harm” minimum: the basics to retain a licence to operate.
True corporate sustainability, however, is not just about managing the risks by minimising SEE impacts; but also explicitly emphasises maximising positive SEE impacts that a business has. Hence definitions of Corporate Sustainability as “a business commitment to sustainable development, and an approach that creates long-term shareholder and societal value by embracing the opportunities and managing the risks associated with economic, environmental and social developments.”
Or as the UN Global Compact says: “Corporate Sustainability is a company’s delivery of long-term value in financial, environmental, social and ethical terms.
This is especially important if sustainability is going to be truly embedded in business. I don’t know of any successful entrepreneur, any enduring business which has been built on a risk mitigation mindset. On the contrary, entrepreneurs look for business opportunities. Shortly before he died, the great management guru Peter Drucker declared: “Every single social and global issue of our day, is a business opportunity in disguise.” The challenges of sustainable development offer myriad business opportunities – and I think this is incredibly exciting!
Boards and senior management teams (SMT) have to see sustainability not just as about minimising SEE risks but also about maximising opportunities. It is no coincidence that the recently established Business & Sustainable Development Commission has published papers with titles such as “Mapping The SDGs, Corporate Tax, And Business Accountability” and “Business, Human Rights, and the Sustainable Development Goals.” However, their flagship report Better Business, Better World, articulates and quantifies the compelling economic case for business to achieve the SDGs. Better Business, Better World says: “Achieving the Global Goals opens up US$12 trillion of market opportunities in the four economic systems examined by the Commission. These are food and agriculture, cities, energy and materials, and health and well-being. They represent around 60 percent of the real economy and are critical to delivering the Global Goals.”
Most recently, a follow-up study specifically covering Asia, suggests sustainable businesses can unlock US$5 trillion in new market value in Asia by 2030 and that key market “hotspots” in food & agriculture, energy, cities and health could also generate 230 million new jobs—12% of the Asian labour force.
In almost forty years of working at the interface of business and society, initially on the ground with a start-up social enterprise in the north-east of England, then mobilising business nationally and internationally through Corporate Responsibility Coalitions, and most recently in my ten years in management education as Cranfield professor of Corporate Responsibility, I am very conscious of how our understanding about the responsibilities of business have evolved enormously. This is reflected in changing language from Corporate Philanthropy to Corporate Community Involvement & then Investment, to Corporate Social Responsibility (CSR), to Corporate Responsibility & Responsible Business, and now to Corporate Sustainability that can deliver profit and purpose.
Along the way, we have understood the growing range of issues covered by “Corporate Sustainability.” Human Rights, Modern Slavery and accountable supply chains. Health & Well-Being and being a good employer for working carers. Responsible marketing especially to vulnerable customers and taking responsible for the mis-use of products and services (think alcohol, gambling, financial services). Responsible use of water and preserving bio-diversity.
These demand a range of new leadership skills – especially for collaboration on sustainable development with other businesses, NGOs, governments, international development institutions etc – as I discuss in two recent Cranfield University blogs.
This is an exciting agenda demanding an integrated approach, embracing science, technology and management capacity. This integrated approach is something which we are committed to achieving at Cranfield University. A good example is in our response to disruptive new business models such as the Circular Economy, which leading strategy consultants like Accenture believe has the potential to be a game-changer for corporate sustainability. Successful adoption of Circular Economy will require new technology solutions, sophisticated change-management, new strategic lens, board & senior management leadership, revolutionising supply chain and logistics, and new approaches to collaboration.
David Grayson CBE is professor of Corporate Responsibility at Cranfield School of Management and the author of six books on corporate responsibility & sustainability, including “Corporate Responsibility Coalitions: The Past, Present and Future of Alliances for Sustainable Capitalism, winner of the Academy of Management Best Social Issues in Management Book 2015. His most recent book: “Take Care: How to be a Great Employer for Working Carers” is published by Emerald, July 2017.