Sustainability and the chicken and egg dilemma
- Jun 30, 2021 8:17 am GMT
A growing number of companies have adopted and implemented a variety of sustainability practices in the last few years. Have they done so because they believed it would lead them to greater financial performance or is it because they considered it to be a necessity to ensure survival?
There are those companies i.e., that have adopted environmental systems to achieve cost reduction and thus improve their bottom line. Therefore, by including such systems in their ESG (environmental, social, and governance) metrics, their benefit was twofold – improving the bottom line while at the same time looking good on the outside. But is this enough to accomplish a competitive advantage?
And then some go the extra mile and adopt more comprehensive sustainability strategies regarding environmental social and governance aspects, including recruitment, diversity, and inclusion, and various other business models – those who believe that by doing so they will gain a competitive advantage over the long run.
The truth is we are coming to the end of a 40-year cycle of capitalism, 1980-2020, low taxes, low regulation for business in return for offering growth, jobs, and consumption, because of three main reasons: Firstly, for environmental reasons: the amount that we are consuming now is just putting too much pressure on our biggest factory - nature. So, whether it is climate change or it is plastics pollution, the world is really starting to strain.
Secondly, the fact that social does not get enough attention. In the past, it was about human rights and poverty, and the truth being told those issues are still there. But increasingly, people are asking about inequality. If we look at some of the political upheavals we have had, lots of it is about inequality. What jobs will people have in the future? How do we handle personal data? Therefore, a whole range of social issues are emerging. And thirdly, there is that fourth industrial and tech revolution. We can either use it for good or bad, whether drones, driverless cars, artificial intelligence, big data, or machine learning. They can solve a lot of those environmental and social crises, but they could accentuate them as well. For all those three reasons, environmental, social, and technology, boardrooms need to think very differently in the future.
And the question we all need to ask ourselves is: is sustainability a common practice or does it provide a competitive strategic advantage? Do we put sustainability at the core of our business to achieve long-term results, or do we wait until we have ‘good enough’ results to do so?
Obviously, businesses of different sizes, operating in different sectors and policy environments, are approaching sustainability and ESG in different ways. Some consider sustainability and the ESG metrics as a good to have process, others see it very similar to an ISO certification so that they can go on as “business as usual”, others see it as a critical factor for investors, and then there are others that consider it as a strategic imperative.
In my opinion, the biggest barrier in putting sustainability at the core of our businesses is leadership and the way leaders perceive the future. Take for example the power sector – 10 years ago it believed that wind, solar, and other renewable energy sources were too expensive, and therefore too difficult to penetrate the energy mix. Today, in every boardroom of every power company on the planet, people are talking about the transition from the old coal fossil system to a renewable system.
The second is mobility. Again, people believed that we would always use diesel and petrol, - the electric car being secondary, small, and expensive and that people will never buy into it. Yet, every car manufacturer’s boardroom in the world is now pushing around to respond to electric cars. What I am trying to say is that true leaders need to have the vision, not focusing solely on tangible metrics such as ROI or new business attainment, but also intangible ones like sustainability, ESG, brand, reputation, etc. True leaders need to adapt and need to get ahead of the curve. If we do not adapt, we need to realize that we will fail, and we will be replaced by the beyond coals and diesels of the world.
It seems that some companies are spending a lot of time to catch up with common best practices in their industry, which is great, but wearing the CEO hat on, in addition to catching up and being at least as good as our competitors, we also have to think about how we establish our uniqueness, our differentiation, our competitive advantage or our leadership in this space.
I foresee four ways that would make it easier for organizations to transition to a sustainability-centric approach: Firstly, we will need to identify and engage with all of our stakeholders and try to understand what they need, want, and care about. Then we need to define our target/s, solid commitments, that will deliver positive and tangible outcomes. As soon as we define our targets then we can begin the process of ensuring that our target is not seen as unattainable or unrealistic – we, therefore, need the buy-in from all stakeholders. Finally, it is essential to continually monitor, measure, and assess our progress.
The world is changing and so do we - or at least this is what we should be doing. It is not yet clear what our sustainable future will look like, but by utilizing the emerging technologies we have available, now is the time to adopt sustainability strategies across the board.
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