Do these new schools of thought on sustainability provide business with the tools of transformation – or are they just more smoke and mirrors?
There’s something different about this latest edition of our Directions report. All of this year’s inputs and contributions seem to confirm that business and brands are now focused very much on the question of how to drive sustainable commercial success, rather than on whether or not this is an agenda that actually matters to them.
It seems to me that, in their different ways, all of the ideas and methodologies – Circular Economy, Shared Value, EP&L, Net Positive and Benefit Corporations – discussed here (there are others of course too, but we have highlighted the ones that we see as the most significant) are proof that business is trying to integrate sustainability thinking more fully and make it more operational – clearly a good thing, regardless of the alignment or choice of one method over another.
But what are the key factors at work here?
The Need for Practicality
There is simply no doubt in my mind – sustainability thinking has spent too long with its head in the clouds and not enough time homing in on the commercial realities. This is now changing.
Business knows that there is a huge opportunity in the sustainability challenge. It is now trying to work out how to maximise this opportunity to achieve competitive advantage and ensure future viability and profi tability. These different methodologies and ideas give business leaders and managers some of the tools and processes needed to plot a path to the desired results. They may not be perfect yet, but they are at least valid attempts to move from management theory to real, on-the-ground transformation that delivers useful outcomes – social, environmental and commercial.
Legitimising the Transformation
And it is perhaps also down to the fact that these models are not perfect yet that they are acting slightly as totem poles around which there’s growing collaboration, innovation and momentum. The fact is that managers within business often need the legitimising effect of a credible school of thought in order to get adequate buy-in within their companies to spur on real change.
We should not underestimate the important legitimising effect within business that’s come from the names of the Ellen MacArthur Foundation and McKinsey sitting comfortably alongside the circular economy movement and the Michael Porter/Harvard name being put squarely behind the concept of Shared Value.
As well as the legitimising effect, the fact that these concepts are seen to be increasingly credible also provides another kind of much needed security. It offers cover for some of the failure that is going to be an inevitable and, indeed, essential part of the journey to find workable solutions.
As Kingfisher confirms, not all the innovation and new thinking will work and so it is essential to experiment within a framework that creates enough room for failure, as well as success, to be acceptable.
Innovative thinking needs an umbrella!
Communicating to Build Critical Mass
We should also not underestimate the massive role that communications and effective engagement have to play in driving change. As everyone knows, good stories really do help to get people on board and, to a degree, all of the models and ideas covered here have a storytelling role to play as well as doing the actual job of turning science into substance. The circular economy somehow wouldn’t be as memorable or as attractive if it was called The Regenerative Economy. Net Positive is a simple story to capture. The EP&L is a neat blend of sustainability and finance – written in a language business can understand. All of these methodologies enable business to explain itself better.
“all businesses need an ambition – a ‘North Star’ to strive for. Over and above just storytelling, these models provide the desired destination and a sense of purpose that gets organisations, teams, people and processes all properly and effectively lined up”.
These organisations themselves would undoubtedly prefer to emphasise the substance and science part of the argument. But in the practical, messy reality of business, there is no doubt these models also help with the important task of communicating new ways of thinking and getting people to engage with them.
Business Filling the Government Void
It was probably shortly after COP15 that business woke up to the reality that governments were not going to be the force for change needed to address the world’s sustainability challenge. Since then, business has taken on the responsibility much more by itself – or in sector or even multi-sector collaborations – to build the momentum needed. All of these models and processes could be said, at least partially or indirectly, to have been borne out of that lack of leadership from government – or at least from the sense that if business is to gain commercially from the agenda then it needs to apply its own rules and operate on its own terms.
That’s not to say that government and other policymakers have failed to respond totally. The big focus on public-private partnerships we’ve seen in the last few years, particularly in developing markets, is evidence of a changing mindset – Guido Schmidt-Traub makes this point well in his article and underlines that, actually, the scale of the challenges we face means that public-private collaboration is essential. And the fact that the United Nations Sustainable Development goals (UNSDGs) appear to be a more relevant framework for business to engage with, and have been relatively well received by business, points to some positive potential.
The Need for Scale
But we also have to be honest with ourselves. Despite all the talk of the last decade and the great theories, has that much really changed? Michael Porter made this point well in last year’s TED talk called ‘Why business can be good at solving social problems’. As he points out, business really has to roll its sleeves up now and apply the profit motive to the societal challenge of sustainability.
This is partly because business is good at solving problems. But it’s also down to the simple fact that it controls the vast majority of the world’s resources, and most of the efforts and initiatives to date have operated at too small a level. The only way to truly address the issues is to operate at scale across the system.
And only business has the model (profit based) and the resources to deliver this effectively. Porter’s statistics underline the dilemma pretty dramatically – total global revenues by stakeholders split like this: Non-profit organisations – $1.2 trillion; Governments – $3.1 trillion; Business – $20.1 trillion.
These new models and schools of thought are all significant attempts to square this circle and to apply commercial thinking to society’s key sustainability challenges – in a way that can be quickly scaled up. They may not provide the final answers. But, taken together, they are starting to look like a tipping point.