As a leader of your organization, your compensation is directly tied to your ability to consistently deliver quarterly and annual profits for your stakeholders. You also have a responsibility to make decisions that ensure the long-term growth and survival of your organization.
Therefore, one of your key objectives is balancing current profitability with long-term sustainability. Sustainability has become a charged word in our business environment, but as Webster defines it, there are two definitions that are relevant for business leaders to consider.
Definition #1 – “the ability to be maintained at a certain rate or level.” We’ll call this economic sustainability.
Definition #2 – “avoidance of the depletion of natural resources to maintain an ecological balance.” We’ll call this environmental sustainability.
We believe that both economic sustainability and environmental sustainability go hand in hand.
For companies to maintain economic sustainability, leaders must begin to place an emphasis on environmental sustainability.
Understanding the Sustainability Movement
On a fundamental basis, the sustainability movement is easy enough to understand. We all want to see our planet and lifestyle survive for the long term. We understand the need to protect vital natural resources and to explore ways to use renewable resources whenever and wherever possible.
While many may think sustainability is altruistic and a difficult concept to embrace, others realize that many of the natural resources we rely on to support our current lifestyle are finite. Forward thinking leaders understand the philosophy of Enlightened Self-Interest, (ESI) which states that acting to further the interests of others also serves one's own self-interest. Organizations who embrace sustainability today will be the long-term winners of tomorrow.
While population growth and changes in the global economy represent financial opportunity, they are also putting a strain on the environment and the ecosystem used to create those goods and services.
How will forward thinking business leaders consistently deliver quarterly and annual profits while doing their part to protect the environment?
Listen to Your Customers and Investors
As the sustainability movement gains momentum, your customers and investors are increasingly aware of what the companies they buy from and invest in are doing to protect their planet.
New Millennials as a group are keenly aware of how the relentless focus on growth at all costs has damaged the ecosystem. That awareness will have a direct impact on the future success of the strategies you develop today. These new buyers and investors want to know if you are using their natural resources wisely. They fully understand concepts like renewable energy, closed loop energy utilization and recycling waste into energy. At the end of the day, they want to know if you are being a “good corporate citizen.”
A 2017 Morgan Stanley Report says that interest in sustainability investing is on the rise and is especially evident amongst Millennials who are the consumers and investors of the future. James P. Gorman, Chairman and CEO, says they established the Morgan Stanley Institute for Sustainable Investing to …. “help mobilize capital to sustainable enterprises, via global markets and the investors who drive them.”
Their research indicates that
- 80% of all investors are more likely to adopt sustainable investing if they can tailor the impact
- 86% of Millennials have expressed serious interest in sustainable investing, and
- 61% of Millennials took some specific sustainable investment action in the last year
In this excellent Forbes article, “The Changing Face of Socially Responsible Investing,” contributor Kevin Mahn, says he is encouraged by “how the investment community is awakening to the prospect of sustainability.” He cites a 2014 research study by CDP that concludes “corporations that are actively managing and planning for climate change secure an 18% higher return on investment (ROI) than companies that aren’t.
Incorporating Sustainability into the Core Values of Your Organization
Next time you meet with your senior management team and board of directors, discuss how to incorporate sustainability into the core values of your organization. Then aggressively explore innovative ways you can recycle your waste products into energy, streamline your distribution systems to eliminate or minimize over the road transportation of goods, and invest in new equipment and technology that uses less energy than your existing systems.
Clearly communicate to employees, suppliers, customers and investors that sustainability is now one of your fundamental corporate values and encourage your entire organization to embrace the concept. You may be surprised at the new ideas and innovative thinking that “bubble up” and make their way into your planning process.
Ten Steps to Building a Sustainable Business Model
- Begin with a clear statement to everyone involved that sustainability is now part of your core values
- Create or revise your mission statement to include a focus on the sustainability of the environment.
- Create metrics and build accountability like every other corporate goal
- Brain storm on ways your organization can benefit from reducing waste and converting waste into reusable energy
- Involve everyone in your value chain including employees, suppliers, customers and investors to look for sustainble solutions
- Create high level positions with the responsibility to identify profitable strategies that include sustainability measures
- Make sustainability part of your every-day life and build it into your corporate culture.
- Monetarily reward research and innovations that focus on sustainability
- Include a review of your success towards sustainability goals in your quarterly and annual reports
- Set the bar, raise it and move forward to become a true leader in the sustainability movement
The Importance of Building a Sustainable Future
Since the early 20th century, we have experienced significant and unprecedented industrial and population growth that has put great pressure and strain on our planet’s natural resources. While it is not yet clear what our sustainable future will look like, the need to expand this sustainability conversation is growing in importance for all companies.
With population growing and natural resources depleting, something must give.
Companies that fail to engage in conversation with these challenges in mind may find themselves struggling to maintain their current economic levels soon. Evaluating your company’s readiness for this new reality is a worthwhile conversation to have to now, to ensure economic sustainability well into the future.