The Business Case for Sustainability
The bottom line benefits of sustainability are making the business case for sustainability impossible to ignore. The evidence supports the observation that adopting sustainability strategies give companies a sustainable competitive advantage. In his new revised version of the 2002 book, “The Sustainability Advantage,” Bob Willard makes an even more compelling business case for the adoption of sustainability strategies.
Business is the Best Hope
Willard makes the case that it is in the best interests of businesses to adopt sustainability strategies, he also suggests that the business community is both responsible for climate change and the best hope for the survival of our species.
"The only human enterprises that are large and powerful enough to affect the paradigm shift are enlightened businesses," Willard said in his recently released book, “The New Sustainability Advantage.” The case studies reviewed in the book make the business case for sustainability stronger than ever before.
Early in the book, Willard states,"the game of business as we have played it for the last 150 cannot continue." Continuous growth is at odds with sustainability principles and business as usual will ensure that we continue to exceed the Earth's carrying capacity. There will be grave consequences if we keep overtaxing the planet. This is a point that executives cannot afford to ignore, because as David Brower noted, "there is no business to be done on a dead planet"
The late Ray Anderson boldly declared business and industry are the biggest culprits contributing to climate change. In the preface of his book, Willard quotes Anderson's book “Confessions of a Radical Industrialist:”
"Business and industry--not just American business and industry, but global business and industry--must change its way to survive--And by survive I do not mean maintain identity and integrity within the context of a financial system in meltdown, either. By survive, I mean business must be steered through a transition from an old and dangerously dysfunctional model to a far better one that will operate in harmony with nature--thrive in a carbon constrained world, and put down the threats of global climate disruption, species extinction, resource depletion and environmental degradation. In a word, develop a business model that is sustainable."
Goals of sustainability
Willard states that all human activity needs to stay within the ecological carrying capacity of the planet and we must not consume natural resources in excess of the ability of the ecosystem to regenerate them. We need a business paradigm that includes a new approach to the consumption of basic goods and services, one that acknowledges that we are part of the whole, not separate from it.
Willard refers to the Brudtland Report to define sustainable development: "Meeting the needs of the present generation without compromising the ability of future generations to meet their own needs.” Even more succinctly, he quotes Charles Hopkins’ definition, "enough, for all, forever."
Helping the planet is noble, but businesses are motivated to act when they have a vested interest. Willard points to his research which indicates that a typical company engaging best-practice sustainability approaches already being used could improve profits by at least 50 percent to more than 80 percent within three to five years. Doing nothing can erode profits between 16 and 36 percent.
Willard sees beyond the false choice between the planet and profits. He makes the point that it makes good business sense to address environmental and social issues. Willard describes it as a "Win/win approach for the corporation, society and the planet."
The fully revised business case is organized around seven easy-to-grasp bottom-line benefits. Willard calculates the potential bottom-line benefits for both large corporations and small enterprises he also estimates the risks.
Dangers of inaction
Willard suggests that businesses that adopt a wait and see approach will find themselves at a competitive disadvantage. He cites incentives for businesses to act quickly rather than wait, "Whichever company captures these benefits soonest has a significant competitive edge. Companies that ignore this reality are squandering easily achieved bottom line benefits. Sustainability is a race to the top."
Businesses that engage sustainability improve their legitimacy and enhance their image while capitalizing on eco-efficiencies. Sustainability strategies improve revenue, reduce costs, and help them recruit and hold talent. Most importantly to executives, sustainability also helps companies acquire and retain customers which translate to increased revenues and profits. Companies that ignore sustainability are missing a powerful business opportunity.
Willard exposes and quantifies the value of being proactive in economic, environmental and social spheres. He makes the point that sustainable companies do more than just do more with less, they put into play forces which "nudge unsustainable competitors off the playing field."
5 Stages of the sustainability journey
Willard goes on to review characteristics of a sustainable business model that includes new forms of company ownership and more equitable profit-sharing. The five stages of the sustainability journey are:
- Beyond Compliance
- Integrated Strategy
- Passion and Purpose
To be a sustainable planet a critical mass of businesses will need to transition from Stage 3 to Stage 4. The intermediate steps between Stage 3 and Stage 4 are as follows:
3.0 Improve company eco-efficiencies and sustainable brand
3.1 Improve supply chain conditions and footprints
3.2 Create new eco-effective products, services and leases
3.3 Embed sustainable governance
Stage 4 involves maximizing shareholder value while Stage 5 sees sustainability as a goal in its own right rather than a set of enabling strategies. Stage 4 and 5 companies adopt a model of sustainable capitalism that injects sustainability principles into their cultural DNA. For these companies, sustainability expectations are aligned with the organization and across the entire value chain. They make cleaner, greener products and they embrace eco-effectiveness and life cycle stewardship.
As Willard points out, many Stage 5 companies do not go through the first four stages. They start and end in Stage 5. Many of these are small or medium sized business. Publicly traded companies can evolve into Stage 5 once the legitimacy of social and environmental purposes is embraced in the business community.
In an effort to make the most convincing business case, Willard quantifies sustainability initiatives in the business language of bottom line benefits. To help the executive assess sustainability, he uses familiar business frameworks like the standard value chain. He also employs standard income statements used to calculate bottom line profit.
Willard shows how smart sustainability strategies and programs can help strengthen key links in the value chain. With the case study financial statements, he quantifies the benefits of smart environmental, social and corporate governance (ESG) approaches and programs. To help demonstrate the sustainability benefits of different organizations, Willard has developed a Sustainability Advantage Simulator.
Willard offers tangible evidence that sustainability strategies offer real business benefits that are relevant to the bottom line. Willard may be selling sustainability, but his fact based focus on "enlightened self-interest" will appeal to a wide spectrum of business leaders.
"We need to equip enlightened executives with compelling numbers that show that sustainability related strategies are smart business--that the company can do better by doing good; that a more responsible form of capitalism generates higher profits."
In the final analysis, executives who review the most current information will be forced to acknowledge that "the business case for sustaining the planet is stronger than the business case for trashing it."
Richard Matthews is a consultant, eco-entrepreneur, green investor and author of numerous articles on sustainable positioning, eco-economics and enviro-politics. He is the owner of The Green Market Oracle, a leading sustainable business site and one of the Web’s most comprehensive resources on the business of the environment. Find The Green Market on Facebook and follow The Green Market’s twitter feed.