How Should Business Engage with Sustainability?

Given the weekend read of last week, it is not surprising that some of the largest companies in the world are now producing annual sustainability reports. As an example, the GE sustainability report states:

At GE, sustainability means aligning our business strategy to meet societal needs while minimizing environmental impact and advancing social development… Business must now lead and not depend on government to be a beacon for sustainability. We must move on our own. It is no longer enough for companies to focus on their direct footprint, they must think about what types of jobs and opportunities they are creating for society. Tackling environmental challenges, affordable healthcare and energy access remain critical but have become engrained in our business operations.

Clearly, all business firms and leaders will not go as far as GE. They will choose to engage at different levels of pro-activeness. In general, firms can adopt one of three approaches to sustainability:

1) Do no harm: Inspired by Google’s original motto of “don’t be evil”, many believe that at a minimum, the responsibility of business to society is to “do no harm”. This is the approach adopted by Harvard Business School in their leadership and corporate accountability module for the MBA program.[i]

A client recently argued with me that “do no harm” is too easy. But, while self-evident and uncontroversial at first glance, “do no harm” surfaces deeper levels of complexity, trade-offs, and social responsibility. Clearly, business is culpable when directly accountable for harm to others. Then comes complicity, where business is endorsing the harm by not speaking up and/or not actively preventing the damage. Finally, business may be held responsible for harm not caused by its own activities, but because it had the capability to prevent it. Businesses and corporate leaders need to decide where they draw the line for themselves in the face of changing societal mores.

2) Lead in adoption of sustainable business practices: In a survey of 800 plus sustainable development experts were asked to name companies that are leaders in sustainability, Unilever was mentioned by 38% of them.[ii] Patagonia was the only other company to be mentioned by more than 10% of the respondents.

The same survey in 1997 had Dow, Dupont, Monsanto, and 3M as leaders. The change in the last two decades demonstrates that sustainability used to be the top of agenda of chemical companies that were being held accountable for having a direct negative impact on the environment. Their sustainability goal was to do no harm, in order to have a continued license to operate.

The companies that are leaders today have adopted sustainability for positive reasons. Companies like Patagonia, FabIndia and Natura view sustainability as core to their business model because they position and differentiate their products on this dimension. In contrast, are companies like Unilever, whose commitment is led in more emotional, value-laden terms by CEO Paul Polman:

70 per cent of our shareholders have been with us for seven years, and 85 per cent of them say that sustainability is very important. They know that you need to have a responsible contract with society to take costs out of your system, to lower risk, to attract the right people.[iii]

3) Be an activist for societal change: Finally, some companies choose to take an activist position as part of their social responsibility. Rather than simply managing their own behaviour and impact, they wish to engage with, and influence, public policy. Since one cannot be an activist on all issues, companies choose one or a few issues on which they will lead change.

Once again, for some companies led by social entrepreneurs, this activism becomes fundamental to their business model. Examples include Dr. Venkataswamy of Aravind Eye Hospital who mission was “to eradicate needless blindness by providing appropriate, compassionate, and high quality eyecare to all.”[iv] Or Muhammad Yunus of Grameen Bank empowering women through microfinance to aid development and human upliftment.

More commonly, firms have chosen to move faster than the political or social consensus on issues such as racial injustice, sexual orientation, and climate change. While older baby boomers prefer that CEOs and companies do not become activists, younger consumers, especially millennials, disagree.[v] Therefore, business leaders have not been shy of criticizing White House policies recently for decisions such as the travel ban or on amnesty for young illegal immigrants. Apple CEO Tim Cook reflected on this in an interview:

For a company that’s all about empowering people through our products, and being a collection of people whose goal in life is to change the world for the better — it doesn’t sit right with me that you have that kind of focus, but you’re not making sure your carbon footprint isn’t poisoning the place. Or that you’re not evangelizing moving human rights forward.[vi]


Endnotes:

[i] Nien-he Hsieh, “Module Note: Responsibilities to Society,” Harvard Business School case 9-317-065, 6 March, 2017, 1-6.

[ii] Eric Whan, “Who are the Sustainability Leaders (besides Unilever),” 2 July, 2015, https://www.greenbiz.com/article/who-are-sustainability-leaders

[iii] Daphné Dupont-Nivet, Anouk Ruhaak, Marije Schuurs, Jaap Tielbeke and Emiel Woutersen, “Inside Unilever’s Sustainability Myth,” New Internationalist, 13 April 2017, https://newint.org/features/web-exclusive/2017/04/13/inside-unilever-sustainability-myth

[iv] Nirmalya Kumar and Brian Rogers, “Aravind Eye Hospital 2000: Still in the Service of Sight,” IMD case GM908, 21 September 2000.

[v] Jena McGregor, “What millennials want from their CEOs: Activism,” The Washington Post, 7 July, 2017, https://www.washingtonpost.com/news/on-leadership/wp/2017/07/24/what-millennials-want-from-their-ceos-activism/

[vi] Jena McGregor, “Tim Cook, the interview: Running Apple ‘is sort of a lonely job,” The Washington Post, 13 August 2016, http://www.washingtonpost.com/sf/business/2016/08/13/tim-cook-the-interview-running-apple-is-sort-of-a-lonely-job/

Warmly

Nirmalya


Magic Dust: Is sustainability now the key to corporate success?

I invite you to follow me on Twitter @ProfKumar and LinkedIn.

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