New | Corporate sustainability is more than just ticking the regulatory box
Leading firms are redefining their approach to sustainability by placing it at the forefront rather than at the periphery of their strategic thinking
Companies are often accused of striving for profitability at any cost, with little regard for social and environmental considerations. The reality, though, is that forward-looking organisations are already leading the emergence of a new sustainability paradigm. This breaks free from a mindset of having only standalone Corporate Social Responsibility (CSR) efforts to bringing in sustainability-related issues as business opportunities into conversations about mainstream business.
Across the globe, investors and regulators are pushing for increased sustainability-related transparency, such as via mandated reporting. However, a focus on such things alone only drives the perception of sustainability as a burden - as a regulatory box that somehow needs to be ticked. Fortunately, leading companies are redefining their sustainability approach from the boardroom down by placing it at the forefront rather than at the periphery of their strategic thinking, and often finding new business benefits and revenue streams in the process.
When sustainability is well-woven into the business, a company's market position might be strengthened and retention and recruitment of top talent can also become easier. When developing a sustainability-related business initiative, it is therefore crucial to always have at least four audiences in mind: the company's senior decision makers, the customers, the other external stakeholders and the wider employee base.
Microsoft's early history in China in the 1990s and its eventual success illustrate the power of external stakeholders and the importance of engaging with them through an appropriate sustainability strategy.
In its early years, Microsoft struggled in China as it remained somewhat inward focused, not fully appreciating how its operations were perceived by all the stakeholders in the Chinese economy. Microsoft was seen as being arrogant and selfish in its approach and limited spill-overs from its business were perceived by the local players in the economy, giving the government little reason to support Microsoft.
Recognising that their Western "market-driven" approach did not mesh with the Chinese economy and that confrontation had little success in encouraging sales or discouraging piracy of its software, Microsoft managers started investing in local ecosystems and relationships, and in bringing about long-term behavioural change in customers.
The company started to engage Chinese universities and research institutes much more, offered extensive training programmes for local teachers and entrepreneurs, and worked with the government to fund development projects related to information technology and education. It also helped foster domestic software companies - especially those that shared its commitment to protecting intellectual property rights. This helped gain government support, and increased its foothold in the Chinese market.
Sustained success in the long term comes not from trying to make a quick buck just for yourself but from analysing how your company can help create more value for all relevant stakeholders in the society.
Sustained success in the long term comes not from trying to make a quick buck just for yourself but from analysing how your company can help create more value for all relevant stakeholders in the society
This requires finding ways to increase the proverbial "size of the pie" rather than getting stuck in thinking of sustainability as a zero-sum game. This repositioning process requires integrating sustainability into strategy, and fostering a culture of sustainability-driven innovation supported by the company's internal structure and incentive systems.
Many sustainability-related business efforts get frustrated as they do not see direct value of sustainability for the customer. It often is hard to convince the customers to pay more for products and services just because they come from a company that is serious about sustainability. In the end, successful initiatives have to offer the customers a value proposition based on dimensions they are willing to pay for.
As an example, reduced environmental impact by having more concentrated detergent that uses less packaging is great - but the marketing message that might resonate better for some customers is convenience or other product qualities more than saving the world.
While most people consider the customer, a critical stakeholder that is often not considered in the value creation equation is the employee. It turns out that corporate social engagement creates significant value for the employees, which also ultimately benefits a company in very tangible ways.
Take, for example, global technology and management consulting firm Accenture. While developing an internal social impact initiative, London-based strategy consultant Gib Bulloch realised the benefit of framing it as a "business within a business" rather than a not-for-profit or CSR project dependent on external funding. This required a business model that could work towards being financially sustainable despite the lower fees that the development sector clients could afford to pay.
Bulloch found a clever solution: getting consultants interested in undertaking these projects to agree to a significant (up to 50 per cent) salary reduction for the duration of their participation. Many employees indicated that they would still be very interested in such projects, and were willing to sacrifice financial benefits for the opportunity.
Bulloch also had a vision of encouraging returning participants to share their experiences with their colleagues, and leverage the new skills ultimately also in commercial projects - thus offering consultants a hybrid career track with an opportunity to give back to the society without having to quit a promising management consulting career.
Taking a business approach helped Bullock get top management's buy-in for a corporate social enterprise through which Accenture could contribute to wider international development. Bulloch went on to become the executive director of what was formalised as Accenture Development Partnerships.
This has become a tool boosting the brand and enhancing Accenture consultants' understanding of the world, while at the same time helping attract new recruits, keep employees engaged and improve retention. The company appeared in Magazine's list of "Best Companies to Work For", highlighting the potential of weaving sustainability into HR strategy.
These examples show that businesses are realistically left with two options for the future: either they continue to progress reluctantly and consider sustainability "pressures" as unwelcome headwinds, or they change course and make them positive tailwinds by reframing sustainability from a constraint into a competitive advantage and an opportunity.
If choosing the latter, three things are worth keeping in mind. First, steer innovation efforts toward new products, services or business models that leverage sustainability-related challenges as opportunities. Second, interact with key stakeholders (communities, customers, financial markets, unions) in a more inclusive and effective way. Third, drive a "growth-oriented" attitude toward sustainability throughout the organisation.
