A number of our clients admit to a great deal of confusion about sustainability. At this point, we know we’re in for a good engagement because such self-reflective honesty is an uncommon but powerful motivator in the business game.
That there is confusion on the topic is not surprising: on darker days I believe a whole industry has emerged to keep us confused. At the risk of losing a few friends, we have seen the business media, pricey management consultants, global gurus, the JSE, various sustainability award-givers and politicians doing the field no favours by doggedly confusing sustainability with “going green” or “being good”.
“Going green” and “being good” are undoubtedly fine things to do; for business to confuse them with being sustainable is either uncharacteristically meek, dim or deeply cynical.
This confusion is the reason that sustainability slides continually off the Board agenda and is regarded as largely non-material by analysts. The focus is sharpened by environmental organisations rightly questioning the listing of “serious and serial offenders” as best performers on the JSE socially responsible investment (SRI) index. The real casualty, however, will be the number of companies with well-intentioned green programmes that wake up in a year or two to find they missed the learning curve.
Confusing sustainability with Corporate Social Responsibility is equivalent to mistaking your marketing message for your business strategy. They are both important but they are emphatically not the same.
Sustainability is a business approach that seeks to build long-run competitiveness without unduly compromising short-term profitability and cash flows. Like any business strategy, it focuses on managing risk, building brand and reputation, and driving competitiveness through efficiency and innovation.
However sustainability differs from business-as-usual in the extent to which it is informed by an appreciation of the radical transition presently underway in the global economy. This transition, driven by a global decline in natural resources, together with increasing demand and disparity in people’s access to resources, is indisputable and will be profound. It will progressively define the competitive arena. For this reason, tracking sustainability requires metrics that reflect the organisation’s capacity to operate in times of significant change. These sustainability-related competencies are an indicator of the organisation’s agility.
The King III recommendations on Integrated Reporting seek to use the Annual Reporting process to promote this understanding of sustainability. How this is analysed should be of great interest to directors and their financial stakeholders.
Corporate Social Responsibility
While sustainability is largely about shifting the business strategy to ensure enhanced competitiveness, Corporate Social Responsibility (CSR) is largely concerned with managing the impact of that strategy on society and the environment.
The distinction is evident in performance measurement which for CSR focuses on societal impact, usually framed in terms of the ‘triple bottom line’ (social, environmental, economic issues).
From a business perspective, being “green” or “good” can be used effectively as a brand differentiator. Whether it is well-intentioned or cynical doesn’t matter, as long as the claims to greater responsibility can be verified. Green products and social niceties are no guarantee, however, that the organisation appreciates the radical and innovative shifts required to ensure it remains competitive in times ahead.
Nedbank had this realisation when they broadened their focus from solar robots to interrogating their investment criteria. As a key brand element, Woolworths’ Good Business Journey is strongly focused on social responsibility indicators; linking these more overtly to internal agility may help to consolidate the journey.
The challenge of sustainable business
We are not talking philanthropy or the “right thing to do” – we are talking about an overhaul of the profit engine. An engine that gets its power by forcing society to pay its social and environmental costs has simply passed its sell-by date. Customers and successful brands will increasingly see to that.
But joining today’s sustainability leaders will require more than internalising social costs: the scale of change underway will see businesses re-designing, innovating and exploring challenging partnerships as never before. The sooner organisations begin to develop these competencies, the faster they will engage the learning curve and the better they will compete in a radically changing world. Those lulled into complacency by the present confusion are choosing to learn a little late and at considerable extra cost.