The first secret is a focus on the long-term. Sustainable businesses anticipate the future and act to create stronger, richer markets for business to sell into.
We know what doesn’t work. As Samuel J Dipiazza Jr, president of PricewaterhouseCoopers has said “the current financial crisis is the result of short term and unsustainable business models”.
The result of unsustainable business models, as Lord Turner, Chairman of the Financial Services Authority explained is that “hundreds of thousands of British people are newly unemployed; tens of thousands have lost houses to repossession; and British citizens will be burdened for many years with either higher taxes or cuts in public services”. He might have added that massive global businesses have been bailed out. Others have gone to the wall.
This is what, in the new lexicon, will be seen as long term value at risk.
The flip side of this is long term marketing strategy. Companies will look to the future, differentiate between the likely future and their preferred future and act collaboratively to create stronger, richer markets. Coca Cola teased us with this in their 2008 annual report when they said: “by anticipating and preparing for the changing world we will be poised to deliver refreshment and value to our consumers and shareholders in the years ahead”.
John Chambers, Chairman and CEO of Cisco gets it when he says: “we are at an inflection point unlike any other in history, and I believe Cisco has an opportunity to help countries, communities and citizens achieve their social and economic goals”. Jeff Immelt, CEO of General Electric Company, gets it when he said: “we are going to solve tough customer and global problems and make money doing it”.
This ambition is transformed into action through the second secret of sustainable business – a focus on action or, in the new lexicon, behavior change.
The second secret of sustainable business
The second secret of sustainable business is that long term success is based on how employees and customers act today.
This is about the actions of executives. For example, this year, Richard Evans, president of PepsiCo for UK and Ireland has promised to be a “powerful agent of positive change” in the food and drinks sector. A major part of this involves a promise to “renovate the core of our business….by 2020 I want our profit and growth to be driven by healthier products.” In the new lexicon, this is the world of choice architecture and choice editing.
This is about the actions of customers. Companies will support customers who wish to act to recycle more, reduce food waste, save energy or eat well. This is the new world of corporate social marketing – mentioned by the marketing gurus Philip Kotler and Nancy Lee in 2004 as the “best of breed” in CSR strategies by linking real social change with measurable commercial benefit.
And this is also about the actions of employees. Again, the research is out there in plain view for those who wish to look. Gallup have analysed employee engagement surveys from 12.5m employees in 150 countries and identified the key features that drive employees and, as a result, drive growth. The CFO of Wells Fargo Howard Atkins is quoted as saying: “we don’t want to just measure results, we want to measure what drives results, and that includes team-member engagement”.
This focus on action, on behaviour change, also requires a new deeper understanding of what motivates people to act. The old two dimensional model of people was based on an assumption that if you give people the right information and the right incentives and disincentives, then they will always act on their own interests. We now know that this is not so.
This two-dimensional model of behaviour is being replaced by a three dimensional model which also considers factors like habit, the behaviour of others, emotion and fear of loss. Leaders in the new world will need to know this stuff as a core skill.
It ain’t fluffy stuff. It’s hard edged. The seminal work of the New Economics Foundation showed the relevance for this to economic theory through behavioural economics. This understanding is even percolating its way into “behavioural investment”. Roger Urwin and Claire Woods in a recent paper on sustainable investing principles explore in some detail how current investment decisions are influenced not just by cold hard economic analysis but by three-dimensional factors like loss aversion and group decision-making.
The third secret of sustainable business
This focus on action leads naturally on to the third secret of sustainable business. Sustainable success is based on freedom to innovate within a strategic framework. People with an interest in your world are actively involved to help you achieve your purpose.
Companies will increasingly define a sustainable business model that is fit for purpose for their business. Unilever have their vitality framework and Procter & Gamble have their sustainability report card.
But once the framework has been defined, ideas are invited from others through open innovation. It’s an approach actively championed with measurable commercial results by companies like Philips, Procter & Gamble and Reckitt Benckiser. IBM held a web-based “innovation jam” in 2006 that involved 150,000 people in 104 countries and led to 10 new IBM businesses. In the new world, we all have power.
So here, in the new world, each of us uses our power for positive change. Where we live and where we work; in board rooms, committee rooms and living rooms, in homes and high streets, consumers and citizens, employees and shareholders are acting individually and together to create a stronger, richer world.
In this world, we are all catalysts. We all have a role to help the private sector achieve long term success, the public sector achieve public policy results and to help the third sector achieve their social goals. For business, improving lives and achieving commercial success are not at odds. They are indissociably linked.
The new approach to sustainable business is a commercial opportunity. The alternative is a business risk. So, if your current CSR model is based on compliance and an annual CSR report and your approach to business is based solely on short term financial targets, you may wish to look again. The world has turned. Sustainable business is here and it is here today.