Sustainable Development: Leadership and Innovation
by Greg Chambers, Director, Business Development, Sterling Planet, Inc.
(This is Part II of a continuing series on Sustainability. Click here to read Part 1.)
Can corporations pursue Sustainable Development and be as, if not more, successful in their endeavors? This article, the second part in a series, focuses on the attributes of leading companies in regard to sustainability and the challenges and benefits companies realize in their pursuit of integrating triple bottom line accountability into the fabric of their organizations.
Defining the Leaders
Industry leaders create their own visions and develop strategic plans to achieve what they believe is vital to sustaining their enterprise on behalf of their stockholders, employees, and other stakeholders. They find innovative ways to manage their businesses, taking the lead in new opportunities while also considering the attendant risks and triple bottom line implications. These leaders weigh risks and opportunities in areas, including: product development, new markets, operations, goal setting to support their vision, mergers, acquisitions and divestitures, and stakeholder outreach. They innovatively pursue increased shareholder and institutional investment in their companies and strive to increase share value by targeting their inclusion in more funds, indices, pensions, 401k’s, etc including those that are socially and environmentally directed. Leaders are rewarded with enhanced brand value, reputation, competitive advantage, and the cost savings of investing over time. Companies with leadership attributes find attraction and retention of the best minds is markedly easier. Leaders pursue investment at a pace of their choosing versus having to invest to catch up. They set the pace and position on issues by which all other competitors follow!
Innovation is a key component of a company’s sustainability plan. Companies willing to challenge the way they think about their businesses often change the paradigm with which they have operated. As an example, witness the evolution within businesses over the last decade with the advent of e-business. Hard disk drive companies have become broader storage enterprises. Automotive companies reinvented themselves as mobility companies with a view to new forms of propulsion. Renewable energy technology companies are emerging as energy providers while traditional extractive petroleum companies and power generating companies are slow or unable to innovate.
Barriers to Success
Sustainable Development has evolved into a multi-faceted discipline of economics, environment, and social equity due to the recognition of a complicated set of pressures and barriers. The overarching focus on economics is simply not sustainable. One must also recognize that for the time being, we have an accounting system that does not properly value natural capital. Also, there is a growing awareness that the externalizing of social and environmental costs must be addressed. What we have been seeing with the industry leaders is an effort to better integrate this triple bottom line of economics, environment, and social equity issues.
If you were to ask many executives and managers in a given company what they thought sustainability meant, you would likely get answers couched in term of financial viability and technology; very different than the U.N. perspective as discussed in part one of this article. Other barriers include: the quarterly and annual profit focus, political issues, accountability and governance issues, organizational structure, bureaucracy, resource inequities (cultural, physical, etc.), lack of broader financial market drivers, lack of consumer input, governmental, and regulatory agency leadership. With all this, one might wonder, “Is a rational transition to more sustainable companies and to a more sustainable earth possible?”
After the increase of corporate governance and accountability scandals over the last ten years, it is interesting to see this dialogue growing. The effects of these misdeeds will be experienced for years through lost careers and livelihood, the erosion in pensions, 401k’s, and other corporate and personal investments. Isn’t it also interesting that recently, more than two-dozen institutional investors who manage greater than $1 trillion of assets, called on the U.S. Securities and Exchange Commission to require publicly traded companies to disclose the financial risks of global warming (a major sustainability issue) in their securities filings.
Future Guidance
Where do US-based companies go for guidance in managing their domestic and global operations? The answer is inconclusive especially if a company’s program is only compliance-focused. The laws of any given country are insufficient to provide strategic guidance to corporations and others on global environmental and sustainability matters. And indeed our regulatory system is not fully in alignment with shareholder and stakeholder environmental and social needs.
An implied need for Corporate Governance and market mechanisms has also risen as evidenced by the continued emergence of reporting frameworks, financial indices and other investment mechanisms that focus on sustainable development, corporate social, and environmental behavior. Coincident with this is that more companies, governments, communities, and others are starting to define what sustainability means for them and demand that governing bodies take action.
In fact, the future is evolving in an interesting way. Information technology is being used to provide more comprehensive data on global indicators of triple bottom line performance for these reporting frameworks. We are seeing best practices emerge while decision-making is continually improved through better integration such as alignment of the budgeting and goal setting process, data management and feedback, communication, and stakeholder engagement.
Developments in sustainability reporting will both assist and challenge companies. We are also seeing continuous process improvement, the evolution of sustaining metrics, and the continued professional development of human capital. And we are seeing companies work to better understand and integrate how they demonstrate and promote triple bottom line value.
The good news is that socially and environmentally-screened funds are the fastest growing segment of mutual funds in the U.S. with their return on investment equal to, if not better than, traditional investments. At the same time, there is ongoing work to better define what being a leading socially and environmentally responsible corporation means as a threshold of entry into these funds. The tide of improvement, leadership and innovation raises all boats.
Sustainability provides a number of ways to demonstrate value to your business, your customers, your shareholders, and the communities in which you operate. Sustainability helps you obtain the trustworthiness and freedom to innovate in your business. And it is in the enlightened self-interest of the organization.
This is the second in a series of articles on sustainable development (Read Part 1). We invite you to provide feedback or comment to gchambers@sterlingplanet.com or call Greg Chambers directly at 916.847.9146.
Edition No. 17
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