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Repair or Rule Total Loss? Reinventing Sustainable Business

December 22, 2012

If it’s broke–fix it? That’s one option, but it’s negotiable. When you crash your car and the insurance company quotes the damage for more than it’s worth it’s ruled total loss. You do have the option to buy it back for salvage value and try to make it work, but let’s face it, it’s either completely out of commission already or on the way out sooner than later.

Total loss truck

At this point, it’s best to find something else, something that works. Now let’s put this in the context of business and sustainability. Is it better to adjust a system that’s old, rusted, missing essential components and failing us, or rule it total loss and start a new? Should we repair or redevelop business to reach social and environmental expectations? It’s debatable, and while studies focus on patching things up, they may not be analyzing the value of their efforts in consideration with ruling total loss. Let’s have a look.

As sustainability gains social prominence, it increasingly gets worked into the corporate environment. A team comprised of Harvard and London Business School professors noticed companies that adopted environmental, social and governance policies in the 1990s have outperformed the rest. After rigorous empirical study, findings reported in the Guardian show sustainability to be key to their success.

I’ll brief over the study and findings ending with two essential follow up questions for consideration.

They sampled US companies, classifying them as high and low sustainability based on environmental policies (carbon emissions reduction, green supply-chain, etc.), social policies (diversity and equal opportunity, work-life balance, etc.), community related policies (business ethics, human-rights criteria, etc.) and relevant customer, product risk and heath and safety policies.

Among other aspects, results showed that the high-sustainability companies were more likely to assign the board of directors to sustainability issues, engaged more thoroughly with stakeholders, employees and society, measure and report on environmental and social metrics and be more long-term oriented resulting in more long-term investors.

In sum, over an 18-year period lopsided evidence proved high-sustainable companies indeed outperformed the rest. These results focused on market values and earnings, trying to prove that businesses can adopt sustainable practices and increase shareholder value, ending with a note that any arguments over the value of sustainability are over.

Reported only a year ago, it’s clear the business environment has evolved since. While increasing societal expectations for social and environmental practices and corporate culture continue evolving, it’s important to question two things.

1) One argument voices causation versus correlation, asking if sustainability itself is the cause of success or merely a correlation?

Many argue correlation, saying it does not depend on sustainable initiative per se, but that any forward thinking company will develop a business plan more likely to succeed. In the meta-analysis, this matters. Sustainable practice requires forward thinking and considering social and environmental long-range parameters. Whether direct cause or correlation, sustainability is a proxy for success.

The proxy, however, is based on looking forward and being innovative in relation to rising concerns for social and environmental benefit. This is what the world increasingly wants and expects. Which leads to the next question.

2) Are they asking the right questions? Will studying traditional corporate structures integrating sustainable changes proliferate an evolved culture?

Whether a proxy for success or not, sustainable practice resulting in significant social and

environmental benefit and evolved societal expectations needs to reach deeper, to break the mold and operate outside of traditional business platforms.

If we continue to work within the confines of the status quo, incorporating ‘surface sustainability,’ culture may evolve into a sustainable society, but it will take much longer with less pronounced results. It’s arguable that time is of the essence.

Widespread initiatives are shaking things up. The more we involve in them, the quicker we’ll see systemic changes resulting in sustainability supporting structures throughout society.

The best plan for success is to dodge traditional structure-rule total loss. Don’t look at how you can make a few adjustments and increase performance within a broken system–find how you can reinvent business for an evolved, sustainable world.

What will you invent?

2 Comments leave one →
  1. December 24, 2012 12:46 am

    Although it is the most difficult option, I vote “total loss”.
    No matter how sustainable a company wishes to be, it works inside of an economic system that is simply not sustainable (in every sense of the word). And so, the entire economic system must be rebuilt, re-invented.
    We must remove the need for constant growth and aim for stability (a “steady state” economy). Companies should be encouraged to increase employment, pay and benefits, not decrease them. And, most importantly, companies should aim to have little to no impact on the environment.
    Sustainability should be the norm, not a target, or an initiative and certainly not a PR campaign.
    In my humble opinion 🙂


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