Are you sustainable dear?
Sustainability has become a strategic issue for most corporations. But numerous concepts of doing good can make it hard for the consumers to see the reality behind the reporting. Mari Vonen, Schibsted’s expert in CSR, believes that disruptive start-up competitors, sharing best practice – and our kids, will push development the right way.
For most individuals the debate about what is doing good and what is doing good enough remains private. For corporations this debate is public and their choices are highly scrutinized. From being the home turf of poorly dressed idealists, saving people and the planet has become the latest accessory for the fashionable and glamorous. Is this a bad thing? I think not; the more attention the issues that affect us get, the better – regardless of the selfappointed ambasador.
Endless list of labels
But why should corporations do good and how does one define it? There is an endless list of labels and focus areas that can be included under the doing-good umbrella, in addition to a multitude of reporting standards and frameworks, which adds to the confusion: It is not always evident when a corporation can claim to be sustainable or socially responsible. In layman terms1 sustainable is defined as “able to be used without being completely used up or destroyed”. For businesses this mean that satisfying the present needs should not be done at the expense of future generations.
The Corporate Social Responsibility (CSR) or sustainability movement did not gain true attention from the business community until the late 20th century. At the turn of the century and after years with cost-cutting and outsourcing of negative externalities to low-cost countries, western corporations faced increased demands of accountability and requests to demonstrate how they balance and optimize the sometimes conflicting interests of people, profit and planet. This balancing act is not always an easy one, and has paved the way for a jungle of frameworks from the consulting industry (shared value2, true value3, blended value4, and thick value5 to name a few).
This abundance of concepts fuels accusation of CSR being merely the latest management fad, a window-dressing or green washing from powerful multinational corporations to avoid state interference. An older critique is Milton Friedman’s argument that the only duty of the corporation is to maximize shareholder profits. Academics and consultants still pursue this line of thought when they try to demonstrate that investing in sustainable development maximizes shareholder value. More holistic approaches expand the group of “holders” to include the stakeholders – a group which is, alas, not as easily defined as their shareholding counterparts.
What matters most
Sustainability proponents use various means to make their cause more business-like. The introduction of the materiality concept – proclaimed to be the missing link in sustainability strategy is one such example. A corporation should define what matters the most to its key stakeholder groups, and use these insights to select focus areas to both invest in and report on. A recent Harvard Business School study6 argues that investing in material sustainability issues will increase shareholder returns.
As a rehabilitated accountant I find the development of CSR towards what used to be an accounting stronghold fascinating. The introduction of standards, audits and frameworks seek to facilitate comparison of the sustainability efforts between corporations and industries. However, all this makes it difficult to easily compare anything but the proverbial apples and oranges. We are a long way from seeing a top executive being sent to jail for fraudulent carbon emissions accounting, although the recent Volkswagen emissions scandal and its reputational and financial consequences prove that we are indeed moving in that direction.
A potential negative consequence of the good intentions behind the calls for transparency is that reporting itself becomes the main focus. It becomes so complex that one needs a specialized degree to interpret it. How then will the average Jane and Joe decide what products to buy and what shares to invest their savings in?
The very reason
We live in an age where many corporations have had to re-learn what it means to be a responsible business after public scandals and media scrutiny before arriving at a level of maturity that we expect today. A lot of start-ups on the other hand tend to integrate sustainability in their very reason for being – their purpose – and their business model and value proposition. I believe the emergence of disruptive players and technology that challenge old paradigms and established truths will be a driving force that can truly bring sustainability factors to the strategic level – even when the tough decisions are made.
If sustainability has become a strategic matter, one can assume that a competitive advantage can be derived from being good. Does this impact corporations’ willingness to cooperate to tackle industry specific issues? Here there is reason for hope: Requesting sustainable and ethical behaviour from suppliers and suppliers’ suppliers is the new norm.
Share best practice
Although the cooperation efforts have historically been directed upstream in the value chain this is changing. Forums and arenas where direct competitors share best practice and cooperate to tackle industry specific issues have emerged in industries ranging from extraction, fish farming to media to name a few. In addition great corporations acknowledge that a significant share of the environmental and social impact of their products and services may arise after the time of sale, and try to influence consumers’ behavior long after the products have left the shop. I believe the trends of increased cooperation and expansion of the sphere of influence will accelerate in the future. The possibility of nudging or shifting consumers’ behavior – in the end they are the ultimate decisions makers – towards more sustainable products and services is probably the greatest challenge and opportunity of modern day corporations.
No other choice
As for another type of corporation – the family – the future generations are taking on the role as the family’s Chief Sustainability Officers. I am hopeful that the combination of pressure from kids, technology innovations, nudging from corporations, and the non-avoidable increase in regulatory requirements can pull and push us all in the direction of a more sustainable way of life to overcome the environmental and societal challenges that we as humanity are facing. It will not be easy or pleasant, but we’re all in this together and frankly we have no other choice.