Why sustainability is good for competitiveness

David Bent, December 1st 2008, Business

Have you ever been told that this sustainability stuff is all very well but it undermines UK competitiveness? That companies will go bust, jobs will be lost and that the Chinese will do it any way all because of you pesky, naïve lefty environmentalists? Ever wanted to answer back?

A few years ago here at Forum we felt that frustration. So, we looked at the latest research on sustainability and competitiveness, and we found there is no inherent conflict between the two. Instead, we need to create a system of competitiveness which is as beneficial as possible to society and the world we all live in.

Plenty of people have legitimate fears that addressing sustainability, or other issues under the label of ‘social responsibility’, will harm the competitive edge of their firm and the comparative advantage of the nation. The business of business is business, they say. Any firm that acts beyond compliance with its legal responsibilities for the sake of it is more than wasting its shareholders' money, they say. It is also imposing costs on wider society, which retard economic growth and harm competitiveness, they say.

We agree.

The key thing is whether a company can make a return from going 'beyond compliance'. Sustainability issues such as climate change are now so important that they drive the context in which businesses make money. So, companies that integrate sustainability into their core business are not wasting shareholders' money, they are protecting – or even growing – it. Good sustainability strategies are driving profits and reducing risk by preventing pollution and exercising good product stewardship. Companies are finding a path to growth through cleantech innovation or by meeting needs at the bottom of the pyramid.

At an economy level, California proves that more stringent environmental regulation can be good for business. Done well, regulation forces companies to innovate - driving profits and creating future markets for success.

So, there is no inherent conflict between sustainability and competitiveness. If you go for sustainability as a bolt-on or through inappropriate regulation then yes, it imposes extra costs. But sustainability is a vital component for success of the core business. Done well, sustainability can create the best future for a business and we believe it should be integrated throughout a firm’s operations.

There is plenty more detail in the briefing on Competitiveness and Sustainability we have published with the Institute of Chartered Accountants in England and Wales (ICAEW), Europe's largest accounting institute.

Finally, I just want to salute the ICAEW's sustainability journey. I am an accountant who sits on ICAEW's corporate responsibility advisory group. Five years ago the ICAEW and the profession was not paying attention to sustainability. Thanks to the diligent work of their CR team, the institute now has lots of activity. This briefing is the first of several in the pipeline. There is work with the Chinese government on environmental accounting. There is the new on-line training programme on Business Sustainability. The ICAEW is helping the profession understand that sustainability is important, which is crucial because accountants have a fundamental role bringing information together and analysing it for decision-making.

All too often finance directors have said no because sustainability sounds like a waste of money. The ICAEW is enabling their members to see that sustainability is part of the future of their business and career.

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Nice but nasty: ‘sustainability’ in 2018?

Joy Green, December 5th 2008, Business

The NICE years seemed good while they lasted, but as we wake up with a hangover to the nasty bill for our long years of growth, it's pretty clear to everyone that business as usual is not an answer and it's time to prepare for radical change.

As banks and high street brands teeter and collapse it's evident that the years of prosperity are over - what Mervyn King, the governor of the Bank of England, dubbed the NICE era of non-inflationary constant expansion. We now have to deal with the nasty consequences - the current economic crisis, climate change, looming energy and resource “crunches”, increasing social inequality and tightening environmental limits. The decisions we take now will be critical and could lead to very different outcomes.

With this in mind, we got together with Capgemini to create four possible, plausible scenarios for the world in ten years time, with particular reference to business and sustainability. We launched the report on Tuesday at our partner event and our guest speaker, Andrew Simms, Policy Director of the New Economics Foundation, welcomed it with a quote from Winston Churchill which serves as a wake-up call for all of us.

“The era of procrastination, of half-measures, of soothing and baffling expedients, of delays, is coming to a close. In its place we are entering a period of consequences.”

Our scenarios are not predictions, but are a useful tool for thinking systemically and exploring several key uncertainties and how they might affect each other, such as: ‘How will China develop?”; “How will markets be regulated?”; “Will there be a globally co-ordinated response to environmental overshoot?”; “What sort of networked world will emerge?” They are very different from each other, and from the world today.

Scenario A – The global interest – this is a ‘best case’ scenario, where an effective globalised response to global challenges prompts increased resource productivity, closed loop production processes and low-carbon growth. In this scenario, successful companies have embedded sustainability management throughout their organisations, and separate CSR departments are a thing of the past.

Scenario B – The national interest – this is a world that current ‘business as usual’ practices could sleepwalk into – countries compete in a zero-sum game for a shrinking pool of resources and there is a retreat to nationalism and protectionism. There are no effective global frameworks for dealing with global challenges. ‘Sustainability’ has been distorted as a concept in many countries to mean supporting the national interest.

Scenario C – Patched up globalisation – In this scenario we considered what could happen if, counter to received wisdom, China stalls and a low-carbon ‘leap-frog’ mode of development gains currency among other emerging nations. Sustainability for global companies in this scenario focuses on helping to deliver local development needs.

Scenario D – Me and mine, online – This is a highly networked world where ‘old’ organisational structures like the nation-state and traditional multinational companies have been undermined by the pace of change. Successful companies are more like hubs, coordinating often temporary and short-lived supplier relationships to deliver customised products. Trust and transparency are key, and anyone with the ability to mobilise a groundswell of opinion can exert a powerful influence.

So what did we learn from these scenarios? Several insights emerged for businesses, NGOs, governments and regulators, which we have collected in our report Acting now for a positive 2018, preparing for radical change, together with an analysis of the past ten years and a much more detailed description of the scenarios.

Overall, the main message is that we, collectively, have to act now if we want a positive outcome. Sleepwalking takes us to Scenario B – a world that is in no-one’s best interest.

If you are a global business, you are best served by an outcome closer to Scenario A – but you have to take the first steps towards it now. Waiting for governments to regulate for all risks will be too late and too costly. Businesses also need to prepare for radical change – implicit in the wide range of possible scenarios - by creating resilient strategies that can cope with a wide range of outcomes. One of the best ways of doing this is to embed sustainability into the main functions of decision-making, innovation and operational delivery.

However, governments and regulators also have a critical role in creating regulation to reduce the risk of catastrophic collapse and create the conditions in which solutions can arise.

Download the report here: Acting now for a positive 2018, preparing for radical change

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