The Sustainable Approach

Posted by April Atwood on Wednesday, November 16, 2022 at 9:00 AM PST

One could argue that environmental challenges are among the most, if not the most, important an organization needs to consider. The challenges being presented by the natural environment are formidable. When we consider environmental degradation, resource scarcity, burgeoning world populations, environmental toxins, and more frequent and extreme weather events, we see the need for resilience and the need for better energy solutions. Add in the effects of climate change and our concern broadens to include the fact that climate change is happening faster than ever predicted. It is affecting temperature, rising sea levels, and reducing the availability of freshwater, increasing the incidence and severity of drought and wildfire, decreasing crop yield and nutritional levels of the crops that are grown, increasing temperatures of ocean waters, and the list can just go on and on. Add to these challenges the changes in technology and increasing consumer expectations around corporate transparency, and we can feel the full impact of the importance of organizational management and responses to environmental changes and challenges. 

Broaden Your Focus

To address these trends and the associated future uncertainties, organizations need to discard their financial bottom-line-focused, ‘business as usual' approaches for more forward-looking strategies that have the potential to create a more flourishing sustainable world. Consider the realm of business, even Pope Francis has identified the need for the focus of business to broaden: 

• "The principle of the maximization of profits, frequently isolated from other considerations, reflects a misunderstanding of the very nature of the economy. As long as production is increased, little concern is shown about whether it is a cost of future resources or the health of the environment; as long as the clearing of a forest increases production, no one calculates the losses entailed in the desertification of the land, the harm done to biodiversity or the increased pollution. In a word, businesses profit by calculating and paying only a fraction of the costs involved.” (ch.195, Laudato Si, Pope Francis second encyclical, 2015)

Take Action Early

Beyond the moral imperatives around protecting all forms of life on earth for current and future generations, there are pragmatic reasons for businesses to act. Unfortunately, the business advantages of taking action on environmental and climate issues are discussed all too frequently- the focus is too often on how to continue to profit under traditional approaches to business. In taking action to reduce their environmental impact, organizations that adopt a more sustainable approach stand to enjoy competitive advantages and reap the many benefits that accrue from demonstrating leadership in this arena. Consideration of the most obvious must include:

• The ability to act in advance of regulations: when it is clear that regulations will be put into effect, companies planning for the future will take them into account when planning their strategies. In many parts of the world (including parts of North America) a price is being put on carbon dioxide emissions now. Forward-looking companies should be planning for this eventuality in the areas where they are located or want to do business so that when this fee is put into place, they will be ready for it- and in the meantime, their action will lead the company to enjoy some of these other benefits as well. 
• Lower costs: making better use of resources and producing less waste means not having to buy as many inputs or results in more output per unit of input. Resource efficiency and reducing waste can result in quick monetary savings for the company to enjoy. Increasing energy efficiency means money previously spent on fuel or electricity can be applied directly to the bottom line. And reducing exposure to environmental challenges means reduced risk, which appeals to investors and insurers. 
  Resource accessibility: using fewer constrained resources as input will save money for the organization and also will extend the length of time the company has access to these resources, effectively ‘buying some time’ for alternative inputs to be developed.
• Innovation: has been found to flourish in companies that are encouraged or forced to find alternatives to their ‘business as usual.’ Innovative changes that companies have made range from a new way of envisioning the business they are in (e.g., Tesla electric car business? Or battery business? Or a clean energy system business?) to a reconceptualization of how the business is structured (e.g., selling a service rather than a product: consider HVAC providers who now sell their ‘HVAC service’ to buildings rather than sell the HVAC equipment outright- incentives are now aligned for those companies to produce high-efficiency, long-lasting equipment; the result is less environmental impact and HVAC services overseen by professionals). 
• Access to workers and a healthier workforce: increasingly, workers today want to work for companies who are considered ‘good’ contributors to society-this is especially true for the current generation of college graduates. Being a leader in environmental or sustainability action is a big advantage to companies in their quest to hire the ‘best and brightest.’ Employees of companies like Ben & Jerry’s (under parent Unilever) openly discuss the advantages of working at a job where they feel like they are making a positive contribution to society through their work. And by providing a positive, healthy place to work, companies are enjoying lower turnover rates, thus avoiding some of the hiring and onboarding costs that hit when employees leave. Taking action to eliminate or reduce toxins in the products made and the workplaces where they are made means those workforces are healthier too-sick time is reduced and health care costs are lower. 
• Marketplace differentiation and brand value: society’s increasing interest in companies who are environmental and sustainability leaders means that the brand reputation and brand image of leading companies are enhanced through their efforts. The segments of consumers who are interested in ‘green’ or ‘sustainable’ offerings continue to grow, so companies who exercise leadership in these offerings and in how they operate their business are enjoying the greatest profits. World leaders including Interface and Unilever have demonstrated that a company can decouple resource use from growth and profitability. These companies have increased sales and profits while decreasing their environmental footprints.

In sum, business leaders of today and tomorrow will be challenged by many changes and interconnected issues in our world. Environment and sustainability considerations intersect with the other ‘big issues’ discussed in this publication; it is vitally important that we continue to prepare our leaders to be able to think more broadly and systematically about the reasons and approaches they can use to address these challenges.