Corporate sustainability has come a long way since the UN’s World Commission on Environment and Development, chaired by the then prime minister of Norway, Mrs Gro Harlem Brundtland, defined sustainable development in 1987.
Her commission was set up to find ways to get countries to work together to improve a fast-deteriorating natural environment and to foster development in emerging economies. Its final report – Our Common Future – is highly detailed and provides the short-form and often quoted definition of sustainable development as “…the kind of development that meets the needs of the present without compromising the ability of future generations to meet their own needs”.
The definition is now embedded in international law and reflected in regional and national legislation. But because the recommendations in Our Common Future are directed at governments, business has been puzzling for some time on how exactly to respond.
In short, business cannot create sustainable development. That is the role of governments. But business can contribute to the process. Governments see the business community as an essential partner in achieving their goals and their constant plea is: “help us make this happen”. The common business plea is: “give us the right policy incentives”.
The main business response to the call has come from the World Business Council for Sustainable Development (WBCSD), established to provide a business voice at the 1992 Earth Summit held in Rio de Janeiro. One hundred and seventy two nations attended and the conference set up the legal process of embedding sustainable development in international law, through treaties such as the Climate Change Convention and the Convention on Biological Diversity.
The WBCSD, a membership organisation of around 200 companies represented at CEO level, has continued in its now official role as a business NGO contributing to the debates and negotiations in all UN attempts at creating legal obligations to promote sustainable development.
One of the organizations most valuable contributions has been the development of the business case for contributing to sustainable development. The case is based on meeting the demands of a broad range of stakeholders – from investors through to policy makers, opinion formers, suppliers, customers and employees – who, to varying degrees, want companies to do their best for the environment and development.
While the business case resonates with many, there remains a great deal of scepticism about the need to change from business-as-usual unless markets or policy demand it. Many in business are disappointed by what they see as inherent negativity of sustainability and an emphasis on risk rather than opportunity.
A briefly successful early concept devised by the WBCSD was the notion of eco-efficiency. This is where a company can improve its efficiency and profitability by reducing waste. But critics were quick to point out that this focused only on the environmental side of sustainable development and ignored the social and economic issues, such as human rights, the rights of indigenous peoples and, above all, the need for prosperity. Furthermore, it concentrated on an incremental reduction of impact and did not encourage new ways of doing business.
Megatrends on the march
As the often intractable problems associated with megatrends such as population growth, rapid urbanization, a fast-expanding middle class (more buying power) and climate change have advanced, the business community has become more engaged with the concept of sustainable development. They have been helped by the emergence of concepts that attempt to overcome negativity and speak to the business benefits of contributing to, in the common parlance, a better world.
Three leading concepts are Shared Value, Circular Economy and Net Positive. These provide a business- friendly route to sustainable development and are increasingly used by companies to drive change in their organisations, communicate the benefits to stakeholders and build better, more resilient businesses.
Shared Value is a management framework that helps companies create business value by tackling social problems connected with their business. This, it is argued, creates new opportunities for companies, civil society and governments to use market-based competition to solve social problems, hence sharing the value created by the enterprise.
The concept was developed in 2011 by Harvard professor and management guru, Michael Porter, working with Mark R. Kramer. They identified three ways in which shared value can be created:
- Reconceiving products and markets. This is about meeting unmet needs in society, and making a profit from the enterprise. In this way the value is shared because society and the company both benefit.
- Redefining productivity in the value chain. Here the company improves the efficiency of its operations and in the process saves natural resources and prevents emissions.
- Enabling local cluster development. The existence of a company creates demand for local suppliers and infrastructure, benefiting communities by building vibrant local economies.
Critics say that this is what business does anyway and the framework merely describes the role of business in society. Nevertheless, Shared Value has resonated with many large companies – Chevron, Intel and Nestlé among them – and looks set to remain a popular route to sustainable business.
Find out more here: http://sharedvalue.org/
In nature there is no waste because by-products become feedstock for other parts of the ecosystem. Supporters of the Circular Economy want to create the same circumstances in our industrial ecosystem, moving away from the linear model of “Take, Waste, Dispose”. The idea was first put forward by the Swiss economist and architect Walter R. Stahel in the late 1970s. The popularity of this “closed loop” concept has grown over the years but it took the charismatic efforts of Ellen MacArthur, the solo round-the-world yachtswoman, successfully to promote the idea as a business model.
The Ellen MacArthur Foundation describes the idea like this: “Today’s linear ‘take, make, dispose’ economic model relies on large quantities of cheap, easily accessible materials and energy, and is a model that is reaching its physical limits. A circular economy is an attractive and viable alternative that businesses have already started exploring today…[it] seeks to rebuild capital, whether this is financial, manufactured, human, social or natural. This ensures enhanced flows of goods and services.”
Critics point to the many hurdles in closing the loop, not least the economics which deflate prices of used materials and make their use difficult to cost justify. This implies the need for significant changes in policy to create the necessary viable markets. Relying on policy – especially in a global economy – erects formidable hurdles in getting political agreement worldwide that would lead to viable global markets encouraging the re-use of low-value materials.
Furthermore, the transition to the greater use of renewable materials from responsible sources is hampered if “closing the loop” is over simplified into an Olympic discipline for recycling beyond any measurable ecological, societal or economic benefit.
While purporting to rebuild human capital, the circular economy model is criticised for failing to tackle the social leg of sustainable development. The model would certainly create more so-called green jobs (e.g. in recycling) but how, for example, will the circular economy deal with human rights in the supply chain? Or issues of ethics and governance?
Despites the model’s holes, the circular economy has many high-profile supporters, H&M, Nike and Unilever among them.
Find out more here: https://www.ellenmacarthurfoundation.org/
Net Positive is a way of doing business which puts back more into society, the environment and the global economy than it takes out. Organisations that take a Net Positive approach share an ambition to grow their brand, have strong financial performance and attract the brightest talent.
Spread across the private, public and not-for-profit sectors, they recognise that business is a marathon, not a sprint, along new routes that are still emerging. The destination for each is the same: thriving organisations that deliver benefits that extend far beyond traditional organisational boundaries.
Becoming Net Positive requires organisations to be ambitious and plan for long-term success. They have to go beyond risk avoidance and incremental improvements and start to innovate.
So how do they do it? Right now, a series of Net Positive principles ties together all of the areas in which organisations should act, and a Net Positive measurement framework means that outcomes can be communicated consistently.
A strong group of companies support the Net Positive route, including the UK telecommunications company BT, the US technology giant Dell, and the Swedish home furnishings multinational IKEA.
Read more about Net Positive here: https://www.forumforthefuture.org/project/net-positive-project/overview
The ultimate aim for any business, surely, should be to make a genuine and valued contribution to sustainable development. How you do this is up to you, using whatever route suits your company best. We are assessing the best path for SIG and we will post our decision on this blog in a few months.