Over the course of the last few months my blogs have explored what it means to be a responsible company – if values can support both sustainability and financial return, perhaps even transcend the need for financial return from sustainability initiatives. I’ve observed how some companies have incorporated certain values at the heart of their businesses, and by combining them with audacious goals and a cultural understanding of purpose, are supporting sustainability across a broad range of strategies.
One question I haven’t had a chance to deal with is the issue of whether a company can have values at all. There are some very good arguments as to why a company can’t have values. Companies after all are nothing more than webs of contracts – legal entities formed on bits of paper. How can they hold values? Much depends on how we think of companies.
It is right that if we simply say that companies should hold values, we can easily end up making very sloppy arguments saying that companies should be nice. But if we think of companies as communities, made up of individuals each holding their own values and together forming a set of combined values, then the company can ‘have values’. The issue is that for a company to act according to ‘its values’ the community must act collectively, something that becomes increasingly difficult with scale.
What is clear, is that the companies that use values to support sustainability initiatives tend to go over and above what is required by law. We cannot expect all companies to do more than is expected of them: companies act just as people do: doing what they must – rarely more, sometimes less. Those companies employing values to be as responsible or as sustainable as possible, are the special cases – the ‘heroes’. They charge ahead, finding out where the opportunities and risks are, showing other companies what is or is not possible. It is through their leadership that public opinion shifts to expect more of business, that policy makers reflect this in sustainability-promoting legislation.
Doing well by doing good
However, values, purpose, or ‘constantly trying to yield to do the moral thing’ cannot in themselves deliver profits or sustainability gains. Companies must operate in the system as they find it. It can be really hard to do well by doing good – Café Direct can testify to this, constantly competing against companies hundreds of times bigger who dazzle an unsuspecting public with liberal application of ‘greenwash’ to make the playing field look level. And yet it is these goliaths that are best placed to support more sustainable business systems. Corporate financial health directly affects the willingness to take on projects with greater payback-uncertainty or longer return horizons.
Even when a company is doing well by doing good, what constitutes good in the longer term is not necessarily clear or consistent. The challenge of opposing internal agendas comes up time and again where multiple individual realities exist within a corporate community that outwardly appears largely aligned. One company interviewed publicly promoted material reuse whilst setting sales staff increasing targets: it argued that the best way of demonstrating the viability of its more sustainable business model was by growing sales. Validating new concepts with old logic will not bring about a new paradigm. The line between survival and growth bedevils all sustainability-focussed businesses.
It’s not sustainable business, it’s just good business
No company is an island. Accommodating ambitious sustainability objectives whilst succeeding within existing market norms is tough. Core values and clear purpose foster organisational processes and coherence that support both sustainability and better business.
It could be argued that oft-touted ‘value-based benefits’, such as common purpose, a longer and broader view of value, and greater collaboration across entire business ecosystems, have nothing specifically to do with values; they are ‘strategic’ considerations that every sensible company should take in account. However, many do not, whilst strong values appear to be present in those that do.
A values-based approach to business appears to provide an incredibly strong foundation for approaching sustainability as boldly as possible. The combined environmental, social and economic pressures we currently face surely mark this as a time where we need heroes that can demonstrate new possibilities to the rest of us? To be the pioneers strengthening the cultural pull to be ethical, sustainable, holistically prosperous.
And what about the rest of us?
Mass regulation is no more the answer than expecting everyone to be ‘good’. Overly complex legislation gradually stripping away individual responsibility to make ethically considered decisions is at least in part to blame for many systemic challenges today. But business will not free itself of greed and corruption until humanity does, so some controls are needed. The system must reflect what we are: it cannot fail as a result of our imperfect nature.
The heroes are pursuing their sustainability strategies in spite of the system. And making it work; doing what they can to influence the spiral of culture in line with values that they hold true. Use it or lose it said Rousseau of citizenship: the heroes exercise their voice by pursuing responsible successes. Government only makes changes based on the mass of opinion – the heroes show the public that sustainability values can deliver maximum societal well-being, at minimum planetary cost, and provide a secure financial future too.
So what of sustainability, free of financial return?
I have come to the conclusion that nothing can transcend the need for financial return. What is important is how businesses calculate returns, over what period, and the ultimate use of returns. Company investments must eventually provide a commensurate return. The heroes invest in sustainability because they believe the profit will follow directly or indirectly through wider business benefits. Putting sustainability at the core of the business ensures it becomes part of how value is calculated, part of everything the business does: less at risk in tough financial times, more likely to be applied when the strategy is unclear.
Hero companies aren’t responsible just because they believe it is the right thing to do. There is plenty of evidence that the legitimacy gap (between what companies do and what the public expects) is becoming increasingly material as companies try to survive in an ever more competitive and responsibility-literate environment. Involving the customers, communities and employees that companies rely upon, the societal right to operate, the ‘table stake’, is on the rise. This wave of opinion could be reversed, but, on the basis of current trends, it is likely that we will search for more sustainable solutions to societal needs and wants.
The second-best time to begin a sustainability journey is now. Opportunities are greatest at the start: while investments can include general leaning strategies alongside more ambitious transformative goals, returns can be relatively confidently predicted – provided businesses use a long term lens backed up by financial and moral conviction that they are doing the right thing.
This is a must-read for everyone who has a stake in the future of the world, from business executives to environmental activists, from community leaders to the politicians with their hands on the levers of power. Capitalism as if the World Matters
Julian Hill-Landolt is an experienced sustainability professional with particular expertise in sustainable business strategies including specialisation in values-based sustainability and an interdisciplinary understanding of environmental law, economics and policy. Julian has recently completed an M.Sc. at Imperial College London in Environmental Technology. he is currently working for Toyota Motor Europe in Brussels. Apart from writing general articles for the Sustainable Business Toolkit, Julian also shares extracts from his masters thesis.