January 22, 2010
Around this time last year, the deathwatch for sustainability was on full alert. Many wondered whether the "green bubble" would burst the same way the tech bubble and the housing bubble did. Would sustainability follow Lehman Brothers into the pages of history, a relic of the good times?
As we go into 2010, it's clear that sustainable business is not only here to stay, it will define the next wave of prosperity.
Consider the evidence: The number of sustainability reports--where companies report their performance against social and environmental criteria--continues to increase, according to the Global Reporting Initiative. Sustainability is everywhere on the agenda of the World Economic Forum meeting in Davos, January 27-31, 2010. And nearly nine out of ten business leaders surveyed at our recent BSR Conference said their companies' sustainability budgets would stay the same or increase this year. Suffice to say, the predictions that companies would abandon their commitments to corporate responsibility have not come true, and sustainability is as critical a business imperative as ever.
It's turned out this way for three main reasons.
There's money to be made. Recessions, even "Great" ones, come and go. When historians look back on the annus horribilis of 2009, they will likely conclude that the sharp increase in commodity prices was more a sign of the future than the sharp fall in share prices and employment. The prices of core materials like oil, wheat, and iron shot through the roof during the first part of the year. Conflict erupted as supplies of food, water, and energy dramatically dropped, and businesses battled over the competing uses of commodities such as biofuels and food. All this convinced the C-suite that resource inefficiencies are a material risk to their businesses today, and will be even more so tomorrow. To outlast the Great Recessions, companies have to improve resource efficiency to position themselves for success.
There's also a top-line story here. Companies now know that big global challenges create big global markets. That's why blue chip companies like GE, Philips, and Vodafone have all identified growth opportunities in areas like health care, consumer energy use, and social applications of mobile phone technology. It's why venture capitalist John Doerr is banking on a renewable energy revolution that he estimates could grow as high as US$6 trillion, or six times the size of the Internet business.
Despite (warranted) concerns about short-term thinking, business actually does look to the future. Look no further than the strong and growing business constituency for action on climate change. While governments move slowly on Capitol Hill and in Copenhagen, business leaders (and NGOs) are making the case for action. Executives responded to the tepid outcome in Copenhagen with a cry for governments to do better. Deutsche Bank Vice Chairman Caio Koch-Weser put it this way: "A strong deal is essential to create the rules, price signals, and risk-return incentives that business needs." Shell CEO Peter Voser called for "much more" to happen to build a strong deal on climate. They are doing this because they know that a price on carbon is coming, and they need to start planning their future today.
Society's expectations have changed—forever. There's just no turning back. Can you imagine the response if companies pulled back from their efforts to protect labor practices in their supply chains? If companies stopped providing information about energy and water use, or workplace diversity? Consumers—and the media—now view such activities as another dimension of product quality, and they're not considered optional.
Critics of sustainability have been planning its funeral several times in recent years. They have missed what most business leaders now know: Over the next half century, winning companies will be those that roll up their sleeves and build solutions to our most pressing global challenges. We need businesses that devote themselves to delivering a climate-friendly energy system, making efficient use of scarce natural resources, and creating efficient transportation for mega-cities. And because companies are waking up to the fact that this is where tomorrow's markets will be made, more and more are on that journey.
This is why sustainability not only survived the "stress test" of the Great Recession, it will define the next wave of prosperity.
This blog also was also published in Fast Company.
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