June 22, 2010
For anyone who thought that drama in the world’s economy had subsided, 2010 has delivered shocks and surprises—many related directly to sustainability—that reinforce just how dynamic and unpredictable the business environment still is.
In the first half of the year, the largest oil spill in American history has raised questions about our ability to manage the increasingly complex technology that fuels our economic growth. In China, worker unrest is surfacing, and it’s possible that steady wage increases will change the calculus that has made China the world’s workshop over the past generation. And, lest we forget, the world’s financial system remains vulnerable, as the crisis in Greece shows us, and there is little global consensus on the answers.
In this context, business leadership is more important than ever, and we have made this theme one of the central pillars of the BSR Report 2009, “Innovating for Sustainability,” which is being released today.
Leadership is a much-used (perhaps overused) word. But for these unusually volatile times, business leadership is exactly what we need to develop radically new solutions for the world’s complex challenges. While the public sector is—and should remain—crucial, it is not yet effectively tackling climate change (remember Copenhagen?) or economic development (at the halfway mark, progress toward the Millennium Development Goals is imperfect, at best). The public’s feeling of economic vulnerability—especially in the West—is feeding political pressure for immediate relief, often at the expense of long-term investment in truly sustainable economies.
If business does not lead the way, there is little chance that we will solve these issues, which is a bad outcome for the world, and a bad outcome for business. And while it may seem untimely to look to business to lead while oil is spewing unabated from the well in the Gulf of Mexico, in fact it has seldom been more important.
When it comes to sustainability, business leadership has four crucial dimensions: setting priorities, questioning assumptions, taking risks, and—perhaps surprisingly—getting the basics right. Fortunately, several companies are stepping up to this challenge.
Earlier this month, a group of American business leaders, including blue chip names like Bill Gates, Jeff Immelt, and Chad Holliday, demonstrated the importance of setting priorities with their call for massive increases in clean-energy investments. This group, which launched the American Energy Innovation Council, wants a major reorientation of U.S. government policy to support a transition to low-carbon prosperity. At the council’s launch, venture capitalist John Doerr pointed out that today’s business-as-usual approach has companies spending more money on developing potato chips than on researching new forms of energy. Offering a five-point plan, these iconic executives are building on the efforts of those who called for action in Copenhagen last winter. With a little luck, the results will be better this time.
Leaders also question assumptions. Recently, I have been pleased to see more businesses wrestle with the topic of sustainable consumption—an issue whose solution requires challenging a belief that has defined business for the past half century or more. Widely accepted statistics make clear that simply extending Western economic habits to everyone will exhaust the Earth’s resources long before prosperity spreads to all corners of the world, where it is desperately needed. This can be viewed either as a massive problem, or the essential business challenge and opportunity of our time. But taking this on requires business to question traditional economic models: How can we reorient the economy away from consumption-driven growth?
Too often, sustainable consumption has been at the margins of the sustainability debate, the veritable green elephant in the room. This is beginning to change. Companies like Nike, Best Buy, Marks and Spencer, eBay, and Unilever are taking risks by exploring ways to decouple the creation of value from the consumption of resources by experimenting with closed-loop manufacturing, shifting from products to services, and creating incentives for consumers who buy less. Companies like these understand that if they can inspire customers to select different products and use them wisely, consumers and businesses alike will benefit (and often save money). The most creative companies are taking risks by suggesting that consumers buy less or shift from a disposability culture, banking on the idea that they can create more value this way.
BSR is advancing leadership on this issue by collaborating with companies to help shape this next frontier in sustainability strategies. Last week in New York, we led 20 company representatives in a lively workshop on the subject, and we will do the same in London this September. Next month, we will publish a paper that outlines the imperative for business to address this question, and presents a framework for how companies can get ahead of the curve. Sustainable consumption is where the opportunity for business leadership is most powerful, which is why we will be focusing more attention on this subject in the months ahead, and why we have included it in the future road map we present in the BSR Report 2009.
Finally, and maybe counterintuitively, leadership is about getting the basics right. BP, Toyota, and Goldman Sachs have all had very rough going in 2010 precisely because they didn’t deliver on core competencies. Ironically, not that long ago, they each topped the list of sustainability leaders. Indeed, a GlobeScan survey released this spring (and completed just before the Deepwater spill), placed BP in the top 10 of sustainability leaders yet again. The images from the Gulf of Mexico remind us daily, and painfully, that mastering the basics is a prerequisite of business leadership. We should anoint leaders with great caution, and companies should wear—and advertise—the crown with intense humility.
I get asked all the time: Which companies are leading the way on sustainability? I understand why people want to know, but I think it’s the wrong question. The right question is: What are the most important characteristics of leadership? Look for the companies that are taking risks by questioning assumptions and shaping the debate over economic priorities, while also delivering the goods every day.
We would like to continue this dialogue with our members and the sustainable business community as a whole. If you have feedback on what’s included in the BSR Report 2009, please email us at bsrinsight@bsr.org.
Let’s talk about how BSR can help you to transform your business and achieve your sustainability goals.