Towards a sustainable business future
In future all businesses will have to be sustainable. E&T reviews an important new book on the subject.
Management books tend towards the macho. Business, to a certain mindset, is conflict by other means - the man sitting next to me on the tube the other day was reading Clausewitz's 'On War', and, with his pinstripes and BlackBerry, didn't look like he was heading for a battlefield. But there's an inevitable attraction in stressing the 'extreme risk' of the office-bound life, and the metaphors of management literature tend to reflect this. 'Firefighting', in particular, seems to have entered mainstream language: managers talk about 'putting out fires', which they safely do while pacing a carpet, taking conference calls, and earning many times the salary of those who walk into burning buildings for a living.
If this were simply a matter of allowing office workers to fantasise about heroic acts of marketing, this wouldn't worry anybody: we all need our daydreams, after all. But one of war's downsides is the collateral damage. In business terms, this means all those at the bottom of the pyramid, which includes a significant proportion of the global population - 'In a world where the ideology of free enterprise has no real challenges, why have free markets failed so many people? Instead they exacerbate poverty, disease, pollution, corruption, crime and inequality.' So says Muhammad Yunus, Nobel Prize-winning economist, quoted by Peter Fisk in his new book on how business has responsibilities above and beyond profiteering, and how the macho attitudes of the past need to be reconsidered.
The first lesson to be learned is that management has to adapt. Business is no longer warfare, but has to be considered instead as a dynamic system; one in which the planet, its people and the making of profit are not alternatives. Too often in the past, profit has taken precedence: hence 'the sweatshops, the emissions, the packaging, the greed'. As Fisk says, 'It doesn't look good' more importantly, it can't continue.
Sustainability initiatives are no longer on the periphery of the business world - something from the 'good to do' box - but are a fundamental driver of business performance; part of the lifeblood of any responsible corporation. 'Business, society and nature need to find a new way to coexist,' he writes. 'It's time to adapt or suffer the consequences.' Which means pursuing aims beyond shareholder value.
In his exploration of the ways in which some companies have striven to improve their performance in this area, and the potential consequences for those which fail to do so, Fisk includes a number of interesting case studies, including a pair which nicely illustrate the issue of choice. Change is no longer optional - business is going to have to adapt to new practices, like it or not - but individual companies can choose to embrace change on their own terms rather than being forced into it, either by progressive legislative measures or customer-led revolt. The Co-operative Insurance model is an example of the former. The Co-op Bank is one of the UK's leading motor insurers, an area in which suppliers are widely perceived to be offering the same product and service, so one in which consumers simply shop around for the best price on offer. Co-operative Insurance opted to be different by encouraging a more environmentally responsible attitude towards car use, and thus developed the concept of Eco-Insurance, in which the price would be based on the carbon emissions of the car insured. Premiums were also lower for those who used their cars less, and were prepared to use recycled parts for repairs. As well as promoting good practice, the policy offered people a positive reason to choose the brand, and allowed Co-operative Insurance to differentiate itself.
Greening the Apple
But other companies have found themselves in the position of being forced to adopt change because their customer base demanded it. Apple provides the illustration here. After being accused by Greenpeace of being one of the slowest companies to respond to the challenge of reducing electronic waste, removing the worst toxic substances from its products and improving recycling policies, Apple found itself on the sharp end of a campaign called 'Green my Apple'. Apple users - a loyal bunch of customers - were encouraged to email Apple's CEO with suggestions for greener products, and demands for a commitment to continuous improvement of Apple's environmental policies. Apple took up the challenge, but then, how could it not? As one of the world's most instantly recognisable companies, it had nowhere to hide.
This is another of the developments underlying the need for sustainable practices: branding is no longer as straightforward as it used to be. Brands allow companies 'to extend the conversation with consumers, moving from functional to emotional and social issues' by encouraging a commitment to the product in question, as had been to Apple's advantage in the past. In this way, business seeks to engage in a conversation with 'the consumer's shared world' - his or her community - and thus position itself within that community. But the other side of this coin is that when that community starts making its own demands, the company can have little choice but to acquiesce.
A high recognition factor can backfire, and recent history is full of examples of exactly that: we have had Nike and what Fisk coyly refers to as 'its sweatshop problems in Asia' Ikea's use of wood from endangered rainforests, and Shell's 'environmental challenges' in Nigeria. The high-profile bad publicity generated by these corporate mishaps has played a large part in forcing these companies into adopting a more responsible, sustainable approach.
Branding, then, is now about ethical reputation - and the reason why this is important is, quite simply, that the customer has decided that it is. Research has shown, says Fisk, that 70 per cent of the UK population recognises the Fairtrade mark, and 64 per cent make a direct connection between that mark and a better deal for producers in developing countries: a growing public awareness which directly correlates to an increase in sales. This is indicative of a powerful grassroots social movement: word-of-mouth communication has been an important factor in Fairtrade's success. For all the complex issues underlying the Fairtrade movement, the message it is successfully putting across is that, by buying Fairtrade goods, the consumer is helping agricultural workers in developing countries to provide for themselves and their families today, and build a better future for tomorrow.
The ethical approach, then, can pay dividends, and the High Street has started to pay attention. Marks & Spencer's 'Look behind the label' advertising campaign was an enormous success, bolstering its environmentally conscious 'Plan A', which quite boldly introduced a charge on plastic bags. The immediate result of this was an 80 per cent reduction in plastic bag use in M&S. Given that most plastic bags end up in the sea, this is a significant achievement, and the company has received its due reward: Greenpeace and Friends of the Earth recently declared M&S the UK's greenest retailer, and at the World Retail Awards, the company was named 'Responsible Retailer of the Year'.
Because this remains business, it naturally becomes competitive: Tesco and Wal-Mart have introduced similar programmes. The result is a measurable change in our shopping habits: the days when we would casually collect a new set of bags each time we went shopping, and discard them on our return home, are rapidly receding. And this change, unlike those customer-led examples, is the result of 'choice editing', whereby a company is making the customers' choices for them, imposing a more responsible attitude towards the planet's resources.
Fisk provides many further examples of the changing corporate landscape, and offers plenty of guidance to managers looking to improve their own performance and set their own sustainability agenda. One thing that seems destined never to change, though, is the way in which such guidance is offered: as with all books of this type, we're offered little mnemonics - 'the five Cs of the new business leader', and so on - and topics are laid out in neatly packaged chunks: 'Me; My world; The world', for example, is Fisk's differentiation of personal, local and global issues. Nothing wrong with this, of course, though it starts to seem a little formulaic when set against his encouragement of creative, divergent and imaginative thinking.
What really matters, though, is his message that those companies that won't adapt to sustainable models of operation will not survive. And while many of the smaller companies Fisk uses to illustrate his points were self-consciously environmentally minded to begin with, it's the big, global corporates that need to pay attention. They'll find no shortage of ideas here, once they start looking for ways to improve: Fisk handily provides lists of 'emergent behaviours' - new products and services that underline the demand for an environmentally sustainable lifestyle, from the incorporation of wind turbines in office design to the use of Cargocycles for merchandise delivery. That there's a demand for such innovation is beyond argument. The sooner big corporations understand the business case for investing in it, the better off we'll all be.