as sustainability hit a wall? Recent reports suggest that, according to CEOs, it’s difficult to implement sustainability practices in their organizations. Despite progress in reducing waste, lowering emissions, and increasing productivity, for many businesses achieving sustainability goals remains an elusive vision to put into practice.
In a way, this is not surprising news. For too many businesses, sustainability means “environmentalism” – conjuring images of spotted owls preventing loggers from doing their jobs, protesters besieging oil rigs, or overreaching EPA regulations. Amazingly, many companies still consider sustainability to be primarily a public relations function, where CSR checklists and glossy sustainability reports are the core deliverables.
But reality bites. And for those paying attention, the next wave of economic development – truly sustainable and profitable development – will be led by companies that recognize the reality of a resource-constrained world and are prepared to manage the risk of climate change. We’re already seeing this fact play out in geopolitical terms as nations invest in farmland to bolster their food security.
To better understand the sustainability conundrum from a business perspective, it’s instructive to examine some very basic tenets of economics. Start with terminology. In business circles, the overriding objective is growth – in GDP, ROI, profits, market share. Growth, however, is not the same as development. To use an analogy, individuals have the same basic physiological hardware as everybody else – a brain, a nervous system, etc. Yet some people achieve much higher levels of spirituality, intelligence, and accomplishment than others. We don’t refer to these individuals as having grown big minds; we say they have highly developed minds.
The same distinction between growth vs. development can be applied to how we run our economies. Rapidly expanding middle class societies in Asia, Latin America, and other developing regions will lead to intense stresses on natural systems and the beneficial ecosystem services they provide to humans. It’s unfair of course to lay blame for that development on those countries themselves. They’re simply treading the well-worn development path pioneered by rich countries. This accelerating growth is based on business models that for the most part have not changed since Spindletop first started gushing crude, signaling the beginning of fossil-fuel driven industrialization and transportation in the United States.
Taking out the industrial trash
If anything is hitting a wall, it is the antiquated industrial age business model – characterized by linear processes with inputs, outputs, and waste. The next economic phase will be dominated by businesses that align their models with the timeless ecological principles – characterized by closed loop systems and regeneration. Indeed, there are many forward-looking companies who have put robust sustainability practices in place. They have invariably found that sustainability means efficiency – and that’s good for business. So why do we hear that sustainability is so difficult to implement? In the end, it all comes down to accountability. As long as we lack policies that account for the health costs, damage to natural capital, and risk associated with massive challenges like climate change, businesses will find it difficult to integrate sustainability practices and turn a profit. For many industries locked into polluting business models, it’s easier to carry on business as usual and pass on the costs to the general public where consequences, if and when they’re accounted for, can be managed through the financial, legal, and political systems.
There are many who lay the blame for degraded ecosystems at the feet of the free market-based capitalist economic system. This view misses the point. Capitalism and free markets are very good at allocating resources and achieving efficiencies in the presence of economic incentives. It’s the values we assign within the free market system that determine the economy’s course – sustainable or not. By properly accounting for externalities (read: providing sustainability-based economic incentives to businesses, such as a carbon tax), managers and investors will allocate resources accordingly. Those incentives form the foundation of thinking beyond CSR checklists and can drive a new era of imaginative, sustainability-based innovation.
It’s often said in the context of personal development that we have to let go of the person we were in order to become the person we should be. Embarking on the next phase of sustainability requires the economic equivalent of a personal epiphany – “letting go of the old” – and unleashing a new wave of innovation based on natural principles.