It’s an irony of these times. Some companies are hitching their future, at least to some degree, to the value propositions opened by embedding sustainability into their business: Autodesk, Interface, Nike, Levis, Steelcase, SunPower, to name a few. Others continue to view pursuit of sustainability as an unacceptable cost — still thinking in terms of minimizing the damage, still hoping that green wouldn’t cost too much more, still blind to the game-changing power of open-data and the Internet of things. Some oscillate, confused, between both camps.
Academics, who bring a necessary rigor to the entrpreneurial advocacy that many (including consultants) can fall prey too, often also bring an innate skepticism. At the sustainable supply chain conference I recently participated in at Wharton, more than a couple of professors expressed that skepticism, maintaining that their research shows little if any correlation of sustainability performance and business performance.
No doubt many of us are skilled at seeing what we want to see, or are used to seeing. Nonetheless, it seems to be my job to keep calling this to consciousness — to demolish the pervasive, latent assumption that there’s any necessary conflict between economic performance and environmental performance, and to challenge the flawed analytics and mental habits that keep that assumption in place.
(It reminds me of the old joke about the economist walking down the street with his granddaughter. “Look Grandpa,” she says, pointing to the sidewalk, “someone dropped a $20 bill!” Unruffled, he responded, “No dear, it’s not really there. If it were, someone would have picked it up already.)
There are multiple approaches to measuring sustainability* value:
- incremental improvement against a business-as-usual baseline, with each measure tested individually against specified ROI targets or capital hurdle rates (the most common approach, and the least powerful);
- portfolio approaches such as SAP’s, with hurdle rates applied to the portfolio as a whole rather than individual measures;
- considering ancillary value, such as Jones Lang LaSalle’s consideration of the impact of energy savings on the capital value of real estate;
- monetizing and evaluating “externalities,” as Puma has done with its “ecological P&L”;
- integrated value, such as Rocky Mountain Institute’s “tunneling through the cost barrier” analyses;
- intrinsic business value, displayed in our current work with two confidential clients, where the “ecological lens” discloses value opportunities that are inseparable from business processes, to the benefit of both.
Against this framework, looking for the business case may not be the strongest approach a business leader can take. “If you can show me the business case,” Bill Gates notably said, “you’re too late.”
In other words, you don’t get business strategy from a business case. Analyzing the business case can be useful to test and refine strategy. But a good business case doesn’t come from analysis. It comes from vision, courage and embedding the laws of nature at the heart of enterprise.
* I’m not happy with the word “sustainability.” As Michael Braungart is fond of observing, you wouldn’t brag that your marriage was “sustainable” — how boring! But it seems to be the word we’re stuck with for now. So please remember that when I use it — or when you use it — we really mean “protecting and enhancing the regenerative capacity of earth’s living systems, and our ability to ‘love all the children of all species for all time.'” (That just doesn’t flow quite as trippingly off the tongue.)