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What’s really the matter? Materiality, Money & Value.

One big idea: In their otherwise excellent HBR post, “Sustainability In Financial Services Is Not About Being Green,” Robert Eccles and George Serafeim may have missed the elephant in the room. They rightly say that “The next time we hear about a bank or insurance company’s ‘green program’—like using energy efficient light blubs or operating out of a LEED Platinum building—we’ll either scream or throw up….[because] these issues are simply not material to the sustainability of the institution itself.”

What’s material? “Their performance on social and governance issues.” Well, yes, since these go to fundamental issues of trust in an industry whose business is all about trust—trust which has been deeply damaged in the last
five years.

But this industry is also in the business of investment—that is, of both providing capital and managing risk—which makes its performance on environmental issues deeply material as well. No, not the performance of its buildings. What’s far more important is the design of its underwriting standards and the performance of its investments. How does a financial institution balance its investments in the old energy economy of fossil fuels and climate disruption with the new energy economy of efficiency, renewables and distributed generation? How does it consider the impacts
of climate, toxicity and biodiversity risk on its investments in businesses, real estate, and markets? How does it protect its own financial sustainability through active policy initiatives that are consistent with its ESG mission and goals.

Social and governance issues are critical as well. But as with all sustainability matters—as with all strategy discussions —materiality must begin with the most fundamental question of all: “What business are you really in?” (Not “what is the thing you sell or the transaction you transact?” but “what is the real underlying value you deliver to your customers?”)

That’s the key that opens the door—for every company and industry, not just financial services.

Tweet of the week:  Forbes: Fracking as an “inherently unprofitable” Ponzi Scheme – a whole new perspective on the XL Pipeline ow.ly/kZOWs

Opportunity: Natural Logic focuses on building substantive business, societal and environmental value. How? With a deep, challenging and powerful process of systems design that may challenge you to rethink your value proposition and business model, as well as your sourcing and operations. Learn more here.

Events: Join me tomorrow for “Making Change Irresistible” at the Spring of Sustainability series; and in less than two weeks at Sustainable Brands,where I’ll  co-lead a pre-conference workshop on systems thinking and moderate a session on  “Radical Optimization: How the Internet of Things, 3D Printing and Innovative Data Analysis are Transforming
Manufacturing and Supply Chains” (register with discount code NATLOGICSB13 for 20% off!). Just added: I’ll be keynoting
Sustainability Applied: Unlocking Hidden Value
in Toronto this fall. (Here’s how you can book me to keynote your next conference or company event.)

With best regards,
Gil

Gil Philip Friend
President & CEO Natural Logic Inc. | Building value at the intersection of profit, brand, risk and purpose.
Tel: 1-510-248-4940 | Cel: 1-510-435-6346 | Skype: gil_friend | Blog | LinkedIn | Twitter | About.Me

PS: You may have a great sustainability team, and a great manager or team captain. But to truly excel—at a big enough game—it may be time for you to bring in a winning coach!