Corporations und Rio+20
Approaching sustainability from an Operations perspective (‘inside-out’) is the key to realizing untapped potential in economic and societal value creation. Only when sustainability is viewed and executed from a core business perspective, we will see large scale adoption of sustainability across industries.
Today ‘sustainability’ is often providing only a ‘warm and fuzzy feeling’, rather than delivering real results.
As we are approaching the Rio+20 conference in June 2012, there is no shortage of proclamations how important it is to progress in the area of sustainability. Public appeals come from governments, non-governmental organizations and corporations alike. At the same time, it is interesting to see that the general public does not recognize corporations as the main drivers of a green economy going forward.
This paradox is also true when it comes to the internal perspectives of sustainability within corporations. Many corporations have embarked on the sustainability journey driven by external pressures from interest groups or due to corporate scandals. As result, the majority of current corporate social responsibility (CSR) activities reside in public relations and/or marketing departments. While it is a first good step to publicly commit to CSR, it falls short of meeting expectations for sustainable value creation and lasting results. In essence many CSR efforts are not really backed up by practices in the day-to-day value chain operations. As result corporations have been accused of ‘green-washing’, where disconnects between corporate sustainability statements and lack of transparent execution became obvious to consumers and interest groups. Contributions to charity and reduction of the CO2 footprint are often seen as sufficient scope of CSR. Even more severe, many initiatives provide only ‘a warm and fuzzy feeling’, rather than delivering tangible and measurable results.
Confusion about definitions prohibit real progress
Currently there are as many interpretations of the term sustainability as there are people discussing it. The result is more confusion than clarity. It is very important to clarify terms and agree what you want to accomplish. Since the public definition of sustainability of the Brundtland Commission in 1987, several other definitions have emerged.
I attended the kick-off event of the German Ministry of Labor and Social Affairs in late April 2012. The purpose was to launch the implementation of the German CSR strategy across a broad base of small and medium sized enterprises. While there was great interest amongst the 200 participants, the panel discussion fell short in addressing CSR as part of the core business. Stressing the point that CSR efforts need to be ‘voluntary’, does not necessarily help to get private sector corporations to become proactive leaders in economic and societal value creation. In Germany’s landscape of small and medium sized businesses, the prevailing understanding of CSR is encompassed by supporting a local charity and treating workers well. There is no understanding yet, that sustainability is embedded in all processes of a corporation and its touch points to society.
To resolve this perception and to tap into the potential of economic and societal value creation, sustainability needs to be part of the core business. A definition that is inclusive of the global value chain scope, could be the following:
To achieve profitable growth and maintain economic, societal and ecologic integrity corporations need to move sustainability into all aspects of core operations (from strategy to execution and covering the value chain from supplier to consumer)
This definition encompasses all practices that provide economic and societal value. It transforms sustainability from context to core business and from a cost to a value adding activity.
Leaders emerge across industries
A number of organizations have already understood how to turn sustainability into a competitive advantage. Food giant Nestle has embedded economic and societal value (Shared Value) in the corporate strategy and provides a consistent breakdown through all levels of hierarchy and departments. Puma, the sporting goods company, wants to be the most desirable and sustainable consumer sports brand, internalizing all environmental cost of doing business. These proactive companies will define the future markets, tap into new customer groups and protect the future.