Rising above the clouds of uncertainty

Isn’t managing Risks the most haunting concern of any entrepreneur? Uncertainty and its effect on objectives are the daily sweat of any person managing an organization towards goals of any kind. We live in a world full of uncertainty and the business environment is as volatile as ever. Therefore, how much would you like to have an approach that helps you to rise above such hell of a stress? I have one to suggest: it’s called Embedded Sustainability. What is it?

Let’s say what is is NOT, first: it is not becoming an environmentalist. If you are an entrepreneur or an executive, your responsibility is to run your business in a sustainable way, not to become the knight of polar bears or a tree-hugger. With all due respect for people whose mission in life is as such. It’s also NOT paying a lot of money to PR agents in order to build a reputation of being good with your public. That’s why I always say to anyone willing to listen that on the journey to Sustainability reporting comes very LAST.

Now what IT IS. As a person with the responsibility to run an organization that has to sustain itself without sucking-in taxpayers’ money, to pay wages and salaries that support families and your community, to match some of the Needs of your Stakeholders, you have to embrace something else: the three pillars of Sustainability:

Environmental Stewardship, generation of Economic Prosperity and of Shared Social Value.

Oh wow, that’s great. Now what? Indeed, when you are not so much into the discourse around Sustainability it is not granted that you know how pragmatic it is. As I said, it tends to be confused with “being good”, which it is not. That’s why I have made this video to state what a good start on the journey to Sustainability is without a chance of misunderstanding. Sustainability is a strategic approach to running a business which tends to:

1 Pay for itself

2 Generate excellent ROI

3 Strengthen the business social and market position

Let’s be clear: businesses don’t have to justify that they need to make profits in order to survive. It would be like justifying that human beings have to breath in order to live. A business that does not generate profits is UNSUSTAINABLE, point. It does not matter how “environmentally friendly” are its products or services. Sustainability entails the profitability of a business. And more.

From the Bruntland Report 1987 on, the World is interrogating itself about how to generate prosperity today, without hindering the possibility of future generations to live themselves in health and prosperity by an excessive exploitation of non-renewable resources and degradation of the ecosystem. Since political leadership has unfortunately deteriorated both in terms of ethics and competence, while the business world has taken on the power of shaping the society we live in, the responsibility to set the situation right rests on business. Despite all the excess of greed that still lingers, such goal can be achieved, without sacrifice in quality of life and the long term prosperity of society.

One of the fruits of this reflection on how to secure a future to our children and grandchildren is the Sustainability concept. Enough of history, though! Let’s just get back to how pragmatic it is. Entrepreneurs are by definition people who “organize the factors of production” and generate value through them. They do this by setting up structures and processes, “Companies” or “Corporates”, i.e. “artificial living beings” that don’t exist naturally in the ecosystem. Now, as I have described in my 2015 book Sustainable Leadership, for the corporation to rightfully exist it has to satisfy one essential condition: it has to match at least some of the Basic Needs of its Stakeholders and NOT harm any single one. Among such Stakeholders are, just to name some: the environment, employees and workers, customers, the local communities they impact and serve, shareholders and so on.

Sustainability is the compass that steers organizations safely through the challenge of matching the requirement just described and keep it alive and well in the long term. It is only by managing according to the three pillars that a Company can operate in the best interest of all and be safe from the pitfalls of shortsightedness. The history of business is full of examples where focusing on money and the short term has led to disaster in the long, likewise when executives focus on maximizing the quarterly share value and Companies die away due to lack of investment in R&D. Or when environmental or workers’ safety is neglected and it ends up in massive damage liability (remember Deep Water Horizon?). Or when governance is “deeply flawed” (let’s say it mildly) and the business ends in ruin (Enron, to name just one). The list is long and we might add names of any size, because un-sustainability is a plague that does not spare any category of organization, when they are poorly managed.

So Sustainability is pragmatic, in a first meaning, by the fact that if you manage to ESG best practice standards, that are today quite widespread and structured, you can achieve an effective Risk Management regarding some of your larger operational risks. It gives you hints and guidelines on how to manage in relative safety. If you take into account some or all the SDG goals you can assure a stronger “Social License to operate” because you collaborate to make human society better. But, honestly, ESG and SDG are just the ABC of an Industrial Sustainability Strategy.

The second meaning is much more exciting! If you take on Sustainability as the driver of your business decisions you shift paradigm altogether, and make it the tool to improve the performance of your organization dramatically. You become so dramatically innovative that you walk constantly many steps ahead of your competition. What do I mean? Let’s take just the example of “Zero Waste“, a typical Embedded Sustainability strategy.

When I studied Sustainability at Harvard, I learned the best definition of waste: “Squandered Corporate Assets“. SCA means that something you have paid for as “input” in your processes goes out as an “output” that doesn’t generate a revenue stream. Rather, it often generates a cost stream, because it has either to be treated, or is something that your Company is going to be blamed for, a pollutant. When it does not present immediate threat to the safety of your people or the surrounding community. Therefore, aiming at “Zero Waste” has nothing to do with “being good”: it is the sound reasoning of a clever entrepreneur who wants to cancel a loss from his/her budget and make of every input a source of profitable outcomes.

Examples? Here we go: COVESTRO, not a tiny Company, is running an experimental plant that captures the CO2 emitted by its processes and uses it as raw material for a foam that is excellent for mattresses (forgive the non-technical language: it’s not my field). TATA Steel and Sheffield University are working on a system to turn algae into biofuel by feeding them with CO2 from the melting process (forgive again…). INTERFACE is going through a complete change in its business model by providing “flooring services” instead of selling carpet tiles, which, together with the development of a technology that allows the 100{f62d5d00145dc1761a46bb3b9876f4fb2b6782fa0e48784c716da9a8908fe5e5} recycle of its used products, will eliminate waste from landfills and provide cheaper second-life raw material. BTW Interface is making huge extra profits from its Sustainability journey started in 1995!

None of the above Companies is yet 100 percent Zero Waste, or impact. No human being is, except maybe for the native tribes, whom we call “underdeveloped” or “primitive” but for whom we should rather learn a lot in terms of (not only) Circular Economy. However, such examples serve to see that making the best use of matter, aiming at the best Carbon Productivity to name a project, or becoming proactive in term of climate positive influence – see Interface TAKE BACK program for a lead – are strategies worth considering of sound business logic.

Wouldn’t it be great if you could sell your waste to another Company as raw material? Or if you could, say, grow biomass on your waste stream and sell it as feedstock, or basis for a biofuel refinery, or a bioplastic maker? Or altogether stop using toxic cooling liquids to disperse the heat from your processes because you have innovated them, saving a lot of money? Think systemic, think Circular Economy: as I said in a previous article “Think Eco-system” if you want to run a successful business. Sustainability, keeping your and your people’s thought stream within the guidelines of Environmental stewardship, generation of economic prosperity and shared social value, helps you:

• Develop and keep focused on a Vision

• Manage the “day to day” effectively to achieve the Vision

• Stimulate the most intense disruptive innovation

• Get the best out of your Stakeholder

• Provide the best for all of them, within your responsibilities

In order to achieve such goals Sustainability has to be Embedded into every single process of an organization, while Sustainability Objectives and Programs have to be fully integrated within the core strategies and decision making processes, with equal dignity (i.e resources and power) as any other element, e.g. Finance, Production, Marketing, Sales, HR etc. Finally, it needs an environment where creativity and the full expression of the human potential are encouraged, thus a lot of work on the quality of Leadership and Organizational Culture. Well: maybe not an easy, done-in-a-day task, but certainly one that is worth pursuing.

Let me know if the article rings bells: if you want to deepen the talk, and explore the possibilities offered by Embedded Sustainability to your Organization, just drop me a line and we’ll get in touch with you ASAP

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