It’s as if the concept of globalization has suddenly put a boundary on what was previously considered an infinite amount of reserves for natural resources and social mobility.
Trends in contemporary human social dynamics, as well as global environmental disenfranchisement have stripped Earth’s once abundant canvas and cluttered it with debris, overexploited resources and placed a spring between the gap of rich and poor, thereby perpetuating inequality throughout the world. As climate change threatens the natural environment, as grassroots revolutions spread democratization throughout the world and as technological innovation continues its rocket-propelled uprising, it becomes naturally apparent that the barriers once dividing us are diminishing and that the world is more connected than ever before. Yes, geography still matters, yes-cultural differences are under appreciated and stronger than global homogenization, but never before have so many pieces of Earth’s puzzle been attached in such synchronicity. Never before has the threat of an isolated event held the potential to trigger dominos to fall throughout the world. Think of how the collapse of the Lehman Brothers almost brought down the world’s financial system. So rather than lessening the private sector to its traditional reductionist template, the time has come to recognize it as a holistic entity.
Sustainable Business Development (SBD) is about transformation. In a historic sense, the private sector first operated as an autonomous entity with a maxim of short-term profit maximization. Initially, there were no social or environmental concerns and private enterprise was driven by economic and market forces. This was the Gilded Age and Progressive Era as the industrial world flourished and tycoons like J.P. Morgan, Rockefeller and Henry Ford inundated their bank vaults. These moguls turned the distribution of income equality upside down in much the same way as has occurred with the recent global recession— Great depression, great recession, J.P. Morgan, Goldman Sachs, Lehman Brothers… it’s quite the comparison. At least Andrew Carnegie spent much of his large profits on funding public institutions. And that’s the key— promoting social good.
In his first term, Barack Obama mirrored Teddy Roosevelt’s New Nationalism speech in Osawatomie Kansas, calling for reformation to curb the concentration of income away from corporate greed and corruption and create a more fertile economy with a stronger middle class. FDR created the New Deal and precisely between the recessions of the 1930s and early 2000s was the Glass-Steagall Act which prohibited investment banks from engaging with commercial banks. As Glass-Steagall was propagated during the Great Depression it restructured the market amongst many other factors and its repeal in 1998 under the Clinton administration came at the assumption it was ‘outdated’- however, the subprime home loan bubble burst just a decade later after investment banks reached a tipping point in their re-fraternization with commercial lenders, slashing interest rates and gambling away their artificial margins at failed hedge funds. Under both historical recessions corporate capitalism was at its highest. Tax rates for the rich were at their lowest and big business was overly interwoven into politics. This kept the heart of the economy immune from the risks of Wall Street investors. As regulation promulgated the private sector, businesses were required increasingly to overcome purely market driven forces due to newly enacted obligations of regulatory compliance. This later evolved into social accountability, waste management and pollution prevention as business operations became ever more transparent. Social pressure accumulated and the value of private sector reputation rose as news headlines were continuously filled with environmental disasters— Agent Orange, DDT and the numerous large oil spills of the late 20th century. The concept of eliminating problems instead of managing them was born. This newfound consumer awareness crafted the stage in market evolution for SBD.
As markets globalize there is increasing pressure on the private sector to integrate sustainability into their business paradigm. This transformation often requires businesses to implement changes that warrant unwanted immediate profit sub-optimization. Profits are the lifeblood to the private sector and this short-term thinking is often an inconvenient roadblock keeping businesses from both maximizing ‘long-term potential and operating as a sustainable enterprise’– the two are interconnected. It’s as if by being a good person you both make the world a better place AND make yourself a better person. There exists a specific point of optimization where an enterprise can achieve its highest rates of return— as social and environmental unrest thrashes throughout both the developed and developing worlds, implementing strategies that optimize profits with social and environmental good have become the mantra for creating success in the midst of an evermore-borderless market. It’s as if the concept of globalization has suddenly put a boundary on what was previously considered an infinite amount reserves for natural resources and social mobility.
However, we are running off the edge of a cliff.
Integrating SBD requires visionary leadership as well as active bottom up contribution. It is expanding the here and now to the future while maintaining an integrated vision between top tier management and employees. This requires having the right players to supplement leadership decisions that accommodate long-term strategies with daily procedures. SBD requires management to think ahead of the curve, preemptively seeking opportunities before the market forces action.
Think about it— As hockey legend Wane Gretzky put it, “A good hockey player plays where the puck is. A great hockey player plays where the puck is going to be.” This visionary leadership masters the art and science of achieving appropriate short-term results while strategically positioning the business for long-term opportunity.
As previously stated, the private sector has entered an era of unprecedented connectivity in the midst of globalization. This synchronized landscape has positioned the private sector with an equally unprecedented amount of influence and opportunity. In order to seize these advantages, leadership must gain conscious awareness of the full-spectrum concerning social, economic and environmental components. Implementing SBD is in-effect a renovation from the traditional “supply and demand” management systems to sophisticated frameworks that are focused more on value creation and social responsibility. The value creation and concurrent risk mitigation inherent to SBD are the key driving factors to long term and sustainable success.
Developing new capabilities is critical to sustaining competitive advantages. The postindustrial market has become the setting of a technological revolution. This era has enhanced the pace of evolutionary change— the front-running opportune leaders that kept ahead of the curve by imposing their own revolutionary changes have been rewarded with unrivaled success. Think of Apple, Microsoft or Google. These success stories explain how human intellectual capital is more important than ever. As developing countries become industrialized and enhance their relative prosperity they will require the consumption of more and more natural resources. The status quo of prosperous living must find an alternative way to fuel its energy consumption because there are simply not enough resources in the world to continue this trend.
This era in human history is therefore begging for even more innovation. The private sector has never seen a more opportune time to implement SBD. The best way to do things better is usually to do them differently, therefore, both the transformative and transitional innovations inherent to SBD provides fertile soil for business leaders to integrate holistic principles that provide both business opportunities and social and environmental betterment.
SBD encompasses big picture thinking. It’s getting outside of the box and standing on top of it— The market forces resultant from people, planet and profit (Triple Bottom Line) take on a more responsible business approach that considers both upstream and downstream implications of business interactions. By connecting supply chains to value chains the private sector steps out of its traditionally internal paradigm and extends its business practices and principles to external relations. This creates an inclusive environment where all business processes whether explicit or implicit are accounted for and opens up a dialogue where there is more room for growth, social betterment and long-term environmental prosperity. Strategically arriving at this position can build shareholder confidence, customer knowledge, external trust, and market acceptance. The additional intangible competitive advantages such as enhanced reputation, value creation and mitigated risks are the fundamental outcomes of SBD implementation. This holistic framework recognizes the interconnectivity of man, his neighbor and his environment.
The private sector has an obligation to take the responsible preemptive actions for risk mitigation that maximize value while protecting social and environmental resources. These terms serve to satisfy both external and internal expectations of society and its shareholders. The risks of not implementing SBD include numerous vulnerabilities including increased litigation, lagging behind the curve for regulatory compliance when new mandates or directives are enforced, restricted market potential, limited community support, damaged reputations, higher costs and lost shareholder value.
SBD is about realizing the objectives of the short term without sacrificing the prospects for the future. The whole world is connected; the biosphere, the economy and humans. Therefore, everyone shares responsibility for the present and future well being of the world. The purpose of a business is not just to increase shareholder value; it is to maximize the value derived by every entity.
“We cannot live only for ourselves. A thousand fibers connect us with our fellow men; and among those fibers, as sympathetic threads, our actions run as causes, and they come back to us as effects.”- Herman Melville