The heart of sustainability

Ultimately, sustainability can only be built on the transformation of human character. The brilliant John Elkington did a great job by presenting three dimensions of sustainability – economic, environmental and social (people, planet and profit). Its becoming ever more clear, that the myopic pursuit of economic sustainability alone, is ironically, unsustainable. Or to put it another way, its getting hard and harder to make a buck for most people. Our economic systems are getting more and more complex and encumbered by their own dysfunction. And consequent erosions of social and environmental systems compound the dysfunction.

The iceberg model

Sue Knight’s iceberg principle indicates that the behaviours we get (what people say and do) is determined by what is below the surface (purpose, identity, beliefs, values and capabilities). You can’t change behaviour sustainably without changing the sub-surface drivers. I have road-tested this model over the years with observation of human behaviour (including my own) and I find it it be very useful. The remainder of this blog is predicated on the iceberg as an excellent model of human behaviour. It is applied here not just for explaining individual behaviour, but also for the behaviour of collectives, such as corporates. If your not convinced, you can exit here or maybe comment on the validity of the model.

The fractured iceberg

Where sustainability behaviours artificially overlay a conventional culture of myopic profit pursuit, the iceberg is fractured. The old “beneath the surface factors” aren’t compatible with true sustainability and the resulting behaviours include green washing and reputation-mending. I suspect that even overlaying the more enlightened strategy of sustainability as a competitive advantage will not be truly sustainable until the sub-surface drivers change. Internal forces will continue to generate company behaviours compatible with the old drivers.

The sustainability iceberg and transformation of character

True sustainability will naturally emanate from below the surface sustainability drivers such as those in the diagram below. Motives of extraction and exploitation will be supplanted by those of contribution and service. (The examples of purpose, identity, values, beliefs and capabilities used here are arbitrary and could be replaced by others.)

The drivers that underpin sustainability will translate, over time, to the transformation of character. But can we change? We definitely can! For eons, humanity has been driven mostly by survival drives (see my blog on The End of Empires). When the survival drive is our default mode, more elevated and altruistic expressions of character, innate in humans, are suppressed.

As more of us begin to see that our ancient embedded drives are actually counter-productive, and compromising our survival, I believe we will refine our character and generate sustainability drivers for the benefit of our businesses and communities. An exciting prospect is the reinforcing nature of this virtuous cycle. As we improve character, a more sustainable environment is a more compatible ecosystem to work and live in. Over time, we learn that sustainability is in our self-interest. As we reach a tipping-point where these drivers become more common, there will be multiple unintended beneficial outcomes.

The evidence.

So does this sound too optimistic? I believe there is strong evidence to support this position. In the interests of brevity, here are two examples.

Jeremy Riftkin’s RSA Animate video anticipates “the empathic civilisation”. He argues that we are wired more for empathy than competition.

There is a rich vein of evidence that a more human focussed approach to running business generates better outcomes than older command and control models. A recent paper from the Maritz Institute posits that “Outdated beliefs about human action and interaction hold us in a transactional model of engagement.” Their paper links “the new normal” to a enlightened understanding of human drivers and interaction. These support better stakeholder engagement and (I would add) sustainability.

“A new framework for stakeholder engagement is needed … a framework anchored in the latest research relative to human drives and behavior. The goal of this framework is to create better business results that, at the same time, enrich stakeholders in ways that are most meaningful to them. It is about building a win-win proposition … Better Business. Better Lives”. (from The Game Has Changed, Maritz Institute)

Let me know if you think we are on the road to achieving this – or not.

Sustainability – what’s real?

There are a belwildering array of sustainability ratings – but what do we believe? How do we know they are measuring and evaluating the right things?

In their Rate the Raters documents, SustainAbility identified over 50 sustainability rating agencies. SustainAbility will offer insights into how credible each rating system is, but I suspect that many imponderables will remain.  For example, in part two of the study, the Dow Jones Sustainability Index was ranked highest in credibility by the study’s participants. But in his article titled, When Pigs Fly, RP Siegal noted with incredulity that Haliburton is now listed in the Dow Jones Sustainability Index.

Here are two reasons that determining a company’s sustainability will remain problematic:

• the bureaucratisation and commercialisation of quality processes
• determining sustainability

 The bureaucratisation and commercialisation of quality processes

In the galaxy of organisation endeavour, sustainability reporting can be regarded as a quality measure. For example, while the ISO 9000 series deals with operational quality matters, the ISO 14000 series deals with environmental management. While ISO 14,000 may not be classified as sustainability reporting, it serves the same purpose, in that it provides third party assurance of a quality measure.

I like Tom Peters perspective on quality. He quotes Richard Buetow, a Motorola executive.

With ISO 9000 you can still have terrible processes and products. You can certify a manufacturer that makes life jackets from concrete, as long as those jackets are made according to the documented procedures and the company provides next of kin with instructions on how to complain about defects. That’s absurd.

Where quality processes are formalised, they can divert resources from the product or service itself. Any product or service will justify a finite amount of resource input, so ideally, any quality process will add value equal to or greater than its cost. Too often, compliance-driven quality processes militate against quality as they divert resources away from product or service delivery. This is a big issue in service delivery sectors such as education and health. When teachers spend more time on quality assurance processes, they spend less time on preparation for delivery. It may be that, unless there is a compelling reason to get third party assurance, that resource is best invested in enacting sustainability aspirations, rather than measuring them.

 

I’m not arguing against quality processes – but I am stressing that they have to add value. Sustainability reporting processes will add value to the economic bottom line where there are game-changing benefits. For example:

• a supplier demonstrating conformance with a client’s ESG (environmental, social, governance) standards to ensure continuance of business
• securing a listing in a sustainability index
• remediating reputation losses.

But unless there are clear benefits from quality process third party assurance, why bother?

BP’s gulf oil spill illustrates this issue. Along with Shell, BP scored consistently highly in GRI (Global Reporting Initative) reports, and I believe the company’s leaders had, and have, genuine sustainability aspirations. BP invested a lot in rebranding as “beyond petroleum.” But the gulf oil spill incident has undone a lot of the energy BP had invested in sustainability initiatives. What the GRI couldn’t assess, were complex embedded processes, such as the quality of engagement between BP and its suppliers, and the impact of budgets and deadlines on safety and operations.

Commercialisation

No doubt ratings agencies are also well motivated, but budget pressures will typically create pressure to grow the business and perhaps make processes than they need be. SustainAbility’s Rating the Raters cites commercial pressures as an impediment to more transparent report, partly because the raters are paid by those being rated.

Determining sustainability

Part two of this blog will explore what sustainability means in different industries, and from whose perspective.

Excellent sustainability videos – Adam Werbach

Here is a great Harvard Business video featuring Adam Werbach, global CE of Saatchi and Saatchi. He talks about a psp – personal sustainability plan – steps that each of us can take.

The long twilight of hunter-gatherer capitalism

The firestorm that raged through finance and other companies over the last few years exposed the deficiencies of the current brand of capitalism. The naked greed and short-term thinking that characterised much of commercial world was over-looked as consumers enjoyed a bonanza based on the cornucopia of cheap finance.

But as we stand surveying the wreckage, with hindsight, more of us can see the flaws in the system. In the March 2011 Harvard Business Review, Dominic Barton, of McKinsey and Company identifies three areas to create a more sustainable and kinder capitalism:

1. fight the tyranny of short-termism
2. serve stakeholders and enrich shareholders
3. act like owners

Short-termism

The equities markets have developed a hummingbird metabolism. Barton identifies that “roughly 70% of all U.S. equities trading is now done by ‘hyperspeed’ traders – some of whom hold stocks for a few seconds”. This is hardly the basis for a long-term company-investor relationship. When oil prices peaked at $US140 a barrel, for every barrel of oil consumed in the U.S., 100 were being traded. These short-term market signals generate short-term management thinking, pursuing favorable quarterly results rather than longer-term thinking. There are encouraging signs that the lessons are being learned and some companies are refocusing on longer timelines.

Serving stakeholders

Barton’s article confirms for me that the stakeholder focus is now becoming mainstream. Capitalism is in the twilight of its hunter-gatherer phase, as companies learn to focus on more than the singular pursuit of profit.

“In 2008 and again in 2010, McKinsey surveyed nearly 2,000 executives and investors: more than 75% said that environmental, social, and governance (ESG) initiatives create corporate value in the long-term. Companies that bring a real stakeholder perspective into corporate strategy can generate tangible value even sooner”.

The transition from hunter-gatherers to corporate farmers will see companies becoming more embedded in the communities they serve and more relevant to them. There are two reasons that this has to happen – the first is that the predatory relationships in places such as the supply chain are unsustainable. And the second is that the public, over time, will become more insistent for ethical and sustainable corporate behaviour.

More on predatory relationships

Lets consider the chocolate industry. A BBC Panorama documentary exposed the widespread use of child slave labour in West African cocoa plantations. And the small farmers who actually grow the cocoa are paid so little, that marginal profits are forcing them to look elsewhere for income.

So the chocolate you eat, could have been produced by slave child labour. As the world is increasingly interconnected, this is an issue from every one in the supply chain, from the farm labourers, to the end consumer. Fair Trade chocolate overcomes this issue, by establishing labour and environmental standards, insisting on schooling for children and setting fair prices insulated from market fluctuations. Large chocolate manufacturers, such as Cadburys are including Fair Trade chocolate in their offerings. They are limited by supply. So the big challenge is to move as much chocolate production as possible to the Fair Trade model.

This is more than a moral issue for consumers. It is also a security and economic issue. The largest chocolate producer, the Ivory Coast, continues to be embroiled in conflict. Impoverished conditions are the culture for the conflict germ. We are all stakeholders.

Act like owners

Barton’s third point encourages organisational leaders to act like owners to engender a longer-term focus. This includes more commitment from board members and more sensible CEO pay. I recommend his article.

Challenging assumptions

Going deeper, we need to challenge the assumptions that drive hunter-gatherer capitalism. These are revealed in the language of capitalism. For example justifying a dodgy business deal with the phrase “business is business” tells us that business defines its own rules and is not answerable to broader public sentiment. In a stroke of brilliance, John Elkington coined the phrase, “triple bottom line” – a discursive tool that eventually will see the phrase “the bottom line”, with its implicit dominance of the profit motive, fade from prominence in business discourse.

Of course, hunter-gatherer capitalism is ably supported by (up until recently) unbridled consumerism. I would like to explore the relationship of these two bedfellows, but I will leave it for another post.

And I am not saying we need to abandon chocolate. But if we eat a little less, and pay a little more for Free Trade chocolate – we will all be better off!