Sustainability in Business for Corporate Longevity
Originally published on October 26th, 2020 on https://theshift.fi/building-a-living-company/
How do you imagine the world 10 years from now? It’s October 27th, 2030. Are humanity, technology and nature in balance? Are we thriving as a society? Did we take time to refine and rebuild our systems to create regenerative economy? Have we overcome the challenges of climate change? Did businesses and governments collaborate to beat the global pandemic of 2020? Or did we take short-term decisions, leaving us divided, fighting for limited resources?
There are many possible futures and the great news is that the future is yet to be written! We
hold the power to unlocking the opportunities provided to us by the big world challenges we are facing. What are the actions each of us needs to take to build a more sustainable world? Are we equipped with the knowledge and skills to do that?
Scenario planning is one of the most common tools of Strategic foresight and helps us imagine what the future may look like, based on trends and driving forces we see emerging today. We talk about the future in plural, because it hasn’t happened yet and there are many possible versions of it.
Thinking about the scenario where we found a vaccine and our economies recovered quickly, made me reluctant to think of it as “the best case” scenario.
I recently worked on a set of post-pandemic scenarios. Thinking about the scenario where we found a vaccine and our economies recovered quickly, made me reluctant to think of it as “the best case” scenario. Sure, I hope we emerge from this crisis as soon as possible but I am worried if we have learned our lessons. We would go back to our old ways and systems, which were not sustainable and healthy.
So, I challenge businesses to think about what their main purpose for existence is.
Is your company here to produce a specific product or deliver a service? Is it here to make money? Or is it here to serve a specific purpose within a community, while being profitable and also supporting the resolution of world issues (like one of the SDG, for example)?
50 years ago Mr. Friedman’s doctrine appeared in The New York Times. It stated that the sole social responsibility of a business is towards its shareholders. He received a Nobel Prize in Economics for his work. This idea has since been widely discredited, of course.
We challenge businesses to think about what their main purpose for existence is.
We live in a Volatile, Uncertain, Complex and Ambiguous world. Our concerns are no longer just climate change, which is already a huge concern. We have wicked problems across social, technological, economic, environmental and political spectrum. Lack of social inclusion, widening inequality gap, nationalism, threats to our health, these are world issues that inevitably impact how we live and how we do business. Strategic foresight provides us with a framework to monitor trends across all of these and make sense of why they emerge and what they may lead to in the future.
The issue is that in 2020, we still organize our companies to serve the purpose of maximizing profits, which means we try to cut costs as much as possible, regarding employees or suppliers as a cost center and not an asset. (EoM 2020 forum) And that’s a “terrible way to organize our society and economies, Merely as a cost to be minimized.” (Colin Mayer, Peter Moores Professor of Management Studies at Saiïd Business School, University of Oxford).
Arie De Geus, who led the scenario planning team at Shell at the time when the company was nearing its 100th year anniversary, decided to look for successful companies who are older. He found around 30 companies and examined what made these companies successful. In my presentation, I will introduce you to the key traits of the so-called “Living companies”, which are also traits of strategic foresight. One of the key thoughts he had in regards to why companies fail was that often “companies die because their managers focus on the economic activity of producing goods and services, and they forget that their organizations’ true nature is that of a community of humans.”
In 2020, we look at business purpose from a completely different angle: “the purpose of business is no longer simply to maximize profits but rather to create value for all its stakeholders”. *( The Business Roundtable, a group of chief executive officers of nearly 200 major U.S. corporations, issues a statement with a new definition of the “purpose of a corporation.” Aug 2019)
Businesses are in some sort of limbo – stuck in old organizational systems, with old models of operations but in a new world, that requires them to take a wider responsibility – not just to shareholders but to all stakeholders. We struggle to sustain what makes money now, being incentivised, based on annual targets, while we have to also look for innovations that will take us into the future and make us successful and respected, at the same time considering the impact we have on lives and the environment.
Understanding, learning and acknowledging the impact our businesses have on the wider network of stakeholders, together with the immense power many corporations hold as their market capitalizations is higher than the GDP of entire countries, brings a new level of responsibility.
Consumers and employees hold companies accountable for their actions and have had enough of greenwashing. They demand transparency and sustainable practices and they will vote with their pockets to get those.
This realization has made us look for new economic and managerial models, which can help modernize the stale structures of shareholder interest driver businesses with some side CSR practices. It brings a large shift in what the corporate purpose should be and why profit can’t be the only driver of an organization.
Consumers and employees hold companies accountable for their actions and have had enough of greenwashing.
With that thought in mind, the chief economist of Mars, Mr. Bruno Roche started working on a new economic model called The Economics of Mutuality, which aims to create profit for company, people and planet. In this “win-win-win” situation, finance is in service of business, and business in service of people and not the other way around.
Could this be a sustainable way to practice business in the 21st century? Could your company adopt these practices? Could you put the planet and people in the heart of your corporate purpose, while getting a better profit and setting up your company to live longer?
This Economics of Mutuality encompasses 3 key areas:
Redefinition of corporate purpose
Measurement of performance / redefinition of profit
Education of existing and future business leaders
Could you put the planet and people in the heart of your corporate purpose, while getting a better profit and setting up your company to live longer?
In 2007, one of the board members of Mars Inc asked the question: “What should be the right level of profit?” 14 years later, we can answer the question.
In business, the time has come for us to start thinking and planning long-term and look outside of our immediate industry into the wider operating environment. We have no other choice but to build better systems and the disruption the pandemic caused has given us the perfect opportunity to do so. Strategic foresight is an excellent methodology to do that. It can help us peak into the future. And the Economic of
Mutuality is a great way to practice a more intelligent way of doing business, generating value for all stakeholders in this new future reality.