This month HBR publishes an article by the global head of the consulting firm McKinsey & Company on “Capitalism for the Long Term.” In it we learn that companies need to adopt a long-term perspective, which is defined as five to seven years. What? Business leaders should address environmental and social issues for stakeholders, in order to create shareholder value, using a five- to seven-year time-frame? To quote Bill McDonough, such near-term thinking could in fact be pernicious as it only shores up a failing system.
Setting five- to seven-year targets to incrementally reduce CO2 emissions may be wholly insufficient for an energy-intensive business given the stated objective of the world’s scientific community to cut global CO2 emissions by 85 per cent by 2050. Water use, waste, chemical toxicity, and biodiversity loss demand paradigm changes in how business is conducted. So does global poverty. Tweaking existing business models and product designs – by making them only a little less harmful – will only delay needed change and, equally importantly, forego business advantage to companies who are willing to pursue game change. The challenge is for businesses to succeed in the short term with sustainability objectives that make sense in a 150-year perspective. The key is to embed sustainability through innovation.
In our new book, Embedded Sustainability: The Next Big Competitive Advantage, we show what it takes for business leaders to incorporate environmental and social performance into core business activities without trade-offs. Here are three key ideas from the book. Ask “heretical” questions to drive sustainability deep into the core business in ways that create even more value for customers and investors. Focus on opportunities to provide profitable solutions to environmental and social problems, not just on doing less harm. Rethink your business model in order to profitably meet the needs of underserved and low-income consumers, not just to sell “green” products in your legacy markets.
A floor-cleaning company that uses only ionized tap water with no chemicals, a cement company that captures CO2 instead of emitting it, buildings that are net generators of energy, fingerprint-enabled phones that act as bank branches in Africa … the possibilities are endless.
What if sustainability was embedded into the DNA of your organization?
Chris Laszlo & Nadya Zhexembayeva