Business and Sustainability

Photo by Sillygwailo

Getting me agitated

I was sitting in class listening to two consultants, Anthony & Louise Lupi, who came especially to our course in order to introduce us to the overly-used term “Sustainability”. For a day and a half they tried to convince us, MBA students, that sustainability is the right and ethical way for companies to do their business. “The world is changing”, they said,” there is no more bottom line, today companies start to talk about the triple bottom line (TPL) – economical, environmental and social”. I guess that at this stage, my face transformed into the expression I do when I don’t agree with someone (my roommate used to hate that one when we were studying together). “Combining social with commercial create the outcomes of innovation, social outcomes and profit”. My agitation level grew.  But the moment they said: “Sustainability is a goal”, I knew that I did not buy what they were trying to sell.

Companies have one goal

I believe that companies have only one goal. Ask Eli Goldrat. Their goal is to make a profit for their shareholders. There is only one outcome for a company: profit. Now, don’t get me wrong. I think helping the community and the environment is important and great, but it is not an outcome or a goal of a company. It is a side effect, although sometimes, a good one.

Companies are good at making a profit. That is their comparative advantage. And that is what they should do. And again, this does not mean that the best way to make a profit does not change or evolve over time. On the contrary. I think the concept of profit is going through an enormous change these days (and I will elaborate further up ahead).

What did Warren Buffet had to say about that?

The Lupi’s quoted Warren Buffet saying: “Companies do not exist to make profit. They make profit in order to exist”. I agree. But I don’t think Buffet meant that companies should do good things because there are good. Vice versa, I think he meant that profit is the only test that will help a company decide if something is worth doing.

The problems with the term sustainability

I personally believe there are two problems with the term sustainability.

First, what does it mean? It means different things to different people.  As English is not my first language, and in Hebrew there is no real translation for this expression, while the lecture was in progress I opened my wordweb dictionary and looked for the definition of sustainability. Guess what was it?

“The property of being sustainable”.

Wow! That really helps. So I tried looking for the word sustainable. It was not a bigger success:

“Capable of being sustained”.

 I did not give up. I looked for the word sustained. Here we made some progress:

“Maintained at length without interruption or weakening”.

So, sustainability basically means long term. I could live with that. But here the second problem presents itself. Whose long term?

Who are we talking about?

I think that a lot of the problems with the discussions about sustainability and companies are the result of it being focused on the sustainability of the plant, the environment and the society. But companies should not care about the plant, the environment and the society. They should only care about making profit. So when we use the term in regards to companies we should focus it on the company. So we should try to maintain at length without interruption or weakening the making of profit by a company. That is what sustainability should be all about.

Does that make sense?

This is a way to understand what is happening in the world. Frankly, I don’t find the rhetoric of companies saying something like: “we know companies should do right by their communities” quite convincing. Everybody sees the bluff. What the company should say is: “we know we know companies should do right by their communities because it is profitable”. What companies are starting to understand is that thinking long term, getting involved in their communities, using environmentally friendly technologies and other “sustainable” strategies, help them achieve the one important thing: sustainable profit for their share holders. And by sustainable I mean long term profits.

Check out the time frame

It is not a matter of ethics; it is a matter of strategy. There is no triple bottom line. Better reputation has monetary value. Employment satisfaction has monetary value. Lowering energy costs sure does have monetary value. Businesses understand only one language and that is the language of money. And as we progress, it is becoming easier to express intangible concepts with money.

But something else is happening. And this is linked with the economic crises. There is a shift in the focus of strategy. Because in order to apply “sustainability” strategies you have change your focus. You have to have as your goal not the only the next quarterly report but the state of the company in five or ten year’s time. And if you look up in this post, that is sustainability. “Maintained at length without interruption or weakening”.

When you look on for the next five or ten years, strategies that did not make sense on the next quarterly report, suddenly make sense. Ask the CEO of Coca-Cola – are you taking of soda drinks out of schools because it is right or because it is smart business? Do you care how bad it will look on your next quarterly report or do you look farther ahead? 

Stop lying to yourself

So, I think it is about time we stop lying to ourselves. It is about time companies will not be ashamed of doing what they are best at. Being agents of wealth. If the best way to be an agent of wealth means they can also be an agent of social change – great. It usually is. Not because it is right ethically, but because it is right business wise. We all know that crime pays in the short term but does not pay in the long run. The same is true with business strategy. It is just a shift of time frame you are looking at.

So, let companies do what they are best at – maintain their profit. Let the governments take care of maintaining the environment and our social communities.  The day CSR & Sustainability consultants will stop prettying up the message of sustainability and start describing it with the language of business maybe they will succussed better at selling their ideas.

Elad