Sustainable IITD Blog

Making Difference: One Step At A Time

How Sustainability Is Changing Management

Sustainability is steadily changing the way the world works, thus affecting how business also works.

In August 2009, the US military and intelligence announced that the greatest threat to US national security is the fluctuating global climate. There would be direct consequences of phenomena such as rising sea levels and melting ice, which could result in key military bases getting submerged, while other military bases would be subject to frequent storms. The recent melting of Arctic ice means that the rising number of new sea lanes formed will have to be monitored. But a far greater threat would lie in the indirect consequences of climate change: water scarcity, drought, food shortages, mass exodus, pandemics, civil unrest and political instability. Such repercussions would demand a humanitarian response or even military action to a scale that even the United States Armed Forces would not be able to handle.

Though it is significant that one of the world’s largest and most powerful organizations has recognized the need for sustainable thinking and is planning its strategy centered on it, numerous CEOs and management leaders are already a notch ahead of the USAF. In a course of interviews conducted by the MIT Sloan School of Management and BCG for the “Business of Sustainability” research project, they spoke of sustainability as a concrete force affecting modern management practice, directly and indirectly. Michael S. Hopkins of MIT Sloan has summarized, in brief, eight advantages that companies gain when they incorporate sustainability in their business practices:

  1. PLANNING – Pressure to change immediately can come from parties like government regulators, NGOs’ interruptions, protests, eco-conscious customers, unexpected resource shortages, competitors and even investors themselves. Companies like Nike, Unilever, Chevron, Rio Tinto and Wal-Mart have revised their strategic agendas preemptively in order to cope with such issues that may arise later.

  2. PRODUCTIVITY – Most of the managers familiar with sustainability affirmed the benefits accrued from energy savings, resource-utilization efficiencies and labor productivity. Evidence points to improved employee engagement and effectiveness when companies pursue sustainability strategies. Amory Lovins, a renowned sustainability business strategist states that efficient buildings with better thermal, visual and acoustic comforts will typically yield up to 16% higher labor productivity in offices.

  3. REPUTATION – Global Business Network chairman Peter Schwartz noted that a company that rigorously manifests its core business principles and practices about sustainability, is likely to be rigorous and thoughtful about things like finance and markets and the technical quality of products. Thus sustainability performance can become a suitable proxy for assessing a business’ management quality, which is otherwise hard to assess.

  4. STRATEGY – Most of the interviewees claimed that when their companies undertook major sustainability initiatives, they were able to discover details of their operations and their organization that surprised them. Sustainability prompted them to see the whole system from a higher perspective.

  5. INNOVATION – Sustainability challenges usually demand patience, requiring diverse inputs from multiple disciplines. They require collaboration across diverse business sectors. They promote patient, thought-demanding experimentation of different ideas, which will lead, sometimes accidently, to improved innovation.

  6. COORDINATION – Sustainability challenges demands collaboration across all boundaries. These networks will have to be established across different intracompany departments, industry sectors, and sometimes even competitors to tackle such challenges. From doing so, companies gain huge functional advantages.

  7. TRUST – Management practices geared towards sustainability would enable stakeholders to assess risk more confidently and transparently, thus fostering trust between various players in its network. This would provide huge advantages to the business in terms of brand imaging and public perception.

  8. FIRST-MOVER ADVANTAGE – Preemptive efforts generate more than typical first-mover advantage. Companies fostering sustainable innovation have been able to leapfrog to smarter technologies, before issues related to the sustainability of their products even arises and regulators exert pressure. Being ahead gives them huge advantages.

This article has been adapted from Reprint 51109 of the MIT Sloan Management Review, Fall 2009, authored by Michael S. Hopkins, with permission of MIT SMR.

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This entry was posted on October 1, 2014 by in Sustainability in Management Practices and tagged .

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