Making Difference: One Step At A Time
The global shift toward sustainability in business echoes well with companies wishing to create competitive advantage. But to leverage this advantage successfully, one must act across all the fronts and challenges posed by sustainability, not just the limited subset that companies pursue today in their initiatives. To fully understand these challenges, one must look at sustainability from six unique perspectives and integrate insights from them.
A perspective that has been mastered by many corporates, the primary focus for exploring this perspective is to understand to what extent the government can, and will raise the bar for compliance in the future. Ideally companies should act proactively so as to get ahead of future regulatory requirements and prevent any disruptions down the line.
The current focus of most businesses today, this aspect has introduced new concepts to business such as impact measurement, emissions and waste reduction, recycling and reuse, conservation, green products and processes, and green-image related marketing. But such concepts are typically appendages to essentially unsustainable supply chain operations.
As a principle, sustainability has garnered a lot of attention in recent years, especially from the growing consumer public. This has compelled most companies to increasingly align their organizational values and vision towards sustainability, conservation and the reduction of negative environmental impact. The current challenge is to create opportunities for employees to apply their creativity and gather initiative to solve sustainability issues, which would translate directly into competitive advantage for businesses in dynamic and uncertain business environments.
Whole System Design
Prior to recent times, technology was often designed to maximize process efficiencies and profits and minimize costs, without due focus to environmental sustainability. Unfortunately these designs cannot be simply substituted by more environmentally benign designs – often we will need a new approach to technical process design that would optimize the whole process for profits and energy and resource conservation. This would create substantial operational savings in the range of 50-80% (a statistic tested by most companies). Capital costs are usually comparable to conventional designs.
Business Model Innovation
In order to complement internal process designs, as mentioned in point 4, it is necessary that the conventional business model be retrofitted to create economic and environmental benefits to all affected stakeholders. This can be done by creating a service oriented business model, where the sale of physical products is now converted into the rent of a service. For example, taking the case of a chemical company that rents toxic chemicals to its customers, while providing recovery services for the same, thus reducing its own production costs.
The final perspective, it compels businesses to go beyond the frontiers of a business’ operation. The business would have to explore the extent to which it impacts the society it exists in, and the kind of society it exists in. Ultimately, businesses will have to take up the initiative in reforming its society’s perspective by transforming its own products, and then transforming the visions of its society in order to achieve environmental sustainability.
By Alex Markevich. Alex Markevich is an independent management consultant who works at integrating business strategy with sustainability, having previously worked with Bain & Co. and Rocky Mountain Institute. In this article, he discusses how sustainability can yield fruitful competitive advantages for companies pursuing it.
Adapted from Reprint 51103 of MIT Sloan Management Review, Fall 2009 Issue.