Sustainable Development ~ The Business Case
Author: Valerie Geen ~ Director of Climate and Energy - National Business Initiative (NBI)
( Article Type: Sustainable Development )
Terminology is often a barrier to getting different sectors of society to appreciate that they are quite often talking about the same thing though their goals and outcomes might be different. Consequently the ‘Business Case’ argument is often construed simply as a profit making and competitive one. On the other hand, while the Sustainable Development concept has evolved over the past 20 years, it has still not found a comfortable home in all companies because of how it is defined, where it is located in the organisation and how its value-add to the organisation is strategically conceived and externally perceived. Rather than dwell on concepts therefore, this Article is intended to offer a few insights and trends that are unfolding which could assist in words which have been lost in translation.
Vision 2050, a project of the World Business Council for Sustainable Development (WBCSD) and work led by 29 of its member companies and commented on by businesses and countries across the globe, sets out a new business agenda. This agenda acknowledges that critical to the sustainability of the planet, its people and Business itself, is the development of a shared vision complementing both global and local contexts that supports the trajectory of an expected 9 billion population by 2050 who will be living well within the limits of one planet. Living well implies that all people on the planet will have access to enough food, clean water, sanitation, shelter, mobility and education and health within the limits of what this planet can supply and renew every day. Vision 2050 also offers 9 critical pathways to achieving this vision which includes: People’s values, Human development, Economy, Agriculture, Forests, Energy and Power, Buildings, Mobility and Materials. Without seeking to redefine Sustainable Development, this vision and set of pathways can assist in moving all sectors of society towards convergence on their respective roles and responsibilities in effecting change.
While it may be argued that Business is not the sole player or custodian for addressing all the issues that embrace sustainable development, it is nevertheless a key player given that it is a located within a local and global society where it is increasingly either a giver or taker of key resources which are rapidly depleting or degrading and these include both human and natural resources. Business is also operating within an ever-changing environment where the impacts on Business through globalisation, population growth, inequality, urbanisation, environmental change and scarcity and degradation of natural resources cannot be ignored. In fact while the traditional lens through which business regards challenges is one of risk, flipping those risks into opportunities assists in accentuating the Business case for defining its own role in sustainable development in a manner that places sustainable development at the heart of Business strategy and operations.
How businesses organise themselves to move beyond a focus on the production of an annual sustainability report that is often driven peripherally is still a journey to be travelled. Rather, with the emergence of integrated reporting, there is an expectation that visionary business leadership, organisational process and alignment and continuous focus by all business units on their contribution to their business’s impact on sustainable development is what is needed.
While it’s primary focus has been on carbon, the reporting of leading South African companies into the Carbon Disclosure Project led by the National Business Initiative over close to five years, offers interesting insights and trends that can be extrapolated into other areas of sustainable development. Among these insights are:
• The extent to which identification of risk is either an impediment or driver of change towards a company’s own sustainability and success. An interesting finding in these reports is the extent to which companies prioritise their corporate reputation over and above regulatory, physical and litigious risks. No doubt, as companies engage more with impacts of regulatory and physical risks in particular, prioritisation might change but indications are that Business’s role in the society in which it operates is an issue of concern to South African Business.
Taking lessons from the recent economic meltdown and other business-related disasters, it can be expected that more attention will be paid to whether businesses are contributing to sustainable development or undermining it. For those businesses that are seen to have contributed to a debt crisis or environmental disaster, there is work to be done in winning back the trust of the citizen and governments. These impacts have already sent shocks into the South African economy with job losses being one of casualties. Job losses are bad for governments and business and therefore any negative impacts in this regard of governments and business undermine the idea of ‘all people living well within the limits of the planet.’
• The value of data that supports whether an issue is material to a business or not and how it can inform business strategy and new growth and development opportunities is also an interesting observation that can be expanded to other sustainability issues such as water, energy, skills, impacts on ecosystems and people. Again the Carbon Disclosure Project and even the Initial pilot Water Disclosure Project have solicited data which has begun to drive change. There is still much to be done across all sectors in data gathering that will inform and identify change drivers towards a more sustainable pathway. The NBI’s own work in Energy Efficiency revealed that few companies were able to set baselines on energy consumption in the year 2000 as required by South Africa’s first Energy Efficiency Strategy. With increasing prices of electricity, carbon tax and the emergence of standards and labelling and the imperative to attract green investment, the gathering of reliable data is becoming core to business decision-making and investment. Acting upon this data will decide whether companies will be able to sustain themselves apart from contributing to the sustainability of people and planet.
• The identification of catalysts for action has been yet another lesson to draw from. In the process of identifying their carbon emissions, companies have begun to look at other sources of emissions and their impacts through their supply chains and employees. Through this, companies in themselves have substantial leveraging power. This is evidenced by companies starting to forge new partnerships within their value chains and identify roles they can play in raising awareness and stimulating behavioural change among their employees and customers. The role of investors in paying more attention to whether environmental, social and governance principles are being considered so as not to undermine their long term investments and shareholder returns is increasing in its traction and leveraging power as more investors become educated and interested in these issues. This change amongst investors can be a catalyst for an increase in long term thinking and planning in how businesses operate.
• Skills and Capacity. There has also been a gradual awakening that companies do not have all the requisite skills and capacity they need to respond to a changing world and while this has presented good opportunities for consulting firms, the understanding for building long term capacity within companies is still emerging. This begs the question also of the role of government and educational institutions in their responsiveness to work coherently with business and vice versa. It is clear that there is a growing disjuncture between what companies and governments will require in order to produce the necessary innovation and responsiveness to an increasingly complex world. It is incumbent on both business and government to engage with each other and learning institutions in defining and producing the necessary skills required to create a more sustainable world.
• Opportunities. Part of responding to a changing world with its new challenges also presents opportunities .To realise these opportunities will require greater investment in research and development to lead innovation into new and efficient goods and services, and greater synergy and investment in supply-chain capacity which often operates under the radar of sustainable development objectives. In the context of South Africa, the supply chain as well as the sectors identified for future economic development such as Tourism, Agriculture and Mining include opportunities for the development of Small and Medium enterprises.
• Partnerships. Companies who have seen the need to embed sustainability principles into their business have also begun more active exploration of collaborative partnerships within their sectors, with government, research institutions, communities, NGOs, and international organisations. While the challenges of the present and future may appear daunting, they will continue to remain daunting if the need for a more collaborative approach is not pursued. The NBI is a proponent of collective action since there is so much that businesses can learn from each other or partner with each other on at reduced cost. At the same time, strengthening a partnership approach with government, NGOs and civil society is a prerequisite to sustainability.
In conclusion it needs to be recognised that Businesses are fundamentally about driving a profit margin and they do operate in a competitive environment. The new competitive environment is being led by economies who are putting significant investment into low carbon or clean investment. The concept of a green economy in South Africa presents a new opportunity to enhance the framework for sustainable development in a manner that seeks to reduce carbon emissions, adapt where it is vulnerable to change, climate change in particular, while addressing poverty alleviation and social development. The Business Case for sustainable development is ultimately not simply about doing business in a sustainable way but also about what contribution business can make towards the sustainable development of all, in order to ensure its own sustainability in the long term.
The nature of the challenge cannot be underestimated but once understood, will require greater innovation and resilience in technology solutions, placing a value on natural resources and ecosystems, establishing new partnerships, behavioural change, systemic and multidisciplinary approaches and more meaningful stakeholder engagement and relationships.