Sustainable Development makes good business sense

Article written by Lord Holme for the International Herald Tribune

4 June 2002 - I believe that sustainable development is central to the way in which a successful and enduring business determines its strategy and makes its decisions.

This belief is certainly not derived from some vague sentimentality, the sort of wishful thinking that Eliza Higgins sang about in "My Fair Lady" in "wouldn't it be luvverly?" a rosy world with no hard choices.

Because sustainable development is all about making tough trade-offs to arrive at optimum choices; balancing economic, social and environmental goals to arrive at a destination as close to win-win as possible, whilst always remembering, as Isaiah Berlin instructed us, that all good things are not necessarily compatible.

Sustainable development is a constant reminder to the chief executive and his or her managers of the inter-relatedness and complexity of the factors which feed into good decisions. For instance, after local consultation, moving the site of a new factory by five miles may increase capital investment, yet by preserving special features of the local ecology and respecting the wishes of the local community, relationships of mutual trust and confidence can be created which will create a harmonious business environment for years to come. How much would that enhance the return on what in the short-term is a higher investment?

Why should busy executives make the effort to take care, to listen and to think imaginatively? First, because like members of other human institutions, they want their companies to survive, to be around in twenty or fifty years time, in short to be sustainable. Good people the best managerial talent, are not going to join or stay with companies that have no future. Indeed, increasingly those same young people are looking for a better match between the values of the society in which they grew up and those of the companies which they join.

It is no coincidence incidentally that long investment business horizons and sustainable development go together. Large natural resource companies such as Shell, BP or Rio Tinto, which I advise, think in decades. At the other extreme a get-rich-quick merchant may look no further ahead that the next big deal which will let him retire to the sunshine.

So a company which needs to make satisfactory long-term returns to its shareholders if it is to be financially sustainable knows that these in turn depend on the acceptability of the company and its products to a whole set of other stakeholders; employees, customers and suppliers, local communities, governments and regulators. All of these will be sure to find ways to withhold their consent and support from companies which are short-term, irresponsible or careless of their best interests. Such companies will become unsustainable.

Then too, sustainable development provides the spectacles through which the far-sighted manager can take an intelligent interest in the ways in which the world around him is changing. When I was at Harvard Business School in 1969 not one of the case studies mentioned the cost of energy to the business. Today any manager worth his salt is actively trying to reduce costly energy imputs, to reduce pollution and unacceptable emissions and is also now starting to reduce his clean water use in intelligent anticipation of growing shortages. Eco-efficiency, a phrase coined by the WBCSD nearly ten years ago has gone from the periphery to the centre of decision-making.

We should welcome the new emphasis on sustainable livelihood creation which is businesses distinctive contribution to the poverty agenda as we prepare for the WSSD in Johannesburg. Business has a lot to offer on the social agenda particularly working in partnership with NGOs and others, and especially in terms of capacity-creation and training to give its employees and neighbours a hand up rather than a hand out. And that is just the beginning: helping to bridge the digital divide; or, as Unilever has proved so strikingly, in its detergent business in India treating today's poor as tomorrows' market, using economics with imagination and empathy to create social and economic inclusion.

At Johannesburg Business Action for Sustainable Development will be mounting, In cooperation with UNDP, a Virtual Exhibit on the web and on TV, of examples of positive partnership for sustainable development from all around the world. More still from companies large and small, will feature in the joint ICC/UNEP Competition.

Sustainable development is much more than the latest management fad because it can provide a source of competitive advantage, a significant reduction of risk and, above all, a robust framework for good, long term decision making.

By including human and environmental factors in the basic business mix, sustainable development thinking helps to ensure that the company is making good business sense.

Lord Holme is Vice Chairman of Business Action for Sustainable Development.