The changes in modern management practice are starting to make Milton Friedman's 1962 pronouncement that the social responsibility of a 'corporate official' was to 'make as much money for their shareholders as the possibly can' look quaintly old fashioned if not positively archaic.
Even at the time this looked misguided, as Agency Theory explains, those who control businesses generally try to make as much money for themselves as they possibly can and let the shareholders have some of the what's left. But now business has a new buzzword - Sustainability.
What is it? Sustainability is , essentially, the management and coordination of environmental, social and financial demands and concerns to ensure responsible, ethical and ongoing success. The idea is that it focuses on meeting the needs of the present without compromising the ability of future generations to meet their needs.
In the early days of the Industrial Revolution in the West the objectives were growth, expansion, making money and building roads railways, factories and businesses to create and satisfy the economic demands those businesses helped create and this resulted in pollution on a grand scale. The West is now largely coming to terms with environmental issues and the need to rein in the causes of atmospheric pollution and other forms of environmental damage even if this is patchy and still governed by self interest in many cases. Climate change conferences are notoriously big on ideas and resolutions but countries are often slow in turning grandiose statements and targets into practical action.
What sustainability initiatives do is to point out that there is not an infinite amount of resource on one planet that if we use it or destroy it we have nowhere to go. So in order not to compromise the future we have to act now to cut down waste and make better use of the resources that we have.
Management nowadays is constantly being urged to do more with less. Pressures from resource depletion, climate change, pollution, water shortages and the political and economic changes these have stimulated are compelling businesses to review their day to day operations, their outputs and how they deliver them.
The key word here is 'future'. The more extreme end of the climate change lobby is more or less claiming that the human race hasn't got one but in building the case for sustainability the chances of this prediction coming true are rapidly diminished.
Companies have leapt on this bandwagon as a useful marketing tool tapping into the zeitgeist of environmental angst typified by programmes such a 'Blue Planet' which showed horrified viewers the extent of marine pollution caused by plastic waste and the traumatic deaths of attractive mammals and colourful fish. Initiatives such as supermarkets charging for plastic bags have been accepted by consumers and has cut usage by about 86% in the last five years, companies such as the giant Unilever have developed 'sustainable living' brands which are growing faster than their other products so, with them and other companies such as 3M, Nike and Proctor and Gamble, sustainability is here to stay.
Many businesses have now realised that Sustainability = Profitability because consumers like it. The words 'recycle' , 'sourced from sustainable resources' and 'reuse' appear prominently on packaging; there is a slow growth of 'zero waste' shops where consumers can fill their own containers instead of buying packaged products. It is slow but it is there.
But not everywhere. The average person buys 60% more items of clothing than they did 15 years ago, and clothing is kept only half as long. Most of it ends up in landfill. In the UK about 45% of household waste is recycled, in the USA the figure is about 30% although the potential for recycling is 75%. There is still a long way to go but at least business is trying to lead the way.
What they have discovered is that Sustainability = Innovation. Adopting sustainability as a business objective means that a business has to review its product range and find new ways of making them or discarding them as unsustainable. This has led to a new range of products or a refreshed range of old products- which can now be advertised as good for the planet not bad for the planet a major marketing plus.
However this is not so everywhere. Those countries lagging behind the West in terms of growth and industrial development have given little or no sign that they are working to the same principles. Instead they are focussing on their economic miracles moving their populations from largely rural to largely urban and creating the jobs and infrastructure to sustain that growth. China , India, Brazil, Indonesia and even the UAE are considered to be among the most polluted countries in the world largely due to atmospheric pollution and a lot of that from motor vehicles.
People want stuff. Individuals who move from a rural area to a town do so because they think the prospects are better. They have a job making stuff, they buy stuff , they get a better job and buy more stuff and so the economic cycle of consuming goes on. This creates waste and pollution of rivers, landfill and the sea unless it can be stopped or slowed down.
The more that business adopts sustainable principles the more can be done to prevent the possibility of compromising the future. Many corporations in the West have supply chains which end in developing countries and it puts them in a position to drive sustainability initiatives in those countries from which they source so much product. This, in turn may stimulate more local businesses to follow suit.
Adopting sustainability as a business strategy makes both environmental and business sense. Sustainability is future proofing the business. That wont guarantee the business survives the challenges it faces in its day to day operations but it does compel a process of innovation and renewal which is a vital part of building and maintaining a successful business and one which has a future not just a past.
John Taylor is an author for accountingcpd. To see his courses, click here.
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