Greed, Not Profits, Derails Sustainability

Business leaders have today warned financial short-termism is continuing to prevent companies from becoming more sustainable.

A global survey of 642 senior executives, campaigners and academics conducted by consultancies GlobeScan and SustainAbility found 88 per cent of respondents regard pressure to deliver immediate financial results remains a significant barrier to firms’ sustainability efforts.

This is the lead in from Business is Green’s article Profit incentive derailing sustainability, and I wanted to take a moment as I feel there is a fundamental flaw in the way this story (and the conclusions of the survey) are being spun.

That, it is in fact not profits getting in the way of sustainability, it is greed.  And this to me is important because on a regular basis I hear, and read, about how so many firms (and their executives) want to “do the right thing”.  They see the problem, they know they have a place to inject themselves, but they don’t.

Apple is a great example of this.  A firm that made a billion USD a week in profits last quarter, and yet claims that not only is the US to expensive to manufacture in (i.e. Apple could not be AS profitable), but it is also a firm that is unwilling to invest in a supplier network that abides by even China’s labor or environmental laws… or holds their key suppliers accountable.  Could Apple sacrifice 300 million USD to ensure that all their supplier’s plant met environmental code and that their compliance team was the biggest and baddest in the industry?  sure.. why won’t they?  simple, it would reduce profits.

Not eliminate profits.. reduce.   Which is a greedy act.

In Business is Green’s article, they make mention of the fact that tied to this is also the consumer end:

Meanwhile, low consumer demand for green products and services was identified as a problem by 57 per cent.

Which for me is completely beside the point. Yes, consumers should push back (particularly in cases like Apple), but the vast amount of greed in the system, that maximizes the size and effect of externalities, are outside the reach of the consumer.. and are not about “green”. Best example of that would be the housing crisis of 2008 where the greed of a select few created the conditions for a financial meltdown

For me, what it all comes down to at the end of the day is value, and the value(s) that leaders themselves have.  At this point, the system rewards those who are maximizing profits in the short term, regardless of the environmental, economic, or social costs, and regardless of whether or not consumers show a preference for “Green” products, there needs to be a fundamental value set within leaders where externalities are considered, minimized, and addressed with a balanced view for profits

Update: In reading through the post again, I realized that it would be best if I highlighted some firms who I thought were on the right track.  Those who, even with a planned profit sacrifice, went ahead and begun transforming the way they do business.

1) Interface flooring – this is perhaps the most commonly used example around, and for god reason.  Ray Anderson took a company who profits were reliant upon a business model that sourced worst chemical compounds known to man as raw materials, and then put those materials through an energy/ water intensive process to develop products where there is no “away” and then he turned it around during a time of peak profits.  He forced his company through a process of assessment, action, and innovation that many thought would result in lost profits, only to find out that the firm would be more profitable, be more resilient, have employees who loved working for the company more, and whose customers did not walk away.

2) Timberland – Jeff Schwartz is one of the most vocal CEOs around when it comes to issues of the environment, and like Ray, he began a process whereby timberland shoes and apparel were designed with sustainability in mind.  Material usage, social responsibility, environment, and fair labor all became factors in a firm whose industry is known for anything but.  It was a process that required investment, but that investment was seen as one the business SHOULD make as a member of the community

3) Haworth furniture – A tour of the Shanghai plant, and in speaking with their team, and this is another clear example of a firm who is doing things “differently”.  Their Shanghai facility is a zero waste facility with no materials going to landfill (there is a waste recycling program), but more than that, it is a process that included suppliers (boxes must be reused by suppliers) and customers (the firm is now taking old furniture and refurbishing it – at a profit).  There is still work to be done with materials, but so far the energy savings, material savings, and increased customer/ supplier engagement has only proven the financial side of going “green”

.. and there are many others who deserve mention.  Particularly those who built firms with the balance in mind, versus the need to find it later, but as the above survey was more about the later I pulled out those three examples.  Figured they were more applicable.

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