Responsible Firms Act Before Governments Do

Building off the presentations and research I have given recently on “Beyond Business As Usual”, one of the common themes of discussion is why and how responsible firms will act when it comes to living up to their duty to more than just the bottom line. That, with the cost of externalities of the current business as usual model rising, a new dynamic is beginning to take shape where firms who do not proactively accept this wider responsibility are forced to.

As the auto industry recently found out in the United States with the announcement that (by 2025) the average MPG of cars must be 54.5mpg.

According to NBC News: New 54.5 mpg rule ‘will change the way this industry operates’

After an unexpected delay, the White House has finalized the biggest jump in the Corporate Average Fuel Economy, or CAFE, standard since the government first set mileage guidelines in 1978.

As part of a broad compromise hammered out between the auto industry, environmental groups and government regulators, the fuel economy of the typical car, truck or crossover will nearly double between now and 2025, to an average 54.5 miles per gallon. That’s a more than 50 percent jump, meanwhile, from the CAFE rules the Obama rules had previously approved for 2016.

Which led to a business as usual industry’s response was:

But far less certain is the impact the new rules will have on the auto industry and on the motorists of 2025. Naysayers have warned that, at 54.5 mpg, tomorrow’s cars will be smaller, largely battery-based and significantly more expensive.[…] But Marchionne insisted, the new rules “will change the way this industry operates,” adding his belief that, at 54.5 mpg, it will be difficult to continue producing high-performance vehicles

Where this example for me is of interest is simply that after years of debate about the need for efficiency, it was ultimately the US government who had to force the hand of the auto industry.  That, regardless of their own beliefs, auto will now have to work on a timeline that is not their own and incur costs along the way that they are not entirely in control over.

The government has reached into their market.. into their BUSINESS MODEL.. and forced them to recalibrate to the needs of the commons.

An action that I believe will only continue to happen in areas where the externalities of business as usual grow beyond the ability of external stakeholders to absorb.  We are entering an age, like it or not, where business is being held accountable for failures that they may not be entirely responsible for, and as the externalities of the current model (i.e. business as usual) grown in size, severity, and scale, actions taken will only reach further the business model.

Just one more reason why firms need to act now to understand the needs of their stakeholders and make sure they have a stakeholder map that truly reflects who they should be engaging, and act appropriately to align (and protect) the business core with stakeholder expectations.

Which leads me to the article Take Ownership of Your Actions by Taking Responsibility, where the author wrote:

Often, we have to deal with situations for which we’re not at fault. But fault is backward-looking, and responsibility is forward-looking. Fixating on blame delays taking corrective action and inhibits learning. Focusing on responsibility offers a sense of peace.

For many firms, and those around them, the debate is often about who was at fault and who should take action. These discussion are distractions to the responsibility of the firm, particularly as government regulation and consumer push back can be far more costly than preventative action, and as such executives need to begin seeing this discussions as warning of things to come.

That, proactive measures should be taken to address or solve the problem before the government forces them to.

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