Last week, during a workshop on corporate strategy, I was asked to define this thing called sustainability. Now, for context, I typically avoid doing this. There is a good reason for my recalcitrance. Shackling this dynamic term with a static definition risks being outdated almost immediately. Also, I theorise, if I actually defined it I’d lose my ability to change my key performance indicators at will. Just between you and me, I find that keeping uncertainty and vagueness around KPIs is a good tactic when it comes to maximising bonuses. Just saying (or am I over-sharing? Sometimes the boundary is blurred).
This day I had only put down one decaf skinny soy latte for breakfast so I was feeling undernourished and feeble-minded. I lost my resolve to shroud sustainability in a murky green fog. I offered that the appropriate corporate strategy question for a listed company should be “how do I ensure the sustainability of my business?” No drum rolls cued, because it’s an obvious question, and I felt sheepish for offering it. Yet I noted some shocked and widening eyes from the hemp-wearing socially-aware segment of the audience (because it’s a self-serving definition). I further noted some narrow-eyed, cynical nods from the bespoke-suited financially-astute segment of the audience (because it’s a self-serving definition).
I’m just kidding. None of the financially astute audience had wasted their money on bespoke suiting.
Notice I didn’t allude to minimising waste or having a great water saving initiative or avoiding child labour in your warehouse. These are all good and worthy things, but there is a bigger question to start from. The place of business in society.
I went on to explain my view that all companies exist in a social ecosystem. The social ecosystem either allows you to flourish, or marginalises you until you become extinct. If you’re not adding much value and you’re screwing people over, the long-term sustainability of your organisation might be in jeopardy. Conversely, if you’re adding value and your stakeholders can clearly see you’re not shafting various elements of society, you’re on a sustaining footing. We use terms like “social licence to operate” to capture this broadscale permission-to-exist – but such terms, while serving as a useful and catchy handle, are too vague.
Of course that’s all a bit black-and white and you, dear reader, are pooh-poohing me roundly for such oversimplifications. OK so the reality is a rainbow of grey. And shifting grey, too.
As we know, society’s expectations (the enthalpy of the social ecosystem, if you want to really throw some scientific-sounding nonsense around) changes over time. And while it might not seem like it when you look at your kids with abject dismay and rue the loss of good values, these expectations trend on a positive evolution. Let me give you some hokey examples, just to underline my point in a ham-handed way. (There are of course more subtle examples that explore noble and ignoble societal expectations, ethics and Gen X/Y/Z/Millennial perspectives, but I want to keep this post relatively short).
- In 1866 it was cool to own slaves. In 2016 it’s not so cool – no, I don’t care which Tarantino movie you’ve been watching – not to mention prohibitively expensive.
- In 1956 it was perfectly fine to openly discriminate against women. In 2016 you need to be more surreptitious if you have that particular trait in your character (and I advocate surgical removal just to be sure).
- In 1996, it was admirable to challenge the science of climate change with your free-thinking Kindergarten logic. In 2016 you can only get away with it if you’re Donald Trump or Pauline Hanson, and your PR machine is intellectually challenged/a rerun of Mad Men you watched last night/staffed by pro-Brexit politicians.
So there was a time when a slave-owning, misogynistic, polluting entrepreneur could make a lot of money on the stock exchange. In fact, you were more likely to make a lot of money if you had these admirable traits and a handlebar moustache. Today, you’d be less successful. Trust me. Time moves on.
I spend a bit of time with institutional investors (you know, the big funds that have billions and trillions in assets, superannuation funds etc), and analysts who advise these investors. And in the last five years, I’ve noticed that they have cottoned on to the same thing. Increasingly, they want a reasonable chunk of their long term investments to be funnelled into companies that have a strategy that is likely to be congruent with tomorrow’s societal expectations. If that sounds sane and logical, that’s because it is.
Societal expectations cut a wide swathe, from ethical conduct to governance, to environmental and social issues, to customer interactions, to the many challenges humanity faces. Some are core to your business, others aren’t.
Contemporary societal expectations that have simmered for a while (I think about them as yesterday’s societal expectations) have typically made it into law. Sometimes a bit late, admittedly, but better late than never, they say. So it’s generally unlawful to have slaves or openly discriminate on the basis of gender, race and so on. And most businesses at least put some cursory effort into NOT breaking the law, which is why I say don’t waste too much strategy time on this. Adopt a just-do-it policy to regulation.
What about today’s societal expectations? Clearly, you’d better have your finger on the pulse of today’s expectations, whether or not they are enshrined in law. Because if you don’t you’ll probably lose market share to the business that does. It’s called today’s competitive advantage, and it’s probably more tactical than strategic.
And tomorrow’s competitive advantage is vested not inconsiderably in tomorrow’s societal expectations.
Which is where the world of strategy, with its five-to-thirty-plus-year outlook, might focus. Not just on market dynamics, oil prices and commodity supply/demand trends, but the dynamics of societal expectations.
So, if you want to run a sustainable company, angle your strategy toward tomorrow’s expectations while meeting today’s expectations. If you want a future competitive edge, lean into tomorrow better than your rivals.