CEO
Triple Impact Consult
“The only social responsibility a business has is to maximise its profits” – the controversial statement made by American Economist, Milton Friedman is one which is unique in that it appears to remain relevant but also incongruous with the 21st century. On one hand, there is no gainsaying that profit maximization remains a fundamental feature of commerce, however, given the current state of social and environmental degradation largely caused by unhindered industrialization, it is becoming largely apparent that this objective as an end in itself is a double-edged sword both for individual businesses and society as a whole. This explains the imperative being put forward to businesses to widen their spectrum beyond protecting merely shareholder interest to a more holistic ‘stakeholder’ approach. Ironically, it is also being observed that corporate actions are taken without due and sometimes overriding regard for other factors than profit may, in fact, threaten the long-term sustainability of corporate profits over and above the competition. As such, heeding to this responsibility is not only the indirect interest of a business itself but also the society and the environment which provide the human, intellectual and natural capital which, again, are either directly or indirectly necessary for it to function. The COVID-19 Pandemic exposed these systemic vulnerabilities in a significant and unfortunate way but perhaps provided the necessary ‘eye-opener’ to this imperative.
Arguably, Friedman had the right idea in 1970, especially with technological advancements enabling significant prosperity for mankind, giving a false sense of being untouchable and unstoppable. At best, companies were expected to maintain the governance ‘baseline’ of compliance with laws and regulations. Herein lies a critical flaw, however, in that laws are largely reactive and limited by the existing understanding of what constitutes public interest. It is quite an inadequate tool for systemic foresight regarding the kind of future being shaped by businesses’ collective actions and/or inaction.
With the help of science, however, the vision of the world we could be faced with is now being made plain, but why should businesses act now? The most obvious is that there can be no ‘business’ on a planet that ceases to flourish. However, as this appears far-flung businesses may then ask – ‘Why should I act to my detriment and, therefore, my competitor’s advantage?”. The case for business sustainability management is complex, but it largely reveals that:
1.) It facilitates growth, through new opportunities embraced, and
2.) It ensures resilience, through the effective management of associated risks.
Sustainability management broadly refers to the corporate practice of taking a balanced and holistic view of a company’s ‘triple bottom line’, i.e. economic, social and environmental, with a view towards ensuring minimal negative performance on each line, as a minimum starting point. Sustainability management is of strategic importance in today’s world due to the increasing global awareness of current ecological challenges and the impact on several critical drivers for businesses: including consumer/investor behaviour, regulation and innovation.
The slow but steady rise of the conscious consumer/financier either financially supporting, withholding support or even undermining businesses based on their sustainability practices is certainly a trend for businesses to watch out for. Similarly, global and national regulations are reacting and effectively pushing the baseline for businesses to act sustainably. These two trends are fostering a business environment in which innovation for sustainability is a non-negotiable approach for defining/redefining business models, product design, supply chain management, etc. The evidence also suggests that this is yielding measurable value, and it is likely that as time goes on, innovation would truly be ‘the only sustainable competitive advantage a company can have, as David Friedberg expresses.
So, what next? Businesses are encouraged to become more strategic in adopting business sustainability management as a response to the dynamic global environment and to protect present and future profit margins…