3 questions on how we assess what makes a business truly sustainable

"How can we ensure that we encourage and reinforce progress made by companies that are truly working towards greater commitments to sustainability while also pursuing profits?" - Kathy Miller Perkins

“How can we ensure that we encourage and reinforce progress made by companies that are truly working towards greater commitments to sustainability, while also pursuing profits?” – Kathy Miller Perkins

In her July blog, Transatlantic Solutions to Becoming Truly Sustainable, Katrin Muff contends that it is important for businesses to have a yardstick for measuring their progress in becoming truly sustainable.  Moreover she describes two assessments, one from the B-Corporation movement and the other from the Economy of the Common Goods.  Both do indeed enable companies to measure the impacts of their sustainability-related efforts.  As I examine both assessments, I can easily understand the benefits of both. I believe Katrin would agree that their value lies mainly in enabling companies to track progress towards reaching their environmental and social impact goals. However, I fear that in discussing the categories to which we assign companies based on the results of their assessments, we may be implying that we are subjecting them to litmus tests which serve no useful purpose.  Thus, in this blog, I am sharing with you, the readers, questions I have been pondering and have not yet been able to resolve to my satisfaction. Please let us hear your thoughts on these issues.

Question 1: Is it harder for large, and perhaps older corporations to achieve the status of Muff and Dyllick’s Business Sustainability Typology 3.0?   A B-Corp website FAQ states that  “Most businesses that use the B-Impact Assessment are firms that have between 0 and 50 employees.” My question is why this is so?  I’m guessing that it is much easier for a smaller start-up company to establish a problem-solving mission and provide the means to carry it out, as compared to larger, more complex, publicly-traded companies.  If this is the case, does that mean the smaller, newer companies are more praise-worthy? Or should we be more affirming of the efforts of larger, older companies as they attempt to jump potentially higher hurdles?

Question 2:  How can we ensure that we encourage and reinforce progress made by companies that are truly working towards greater commitments to sustainability while also pursuing profits?  Recently I conducted a research study with George Serafeim from the Harvard Business School that looked at, among other things, the stages that companies go through in pursuit of sustainability.  We found several companies with missions to solve social and/or environmental problems and at the same time were profitable.  I have not found any of the organizations such as the B-Corporation or the Economy of the Common Good to directly assert that to be truly sustainable, companies cannot actively pursue profits.  However, some of the language we all use may indeed lead to this conclusion, as very often our words do imply that pursuing profits is not a worthy goal.   For example, in explaining the B -Impact assessment, the B- Corporation web site differentiates what they refer to as Sustainable businesses from B-Corporations.  They suggest that Sustainable businesses are those “whose primary objective is to both pursue positive impact and generate returns” while B- Corps are “Businesses that are primarily trying to solve a social or environmental issues.”  In my opinion, how companies are categorized is less significant that the degree to which they are using the assessments to measure and improve their

Question 3:  If a large, multinational company has dedicated only part of its business to solving world problems, where does it fall in the classifications?  Does this company fall outside the label of “truly sustainable”?  If so, are we hinting or implying that companies which have not completely transformed their business models are, indeed, taking only superficial steps towards sustainability?

As I stated in the beginning of this blog, I am entertaining these questions because I do not have definitive answers myself. My purpose is raising these issues is: (1) to challenge you readers to share your thoughts; and (2) to caution all of us who are working with the development, administration and review of these sustainability assessments to take care to consider the complexity of the issues and to avoid looking for black and white answers. Complicated concerns deserve multifaceted solutions.

What are your thoughts? Please leave a comment in the box below.

Kathy MillerDr. Kathy Miller Perkins is a social psychologist and is the CEO and owner of Miller Consultants , a firm specializing in organizational development, executive coaching and change management. Her work involves helping companies create and sustain organizational cultures that are conducive to executing sustainable strategies. She has worked with companies such as Toyota, IBM, Kindred Health, Brown-Forman, Lexmark, Anthem, Ashland Chemical, the U.S. Military and BC Hydro.

Advertisements

4 comments

  1. The operations of large, multinational organizations impact the environment to a much greater extent than those of smaller companies. A minor change in energy generation or water efficiency can have vast effects on the quantity of natural resources extracted and number of ecosystems disturbed. Those businesses that have the ability to utilize big energy and water data to track their sustainability progress should be recognized. While it is necessary for smaller businesses to tackle reducing carbon emissions, it may be more effective to develop a sustainability framework that can be scaled up.

    Like

    1. Your comments seem very valid to me. Big business has a much greater impact on outcomes for the planet. Therefore anything we can do to encourage rather than discourage their efforts seems worth it to me.

      Like

  2. Interesting and valid questions I believe, although this is my take on it;

    I believe that sustainable businesses should also aim to become profitable businesses, the one can hardly exist without the other if the business is to make a lasting impact (i.e. Grameen Bank, etc.). The problem I have come to learn about social oriented businesses, is the inability to become profitable often because of poor business models. Without this fundamental building stone (profit), one cannot exists or attract (impact) investors with a ROI and sustain impact.

    If these businesses intent to remain dependent of grants and government support mechanisms, than, in my opinion, they should not be called entrepreneurs but NGO’s and foundations alike.

    In regards to your question about “older companies”;

    It appears that larger (older) companies grasp the importance to include civic problems as part of their operations, mainly because of their increasing awareness that the livelihood of their society cannot be neglected, since this will alienate their clients and (future) workforce if they don’t. In opposite, the majority of companies still cling on to conviction that the purpose of business is business and treats CSR as an ‘add-on’, or finds ways to include some CSR activities in a non-inclusive way.

    Take i.e. CSV; CSV aims to recognize and select societal problems relevant for a corporation, with the objective to transform these problems into strategic business opportunities, simultaneously solving social issues while driving profitability for the corporation.
    Despite the widely embracement of the concept by MNC’s, CSV still present a concern worth noting. As contested by Crane, et al,. (2014), CSV appeared to be non-inclusive, from which the economic advantage for the corporation has become more dominant, in oppose to the civic value created. Moreover, they argue CSV to be “cherry pick[ing]” and even a form of green washing, due to its selectiveness and promotion of social problem solving, neglecting to combat more intrinsic operational issues which would have more apparent impact on societal improvements.

    Large companies should find ways, or develop plans how and when they will enhance the integration of sustainability across their operations, as it appears with the limitations in the institutionalization of CSV, making it a isolated activity, often funded by revenue created through key, non-sustainable, conflicting or irresponsible activities (e.g. sugary Coca-Cola which is a major contributor to Obesity) Civic understanding increasingly reject this non-inclusiveness.

    Therefore, these types of ‘loose’ flirts with sustainability will often suffer in economical downturns or management overhalls when not integrated and institutionalize. Large corporations cannot and should not try to do this overnight, but aligning vision and strategy over a specific period of time will definitely improve the public buy-inn.

    Like

    1. Yes I too see many large companies addressing sustainability either as an “add on” or as such a small part of a business that is otherwise creating harm. I endorse your suggestion that large companies develop an overall strategy aligned with their vision and implement steadily — not overnight!

      Like

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s