The Evolution Of Sustainability

The growing movement toward sustainability in business offers companies a powerful lever for creating competitive advantage. The key to applying this lever successfully is action across the full range of challenges and opportunities presented by sustainability, not just the limited subset that is currently guiding most business sustainability initiatives. To understand this full range, sustainability needs to be viewed from at least six different perspectives. Integrating insights from these six perspectives can improve many of a company’s business capabilities, not just those directly associated with progress toward sustainability.

Six Perspectives on Sustainability

1. Regulatory compliance. Most companies have already mastered this perspective on sustainability within their operations. The major outstanding issue is to what extent government regulations will raise the bar for compliance in the future. Moving beyond this limited perspective allows a company to get ahead of future regulatory requirements, thus reducing the risk of regulatory disruption to its operations.

2. Incremental mitigation. This is where the bulk of attention in the business world is currently focused: impact measurement and metrics, emissions and waste reduction, recycling programs, conservation of scarce resources and energy, alternative and more benign sources of supply, greener consumer products and green image-related marketing and public relations. All that is a good start and can lead to significant cost reduction, risk mitigation and new revenue streams. But such efforts are typically add-ons to what remain essentially unsustainable business operations.

3. Value alignment. Sustainability as a principle enjoys increasingly broad public awareness and support. As a result, it offers companies the possibility of increasing alignment between organizational values and the personal values of employees. Translating employee interest in sustainability into competitive advantage requires creating real opportunities for employees to apply their creativity and initiative to progress toward sustainability. The more such efforts cross traditional organizational boundaries, the more they can contribute to the development of an increasingly open, flexible and productive organization that is likely to perform better in the dynamic and uncertain business environment of the future.

4. Whole system design. To a great extent, the physical infrastructure of modern society was designed without much consideration of environmental sustainability. Instead, attention was focused on issues such as short-term costs, narrow and immediately evident efficiencies and return on financial capital. The result was massive economic development — but we are now threatened with equally massive environmental disaster. Simply substituting more environmentally benign technologies into each discrete step of a conventional design process cannot adequately contain or reverse the environmental damage. Instead, we need a new approach to technical design, one that optimizes whole systems for both efficiency and sustainability.

While whole system design is a rather technical subject, the best of green buildings provide an accessible illustration of some aspects of the methodology. Green builders today use the sunlight, heat, shade and ventilation available naturally at a building site to reduce a building’s nonrenewable resource consumption. They design each part of the building to serve multiple purposes. For example, a wall may provide structural support, serve as a heat sink for storing solar energy, channel natural ventilation and also reflect daylight to where it is needed most. Such design requires novel approaches to familiar problems — but only seems difficult because it is still so unconventional. Green building designers are only beginning to exploit the power of whole system design, yet they are winning a growing market share in both the commercial and residential building sectors.

Whole system design can be applied to almost any technical design challenge, whether it is the development of a product, an industrial process or an entire industrial ecosystem. Operating cost savings can be substantial. (Typical energy use reductions range from 50% to 80% in new designs and from 10% to 30% in retrofits.) Capital costs are typically comparable with conventional designs. However, whole system design by its very nature cuts across traditional organizational boundaries. Such design is therefore best pursued in parallel with the integration of sustainability as a true organizational value. The value commitment is necessary to create the flexibility and organizational follow-through needed to benefit from this design approach significantly.

5. Business model innovation. Such innovation involves the redefinition of business scope, the redesign of internal processes and the modification of relevant customer and supplier processes in order to achieve economic and environmental benefits for stakeholders. This is most easily done by startups, a few of which are currently moving beyond technological innovation to develop creative new business models to serve the growing sustainability space. But existing businesses will ultimately have to face this challenge as well, as sustainable business model innovation gradually changes the competitive landscape.

One way to innovate is to convert the sale of physical products into services. A service business model creates incentives for the manufacturer to redesign each product to minimize life-cycle resource consumption and encourages customers to purchase only as much use of each product as they actually need. For example, a chemical producer could rent toxic chemicals, instead of selling them, and offer chemical recovery services, thus keeping the chemicals out of waste streams while reducing production costs. Since a service model also offers novel possibilities to serve customer needs creatively beyond those directly met by products, the net result can be the expansion of value added provided to customers.

6. Mission transformation. This perspective invites a business to consider seriously two very challenging questions: Do its products and services truly serve the development of deep human welfare, dignity and authenticity — instead of just contributing to the expansion of an economic system that treats material consumption as the ultimate goal of human existence? And can its efforts to operate less unsustainably ultimately lead to true sustainability in the full natural-systems sense of the word (i.e., capable of continuing ad infinitum without degrading the ecosystem)?

This is by far the most challenging perspective of the six, since it goes beyond the question of how a business operates to confront directly why the business exists and what kind of society it exists in. Most businesses are not ready to tackle these issues head-on, and neither are most members of modern society. Yet such questions will gradually become more pressing as both society and the businesses that serve it increasingly face the contradictions that underlie the conventional viewpoint of economic development as an end in itself. Competitive advantage will accrue to those who first see the possibilities inherent in mission transformation and begin actively learning how to work with them.