10.01.2020 Fabian Roschig

A new climate for business and innovation — Why the current approach must change.

A new climate for business and innovation — Why the current approach must change.

Short-term profits vs. long-term value creation for all stakeholders and society at large

For a long time as business owners or innovators, we often limited our ambition to optimize our product or service offering to serve the needs of our customers, users, shareholders or internal stakeholders to ultimately improve our financial bottom line or strengthen our position within our company.

In search of an immediate or short-term return on investment, businesses have often overlooked how they can continuously provide value not only to their most direct stakeholders but as well how their decisions and actions affect the environment or society at large in the long term.

This is pretty natural as we live in a VUCA world (volatile, uncertain, complex, ambiguous) and first of all, we are thinking of protecting our current business which is hard enough with an unprecedented set of (technological) disruptions, new market entrants and changing competitive environments as well as changing customer expectations and behaviors.

“If companies don’t make money and economies aren’t robust, climate change, environmental concern and gender equality fall by the wayside.” — President and CEO of Huntsman Corporation

A new business imperative

As topics such as global warming or other natural catastrophes are getting more and more exposure and people such as Greta Thunberg are reaching celebrity status, the expectations of customers and shareholders change and we have to redefine the role of business in society, in sync with these changing customer expectations, and define clear business purpose that goes beyond short-term profits and own interests.

Organizations are increasingly judged on the basis of their relationships with their workers, their customers, their communities, as well as their impact on the environment at large.

Consumers expect companies to give more back. There is a notable shift in consumer mindset as they increasingly demand companies to be socially responsible. (Deloitte: The rise of the social enterprise 2018)

In fact, 85 % of customers hold companies accountable for improving the quality of their lives!

Photo by Markus Spiske on Unsplash

Many businesses are already implementing sustainability into their operations and understand the importance of doing so as seen in the 2019 UNGC Accenture Strategy CEO Study on Sustainability:

48% of CEOs are implementing sustainability into their operations. —

71 percent of CEOs believe that with increased commitment and action business can play a critical role in contributing to the Global Goals.

“L’Oréal will continue to be a high-performing company if, and only if, it generates sustainable growth while creating shared value. It’s the condition inherent to the company’s long-term success and to safeguarding our planet. Our future as citizens of the world hangs in the balance.”
Jean-Paul Agon — Chairman and CEO, L’ORÉAL
“Achieving more sustainable, long-term growth requires us to continue reducing sugar where possible while ensuring our portfolio around the world is broad enough and diverse enough to meet our consumers’ needs. Our sustainability efforts aim to help strengthen the communities we serve and address the challenges we face as a business.”
James Quincey — CEO of Coca-Cola Company
“At a time when our ECONOMIC MODEL is pushing the limits of our planetary boundaries and condemning many to a FUTURE WITHOUT HOPE, the Sustainable Development Goals OFFER US A WAY OUT”
Paul Polman — CEO of Unilever
“It’s time for leaders to ensure sustainability goals are firmly embedded in corporate strategy and company purpose.”
Peter Lacy— Senior Managing Director, Accenture Strategy, UK & Ireland and Accenture WEF Lead

The Financial Times wrote in September 2019, “businesses that combine profit with a wider purpose will benefit from the reinforced commitment of employees and customers. Those that fail to do so will not survive to become the companies of the future.”

Planet AND Profit

Creating sustainable growth models and business is not just good for the environment and society; it makes good business sense and focus on sustainable growth (not only from an ecological perspective) might be one of the biggest opportunities of our time.

As stated by the Business & Sustainable Development Commission, achieving sustainable business models opens up US$12 trillion of market opportunities and creates up to 380 million jobs.

“Making sustainable living commonplace for our customers is helping drive profitable growth” — Unilever Sustainable Living Plan
“In 2018 Unilever’s Sustainable Living brands were growing 69% faster than its wider portfolio, delivering 75% of overall growth”

Having a closer look at the B Corps movement (Certified B Corporations are a new kind of business that balances purpose and profit. They are legally required to consider the impact of their decisions on their workers, customers, suppliers, community, and the environment.), we can see that B Corps in the UK are growing 28 times faster than the national economic growth of 0.5 percent.

The role of innovation

“With a decade to deliver the Global Sustainability Goals, technology has the potential to accelerate progress while helping companies enhance their competitive agility.”
Jessica Long, Managing Director — Accenture Strategy, Sustainability​

For me innovation basically serves 3 purposes:

  1. Risk mitigation
  2. Creation of new value
  3. Driving efficiency

Especially when it comes to point 2 & 3 in the past we had a pretty narrow focus on our own company as I mentioned at the beginning of the post. When we now change the focus to a broader picture, businesses will increasingly recognize that it will be impossible to meet the world’s growing demand for products and services purely through a linear increase in production and consumption (which from a sustainability perspective would not be wise either). We won’t be able to address the ecological and social challenges of the day without fundamental business model innovation.

With all the changes around us (disruptive technologies, changing customer needs, demographic shifts, and environmental pressures) traditional business modes will lose their competitive edge and fail. Therefore, in my opinion, innovation has to focus more on a system approach considering the triple bottom line framework:

picture from https://travelandmobility.tech/

My core belief

I believe that driving profitable business while ensuring long-term growth and sustainability is a mutual reinforcement with technology as an enabler.

We have to learn to deliver new ventures and new business models with a lasting positive impact and turn sustainability challenges into new profitable businesses.

We have to bring digital skills and sustainable practices together to unleash long-term viability and growth among businesses, communities, and society.

If we get the balance right between these concepts, we embrace the triple bottom line the business will thrive.

Businesses are in a key position (because of their assets and connection with the consumer) to create a fair, resilient and sustainable economy, but it requires courage, ambition and the understanding of the urgency to make change happen.

It won´t be easy, but rewarding!

Photo by Hello I’m Nik 🇬🇧 on Unsplash

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#sustainability #innovation #change

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