What are the ingredients of a sustainable business? Australian academics Wendy Stubbs and Chris Cocklin have tried to develop a model of sustainable business based on two case studies, chosen as ‘ideal types’. The chosen case studies are both well-known already: US carpet manufacturer Interface Inc (which features – as one of the good guys rather than one of the psychopaths – in the movie The Corporation) and the Bendigo Bank in Australia.
These two examples do not typify firms that make shallow claims about their sustainability, eco-friendliness, carbon neutrality and environmental best practice. They are carefully chosen as firms striving for real sustainability, in order to show what could be possible. Therefore, I think we can regard the conclusions drawn by Stubbs and Cocklin as indicative of what a sustainable business should look like.
1. Profits are viewed as a means to other ends – environmental and social sustainability. Or, as Stubbs and Cocklin put it, sustainable businesses “must make a profit to exist but they don’t just exist to make a profit” (p.121). Now, neoclassical economics suggests that the primary objective of a business is to generate returns on investment for shareholders, and everything else in a business model must be subordinate to that end. Therefore, if a sustainable business really does not regard profitability for shareholders as its primary purpose, then it has overturned one of the central concepts of market capitalism.
2. The need for leadership. A business that follows a pathway to real sustainability will have to change significantly within itself and develop what Stubbs and Cocklin call “internal structural and cultural capabilities” of sustainability (p.123), including a “sustainability mindset” (p.122). However, the radical attitude to business objectives outlined above is hardly the stuff of executive MBA programmes. Given the widespread lack of a sustainability mindset among business executives, it is therefore perhaps not surprising that, in the meantime, “visionary CEOs” (p.122) such as Interface’s Ray Anderson are required to push the sustainability agenda within a particular business.
3. Changing the organisational culture. Stubbs and Cocklin suggest that a sustainable business can use the “triple bottom line” approach – the equal focus on environmental, social and financial indicators or reports as performance measures – in ways that can help to instil the sustainability mindset into the people within an organisation. Thus the triple bottom line can be about far more than just impressing the outside world with a few environmentally friendly lines in an annual report.
4. The business organisation is not at the centre of the sustainable business model. This point fits with the downgrading of the profit motive discussed in point 1, above. Sitting within the context of the socioeconomic system, the sustainable business is part of a network formed along with the people, organisations and institutions often referred to as ‘stakeholders’:
– other businesses in the same market,
– industry bodies,
– local communities, employees and customers,
– business partners, other members of the ‘supply chain’,
– investors and financial markets,
– civil society, media, NGOs.
This socioeconomic network also sits within the context of the natural environment and so nature itself is viewed as a stakeholder. This perspective drives the use of renewable resources and technological innovation in the business, along with strategies to offset the environmental impacts of suppliers, to minimise or repair the environmental damage caused by the operations of the business.
5. Changes to the socioeconomic system are needed to allow businesses to achieve sustainability. Individual firms “can make significant progress towards achieving sustainability,” say Stubbs and Cocklin, “but ultimately such organisations can only be sustainable when the whole system of which they are part is sustainable” (p.122). Such changes must be structural (eg in transportation systems, and taxation systems) but also cultural (eg in attitudes to investment returns, consumption, economic growth and wellbeing). The stakeholders listed above are an essential part of the picture when it is recognised that the shift to sustainable business requires changes to the systems that currently determine, to a very large extent, how business is conducted.
Overall, these ideas are quite an advance on the insipid version of sustainability that currently dominates corporate and government thinking. Indeed, removing the firm from the centre of the mainstream model of business might signal a shift in thought as heretical as the Copernican model of the solar system appeared to the Catholic Church in 16th century Europe.
And the recognition that systemic changes must be cultural as well as structural comes as a welcome rebuttal to the technocrats who think that smart inventions, financial instruments and civil engineering projects will be sufficient to avert the ecological crisis.
Stubbs and Cocklin do acknowledge that while they have focussed on what a sustainable business model looks like, they haven’t really examined how Interface Inc and Bendigo Bank reached their current “level of sustainability” (though the comments about visionary leadership and the triple bottom line do seem relevant to the process of change at Interface). More to the point, perhaps, they also do not provide any clues as to how to achieve the system-wide structural and cultural changes they see as essential.
The ‘how’ of such change is what politics is all about; not just the machine politics of elections – which can help bring about the structural change – but also the movement politics which can lead the socio-cultural change that is also so desperately needed.
Wendy Stubbs and Chris Cocklin (2008) Conceptualizing a “sustainability business model”. Organization & Environment, 21(2), 103-127.