How do you define Sustainable Strategy

Introduction

Sustainable is something that can withstand the test of time.  People, organizations, and nations adopt several measures that, sometimes, have a myopic short-term vision.  Such initiatives lose out steam soon due to lack of motivation, non-availability of resources, or lack of awareness in the general populace.  Sustainability is often used closely with climate actions, sociological development, and ecological preservations.  However, the term is much broader as every action and decision is closely intertwined with the environment that we live in. 

There is always scope to improve performance, use resources more efficiently & effectively, and reduce the overall negative impact on the environment.  Adhering to the minimum statutory compliance may make the company a good corporate citizen in the eyes of the law, but going beyond the minimum standards will help transform the organization into a competitive yet respected behemoth.

At an individual level, it could be overwhelming and difficult to drive meaningful change.  But the impact is much larger when individuals, co-operatives, companies, and governments come together to fight the looming crisis. 

Corporate Governance

The world is moving to a new order where nations are increasingly adopting capitalism in a largely laissez-faire economy, which works on the sheer merit of the players.  Wealth creation for stakeholders becomes one of the primary objectives of the companies.  This race to creating wealth and staying ahead of others often leads to compromises in ethics, integrity, and the nature surrounding us.  Whilst the regulators can be made to look the other way in nations such as India that are evolving from the high-handed, iron-fisted socialistic styled policies, the long-term prospects look gloomy.  The climate change crisis, the ecological imbalance, and the increasing carbon footprint are not a result of carelessness.  It is an outcome of short-sighted leadership that has encouraged or stopped short of discouraging malpractices.  Eliminating malpractices is of more importance first rather than promoting best practices. 

The government driving cleanliness campaigns while failing to provide clean roads with easy access to toilets, trash cans every few metres is a glaring example of an unsustainable strategy.  What is the use of educating the masses to not dispose the wrapper on the road when there is not a single trash bin for kilometres together?  Not all would be motivated to dump the trash in their handbags and carry it through the day to dispose it at home.  

Electric Vehicles (EV) seem so hip, hop, and happening as we all feel cool about saving the environment by zipping through in vehicles that run on electricity instead of petrol or diesel.  The flipside is not just the lack of charging infrastructure or the running time of the batteries in these vehicles.  There is no thought process on the source of generating electricity, raw materials needed to produce the batteries or green disposal of the used batteries.  If the batteries would be charged using electricity generated from thermal power plants, the purpose is already defeated.  We are just beating around the bush.  Why not spend that much time and money harnessing renewable energy sources that can charge these batteries?  If the aspiration is to replace all gasoline run vehicles with EV, do we have that much raw material handy?  And finally, disposal of the scrap batteries.  This is a burning example of an unplanned, unsustainable strategy.

CSR and Business Strategy

In 2014, India became the 1st country to legally mandate that companies having net worth of rupees five hundred crore or more, or turnover of rupees one thousand crore or more or a net profit of rupees five crore or more during any financial year shall spend 2% of its average net profit on Corporate Social Responsibility (CSR).  The definition of net profit will be as per provisions of section 198 of the Companies Act.

This was indeed a great step to compel private sector organizations to invest on societal development as a way of paying it forward for reaping profits within that society or community.  However, this CSR mandate made many organizations to treat CSR as a separate vertical focused on doing greater good for mankind.  Ideally, Environmental, Social and Governance (ESG) should go hand in hand with the core business strategy.  A business plan that is unconcerned about the environment in which it operates or the community that it caters to, becomes unsustainable at some point or the other. 

Sustainability does not run parallel to business goals.  They are woven together and move together.  Instilling a sense of purpose in your organization can help attract a motivated, skilled workforce that strives to achieve business goals.  Making your company an organization that does good in the world, rather than just a place that provides a salary, can be a competitive advantage for better business.

A McKinsey report suggests that companies with high ESG ratings have a lower cost of debt and equity, and that sustainability initiatives can help improve financial performance while garnering community support.  The report further states that nearly 3,000 employees said the strongest motivating factors to adopting a sustainable mindset are to: align with a company’s goals, missions, or values; build, maintain, or improve reputation; meet customer’s expectations; and develop new growth opportunities.

Conclusion

Sustainable strategies do not require organizations to sacrifice business goals, profits or new initiatives.  On the other hand, strategies with ESG deeply imbibed within are more respected and stand a chance to do much better.  Millennials are conscious of the importance of ESG and are willing to pay more for products that are manufactured by organizations with good corporate governance and empathy for society.  Gaining market share and increasing revenues then becomes a by-product of the respect commanded in the market.

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