In 2009, stimulus package has trumped sustainability as expected. That is the current issue.
In the long run, sustainability holds well on its own.
Sustainability and Stimulus package search trends in Australia
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Monthly Archives: May 2009
Sustainability strategy in the downturn
Financial Times in its latest mastering management series discusses sustainability in the downturn.
The interesting aspect is their emphasis (as I suggested in an earlier post) about the decline of CSR and rise of Sustainability in the downturn.
We see things differently. The downturn will produce more integrated, strategic and value-creating sustainability efforts in many companies. While traditional corporate responsibility and philanthropic initiatives may suffer, core elements of the sustainability agenda will survive or even thrive in a re-ordered economy.
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Changing economic and regulatory environments will lead more companies to adopt corporate strategies that include sustainability as a core issue. In their simplest form, such strategies will focus on helping a company’s customers to cope with their own sustainability issues.
CSR is Insurance but Sustainability is strategy.
CSR is Insurance
Milton Friedman suggested a long time ago that socially responsible deeds that companies perform make sense only if there is a benefit for the company.
Now Freek Vermeulen, an Associate Professor of Strategic & International Management at the London Business School writes in his blog about CSR and its financial effect on companies.
He comments that there has been no evidence to prove that being socially responsible is financially beneficial to companies. In fact, it helps companies if they are in trouble.
Professors Paul Godfrey, Craig Merrill, and Jared Hansen, from Brigham Young University and the University of North Carolina, came up with a clever insight why the socially responsible types may be better off after all. They didn’t just look at the social and financial performance of all kinds of companies–they decided to specifically focus on companies that got into trouble because some negative event had happened to them. This could be the initiation of a lawsuit against the firm (e.g. by a customer), the announcement of regulatory action (e.g. fines, penalties) by a government entity, and so on. Then they measured what happened to the share price of the company as result of the event. Their finding? The degree to which you were punished by the stock market for the negative news depended on how much of a socially responsible company you were.
CSR may be insurance but again, it is still not justification enough.
We have covered those topics before.
Joshua Margolis and Hillary Anger Elfenbein, writing in the January 2008 edition of the Harvard Business Review (subs req. free for the month) on social responsibility inform us that after a meta-survey of 167 surveys over the last 35 years they find that there is a low correlation between doing good and doing well in business sense.
Meeting human needs is a big opportunity, and by being efficient and economical it is good for the shareholders. Considering the earth’s living system in design and operating decisions is being fair. To treat stakeholders with respect is just. To be committed to the well being of both economic and ecological systems is ethical business.
As the Dow Jones Sustainability Index defines it : Corporate Sustainability is a business approach to create long-term shareholder value by embracing opportunities and managing risks deriving from economic, environmental and social developments.
Sustainability; from a business point of view; is all about “Shubh Labh” – to make a fair and just profit.
There is a case for sustainable business but please do not put that under the wrapping of CSR.
Less is More
Susan Cramm in Harvard Business:
With the cash crunch, focus is coming back in style. A lot of people are hoping for a future — both professionally and personally — that will be, in the words of Peggy Noonan, “pared down, more natural, more stable, less full of enervating overstimulation, of what Walker Percy call the “trivial magic” of modern times.”
During the “good times” only 10% of managers lived in a state of purposefulness, defined by clarity of intentions and vigor that is fueled by intense personal commitment (with the balance of managers operating in a state of disengagement, procrastination, or distraction.)
There are many who believe that these “bad times” will bring a kind of satisfying scarcity. That companies (and families) will start focusing on what’s most important by stripping the “nice but not necessary” out of their daily existence.
Consider the case of Frontier Airlines, managing through Chapter 11 bankruptcy-court protection. Given the severe shortage of resources, they reduced the number of IT projects from a few hundred to just 10. Instead of each person having three projects, every project now has five people. The impact of moving 10 balls a mile versus 300 balls an inch? In the words of the CIO, “I believe we are getting more done, but I also believe that we are getting better value done.
Focus is quite important and I am learning that personally. After the birth of my daughter I realized the number of things that I could cut down and still be happy and productive.
