Going green can be profitable -- that is the conclusion of multiple studies that have looked at the financial outcomes of corporate efforts to improve their environmental impacts. By reducing emissions, packaging materials, and waste, Walmart, Unilever, and many other companies have been able to reduce their costs and improve their environmental impact. This has led some to conclude that the best way for corporations to serve society and to operate sustainably is to focus on reducing costs and maximizing their profits.
I think that this is a flawed conclusion. The alternative to this profit-above-all approach is a sustainably effective approach that focuses on the triple bottom line of people, planet and profit. Organizations that practice and integrate sustainability thinking put it into all of their operations -- they do not just work on what leads to profits. They integrate sustainability into their very DNA, and everything proceeds from that. These organizations measure themselves in all three areas and structure and design their operations to perform in ways that have a positive impact on all three.
Another huge difference is that sustainably effective organizations don't look at green or sustainable initiatives as special programs -- as mere window dressing. One-off social or environmental initiatives are not enough. A sustainably effective organization makes much deeper and more comprehensive organization changes.
Sustainable performance is a part of everything the company does -- from how employees are managed to the overall structure of the organization and how work is designed. It must be part of the company's identity and embedded into every aspect of the organization. My recent book, Management Reset: Organizing for Sustainable Effectiveness, explains what organizations must do to make this happen.
A number of CEOs see the value of the sustainable effectiveness approach, including Kenneth Chenault of American Express and John Mackey of Whole Foods. In fact, Chenault has said that in order to pursue profits, corporations must act in ways that protect and enhance the world we live in.
Many organizations still have the "profit-above-all" mentality. They focus primarily or exclusively on the obvious financial gains that exist from doing the right things environmentally and socially. If they do something that does not immediately have a positive affect the bottom line, they usually deem it a philanthropic act and strive to get public recognition for it.
The problem with organizations that adopt a bottom line orientation toward sustainability is that they only do those things that are visible and have a quick financial payoff. They do not go beyond them to search for practices and policies that make sustainable performance a core issue in everything the organization does. They look for cost savings and try to avoid fines, public criticism and other negative outcomes. They spread a good veneer over the organization, but they do not change the essential nature of the organization.
BP had a long history of being fined for damaging the environment and having a high employee accident rate even before the Deepwater Gulf of Mexico explosion. Does anyone remember the company's "Beyond Petroleum" marketing efforts? BP started a highly publicized green energy business in order to improve its image, but it did not alter its commitment to profits above all else. And it did not redesign itself to achieve triple bottom line performance.
The "problem" with the sustainable effectiveness approach is that it takes strong leadership at the top of a corporation to put it in place and a willingness to live with the reality that at least in the short-term it may not be the most profitable way to run a corporation. Thus, there is the issue of why a corporation should commit itself to this approach.
One reason for adopting the sustainably effective approach it is that if more and more corporations adopt it there will be less and less need for government intervention into the private sector. The most important reason, however, is that it will lead to a world in which all of us will enjoy a higher quality of life. Let's hope more and more corporations and their executives see the world this way and commit their organizations to sustainable effectiveness, not just sustainability programs.
Crossposted from forbes.com.
"The "problem" with the sustainable effectiveness approach is that it takes strong leadership at the top of a corporation to put it in place and a willingness to live with the reality that at least in the short-term it may not be the most profitable way to run a corporation. Thus, there is the issue of why a corporation should commit itself to this approach."
The "problem" with this argument is that it gives way too much slack to short-termism.
The truth about short-termism is that it's incompatible even with sound risk-adjusted return allocation.
Short-termism isn't just greed. It's a lack of rigor, at its root.