Every entrepreneur should want to improve the world. Simply because they can and because it pays off, writes sustainable business trailblazer, Marga Hoek. Making a positive contribution to the world is in fact a good business case, and an enduring one. Growth and upscaling of such business cases is exactly what this world needs now. This is the subject of Hoek’s latest book, Business as a Force for Good: The New Norm.
Businesses that do not improve the world, and especially those that consume and damage the social, environmental, and financial assets in the world, are main contributors to the enormous economic, environmental and social problems that we are struggling with at the moment. At the same time, this recognition makes it perfectly clear that it is the business world itself that holds the key to the solution of many of these issues.
Companies have been coming to this realization more and more in recent years. Although initially reluctant, organizations are increasingly and openly changing course and looking for new products and markets based on what Porter calls “shared value”: creating value for business and society simultaneously. They are starting to look at the traditional business case from a new perspective- a view that I refer to as ‘business as a force for good.’
The figures show how huge this new movement is. According to the 2015 New Climate Economy Report, last year alone 270 billion dollars was invested in low-carbon clean energy solutions, in addition to at least 130 billion in energy efficiency. And we have only just begun. In the report, “The Breakthrough Forecast” John Elkington and his team ascertained which developments in which sectors are the most promising. They defined 21 ‘breakthrough sweet spots’ – from 3D printing to sustainable air conditioning and drinking water management to genomics – with multi-billion-dollar market potential – making sustainable, positive business “a trillion-dollar business case.”
The movement has been spreading worldwide as the number of multinationals changing course has grown. Novo Nordisk is one such example. For many years they have been a leader in sustainability rankings in the pharmaceutical sector, and they are now a symbol of “doing well by doing good.” The company’s activities in China are exemplary for their new local approach: 15,000 jobs have been created since 2010, while CO2 emissions have been reduced by a factor of six, which equate to saving 140,000 years of life.
The food multinational Nestlé has also become a source of inspiration. Its Healthy Kids program has reached 7.6 million children in 73 countries in recent years. They have also actively supported the livelihoods of 700,000 farmers and have trained 400,000 farmers in sustainable farming techniques. Moreover, 72 factories within the organization are now ‘zero waste’. This is all in the context of a broader business case that includes social value but at the same time, generates good financial results.
From Periphery to Core
The rise of ‘business as a force for good’ can also be seen by the groundbreaking success of the recent climate summit in Paris. For the first time, governments and businesses widely recognized that they share responsibility for what undoubtedly is the greatest challenge in our history: to stop climate change and establish a world economy that is fundamentally sustainable. Paul Polman put it very well when he aptly said that the Paris summit was “a message to business.” And in my opinion, we should also add that it is: ‘a message from business’!
Paris also seems to reinforce an already existing movement, that of the 17 Social Development Goals (SDGs) of the UN. Although originally aimed at governments, SDGs are often a good compass for the
business community to develop sustainable business models in various sectors. According to a recent PWC report, the SDG Engagement Survey, companies in virtually all industries see ‘climate action’ as one of the five most important SDGs to act on. In my opinion, SDGs are the compass by which all areas of business, science and government should focus on in order to move forward in solving all of the 17 goals. “Begin with the end goal in mind,” as management guru Stephen Covey said, is an appropriate credo.
What also gives hope is that leading companies have clearly set their ambitions higher than ever before for 2020 and beyond. The SDGs are already providing direction in this regard. Unilever, for example, is not ‘merely’ striving for CO2 neutrality by 2030, but to be CO2 positive. In other words, to generate more renewable energy than the company itself needs, so that they can contribute to making the environment sustainable as well. Rob Boogaard, CEO of Interface Europe shared with me that the global player has recently formulated their ambitions beyond 2020 much more spectacularly than they had set for themselves a decade ago. These pioneering companies are doing this because they want to generate movement, and because they not only want to challenge themselves with radical innovative steps, but others as well.
The financial sector has also come to the realization that action is absolutely necessary. Achim Steiner, director of the United Nations Environmental Program has proclaimed 2016 the ‘Year of Green Finance’. I was there when the City of London launched the Green Finance Initiative in early January at the Mansion House and believe that it will lead to a new, sustainability-oriented structure of the financial system. The meeting was not only buzzing with positive energy, but concrete plans were also presented. There was no evasion of dilemmas, on stage or off. For me it was clear that day, as I was speaking to the Allianz CEO Elizabeth Corley, “the Paris Agreement has pushed green finance from the periphery to the core of future global capital markets.” And that is already visible. For example, the pension fund APG announced late last year that they will apply a much more rigorous sustainablity yardstick to its investment portfolio. They expect that approximately 30% of their investments will not meet this new criteria and will therefore be stopped without apology. And the remarkable thing is that this is not an appreciable loss of revenue and it even has a positive effect for the future.
A similar movement can be seen in the traditional shelters of capital: the stock exchange. In 2015,
30 stock exchanges worldwide – including Euronext and recently Qatar – joined the Sustainable Stock Exchanges initiative, thereby committing themselves to a set of best practices to promote sustainable investment. Ten years ago, the phenomenon of ‘green bonds’ didn’t even exist. In the meantime, over 42 billion dollars in green bonds have been issued and there are plans to upscale the ‘green bond phenomenon’ worldwide with a new reporting and risk tool. In fact, just in the past two years, the demand for green bonds has tripled and it is expected that it will triple again by 2018. The amount of sustainable investments has increased over the past two years by 60%, two thirds of which has been in Europe. This movement, together with the unmistakable trend to divest from fossil fuels, makes it clear that we are on the threshold of a new era.
Scale is Key
In summary: We know the areas where we need to act. The money is shifting in the right direction and the potential economic revenues are staggering. This is all very positive news, only it begs the question ‘Is there a but’? Unfortunately, yes there is. Companies that define their business as a ‘force for good’ and steer towards shared value must transform themselves. A different kind of leadership is necessary, new management principles, new forms of cooperation and a fundamentally different way of innovating. Seeing the tens of thousands of sustainable start-ups around the world, we know that there is no lack in transformative ideas with tremendous market potential. However, what is often lacking is the ability to scale-up these ideas quickly and turn them into real products or
services with real social value. Collaboration with big companies that have a lot of impact in the market can effectively fill this gap. That is how an innovative provider of mobile banking in Kenya reached results. By working together with Vodafone, they were able to provide more than ten million poor farmers, who have little access to the formal banking system, the ability to save towards reinvestment by using a cheap phone. The savings that this group of small business is now able to accumulate accounts for 11 per cent of the Kenyan GDP!
Well-established companies also find that it is not always easy from the existing business – or rather parallel to the existing business – to develop new business models for tomorrow. That is because the ‘old’ and the ‘new’ activities each require a different profit-and-loss approach. Those who fall into the trap of applying the same P&L approach of their existing business to innovative sustainable business cases will find that the latter is not going to ‘fly’ and that it often dies a silent death. Radical innovations require have a completely different business model and other partners than before, and therefore need an entirely different approach.
Fortunately, businesses can learn a lot from each other on this point: there are good examples of so- called ‘ambidexterous organizations’ which successfully apply a two-legged P&L. Within the walls of a profitable business, they develop tomorrow’s business based on an alternative P&L structure so that it has a chance to grow to full scale. Within The Sustainable Business, Climate-KIC, WBCSD and other networks, we work with companies to implement such organizational innovations. ‘Learning by doing’ is indeed the motto for leading companies. The Sustainable Business Association now has more than 200 member companies that initiate such innovative concepts or contribute to them. For that reason, we are increasingly seen internationally as a cooperative party that can set the stage, with future-proof business cases for the for the achievement of the SDGs.
Not the Exception, but the Norm
Striving towards making a positive impact on our world is not only the morally right choice, it is also the only right choice in a business respect. This is already the case, but it will be confirmed and perpetuated in the coming years. Unsustainable business models are losing ground faster than ever, making way for economic activities based on multiple value or ‘shared value’. And business is the major player in this. We are at a turning point: ‘business as a force for good’ will no longer be the exception, it will be the norm. Only then can we create an economy that is there for the world instead of the other way around. Or, in the words of the voiceover on the introductory film of my book: “an economy that will sustain, as does our world.”
About Marga Hoek
Marga Hoek is an internationally known trailblazing figure in the movement towards a new, sustainable economy and the transition to a new way of doing business. Over the last 20 years, Hoek has held CEO and board positions in business and numerous positions on advisory boards in business, science, education and government sectors. In 2010 she founded and is the current CEO of The Dutch Sustainable Business Association, the Dutch representative for the World Business Council for Sustainable Development. She is also the founder and Chairman of the Dutch Sustainable Science Association, a network designed to unite scientists in the drive towards a sustainable future.
Find out more here: www.neweconomybusiness.world