Wednesday, October 24, 2012

Creating an Upward Spiral of Value: The responsible business and sustainability

By: Josie Plaut, Associate Director

Over the past 10 years businesses has taken a notable interest in the idea of sustainability. From Fortune 500 companies to small firms and boutique operations, everybody wants to be green. Some companies and organizations, of course, are more successful than others. Shining stars like Interface Carpet, Patagonia, and Seven Generations have integrated sustainability into their core business identity – their corporate DNA. Most companies, however, struggle to fully integrate sustainability as an integral part of their business. One of the reasons for this is that green initiatives are often viewed as an add-on, optional (and often costly) measures that feel good, but are not a fundamental component of good business practice. Like lipstick on a pig…

Carol Sanford’s recent book, “The Responsible Business: Reimagining sustainability and success,” shows how sustainability is an integral part of being a good company.  She uses a star diagram to represent the path toward the quintessential top line – the ultimate measure of success.  The five components / stakeholders are Customers, Co-creators, Earth, Community and Investors.  Like tightening down the lug nuts on the wheel of your car, each of these stakeholders is addressed in a star pattern – none too fast and all are equally important.  The key is to add value beyond expectation in each of these areas, simultaneously.

  • Customers: Start by truly understanding your customers’ life – understand, maybe better than they do, their needs, wants, hopes and dreams.  Ensure the customer feels you are taking better care of them than competitors would.
  • Co-Creators:  Actively develop and engage the creativity and thinking capacity of your employees and key business partners (collectively called co-creators) to serve the customer.  Establishing and maintaining a direct connection between co-creators to the lives of your customers is essential.
  • Earth: Understand how your business is directly dependent on the earth and the services it provides.  Then cultivate a partnership with the earth that enriches and nourishes the systems that your business depends on to ensure that those resources will be available into the future.
  • Community: Become a member of your community through understanding, respecting and building on the special characteristics, strengths and needs of each place.  
  • Investors: By time you have done the other four, there is an upward spiral of value creation that directly benefits the investors.  Increased customer loyalty, remarkable organizational alignment driven by shared purpose, ecological responsibility and strong community connections result in exceptional returns.
Increasingly, environmental, social and corporate governance (ESG) practices are becoming metrics for investors and community members to judge the quality and character of companies.  Goldman Sach’s recently looked at 25 environmental, social and corporate governance indicators across companies in a variety of sectors and found that the ones who performed the best on the ESG indicators also provided 25% higher returns on their stocks than their competitors.  The time to make deep and meaningful shifts toward being a responsible business is now.

This isn’t just for big business, though. Small and medium size companies stand to benefit from taking a responsible business approach.  A great local example right here in Ft. Collins is New Belgium Brewery.  Heck, I don’t even like beer and I’m loyal to them as a company! Why is that? Because they have done a remarkable job of addressing the quintessential top line.  Scotch anyone?