Week One: What is Sustainability and Why Should Strategists Care?

Week One: What is Sustainability and Why Should Strategists Care?

“Introduction to Sustainability … The Changing Landscapes of Business … New Rules of Doing Busine”
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Summaries

  • Week One: What is Sustainability and Why Should Strategists Care? > Introduction to Sustainability > What does sustainablity mean to you?
  • Week One: What is Sustainability and Why Should Strategists Care? > Introduction to Sustainability > Thought Leader Insights: John R. Ehrenfeld
  • Week One: What is Sustainability and Why Should Strategists Care? > The Changing Landscapes of Business > The Changing State of the Markets
  • Week One: What is Sustainability and Why Should Strategists Care? > The Changing Landscapes of Business > The Changing State of the Earth
  • Week One: What is Sustainability and Why Should Strategists Care? > The Changing Landscapes of Business > The Changing State of Technology
  • Week One: What is Sustainability and Why Should Strategists Care? > The Changing Landscapes of Business > The Changing State of Society
  • Week One: What is Sustainability and Why Should Strategists Care? > The Changing Landscapes of Business > Traditional Ways of Doing Business
  • Week One: What is Sustainability and Why Should Strategists Care? > The Changing Landscapes of Business > Thought Leader Insights
  • Week One: What is Sustainability and Why Should Strategists Care? > New Rules of Doing Business > Is There a Business Case for Sustainability?
  • Week One: What is Sustainability and Why Should Strategists Care? > New Rules of Doing Business > The Emergence of New Rules

Week One: What is Sustainability and Why Should Strategists Care? > Introduction to Sustainability > What does sustainablity mean to you?

  • Sustainability is a way of consumption which takes future needs and demands into account.
  • You can keep doing without getting extra resources from anywhere.
  • Enjoying the present without jeopardizing the future.
  • Sustainability is the way of living or doing any business that takes care of future.

Week One: What is Sustainability and Why Should Strategists Care? > Introduction to Sustainability > Thought Leader Insights: John R. Ehrenfeld

  • A development as a forum of a … development basically economic development… …and that’s an important point I will come back to, in which the fruits of the earth would be preserved… …for both the present generation and all those that follow.
  • In the years that followed, the development piece of it kind of got lost and it became simply sustainability … Sustainability as a sort of way of doing less bad… …that is, to-to engage in practices and business and in other institutions that were less impactful on the earth and on the people of the earth.
  • Because I believe first that many of the problems that we seek to find solutions for… …that is, the deterioration of the oceans, the un-inequalities among people on the earth… …climate change and many other things that go under the rubric of unsustainability, I think that development is in itself, one of the major causes.

Week One: What is Sustainability and Why Should Strategists Care? > The Changing Landscapes of Business > The Changing State of the Markets

  • Welcome back! So, now we have heard the views of a cross-section of people including scientists, academics, activist… …consumers and students on sustainability and the roles corporations need to play in ensuring a sustainable future.
  • Why has this question gained so much prominence now? Why has this issue become so important that it engages the top minds of government, corporate and the scientific establishments? That economists and philosophers are both discussing and often disagreeing on the way forward? Why are corporates, in the current economic system in which they are entrenched in… …are seen as both the genesis of the problem as well as the potential solution? To appreciate the role that corporations play in building a sustainable future, we need to step back and consider what got us here.
  • The third relates to the state of technology and the fourth to the state of society and politics.
  • These are very interesting facts that indicate that the size and the role of the corporation… …in the global economy is increasing and there have been some really interesting trends that have resulted as a consequence.
  • Between the coffee beans, sugar and the paper cup… …the Starbucks coffee creates a global hub that connects some of the poorest countries of the world with some of the wealthiest.
  • Two, with the emergence of large global corporations and their citizens… …traditional notions of loyalty to a country could be replaced by loyalty to companies, even that being temporary.
  • Three, government and corporate roles have been repositioned… …with governments focusing on becoming smaller but smarter and more efficient.

Week One: What is Sustainability and Why Should Strategists Care? > The Changing Landscapes of Business > The Changing State of the Earth

  • The world population hit a billion mark in 1804 … in nearly 17th centuries.
  • The population reached two billion in another 123 years; 3 billion in 33… …4, 5, 6 and 7 in the next 14, 13 and 12 years with the last billion added in about 13 years.
  • Impact may be measured as a function of population, affluence and technology.
  • Now, consider the fact that over two-thirds of the world’s population reside in China and India… …and they are becoming far more affluent than in the past.
  • If both population and affluence are increasing and technology has not kept pace… …the overall impact on the resources, the human foot print that we create, is likely to increase.
  • If the present trends of growth involve population, industrial production continue unchanged, the limits of growth will be reached by the year 2100.
  • The most probable outcome if these trends are left unchecked will be a sudden decline in industrial output and food availability.
  • What you see here is a graph listing those and several other variables over a period of time from 1900 to 2100.
  • As the population increases, the food per capita declines, industrial output declines and we seem to move into a irreversible decline.
  • To those of you who see a silver lining in this decline in population and pollution… …I need to point out that this is a result of a system’s break down and not so much because we are becoming more sustainable.
  • The boundaries estimated included climate change, ocean acidification… …stratospheric ozone depletion, land use change, fresh water use, interference with the phosphorous cycle… …biodiversity laws and various other factors.
  • Water scarcity is today fast turning into a source of conflict within and across countries… …while it remains a highly undervalued resource for the corporate sector.
  • The regions in red are regions that have acute water scarcity and the others which have a relatively lesser scarcity.
  • A one meter rise in sea levels could see the beautiful islands of Maldives submerged and Bangladesh’s rice production cut in half.

Week One: What is Sustainability and Why Should Strategists Care? > The Changing Landscapes of Business > The Changing State of Technology

  • Let’s examine the third force, that of technology.
  • Innovations and technology are what makes it possible for us to interact today.
  • A terrorist event in any part of the world could pull down stock markets elsewhere in the world almost immediately.
  • Facebook today has close to a billion unique visits per month and that’s more than the population of most countries of the world.
  • One might say the fastest growing country in the world today is Facebook.
  • Consider the impact Facebook, Twitter, LinkedIn and several other networks put together have.
  • I would like to talk about one more technology before we conclude.
  • Think about how manufacturing may be transformed by the emergence of new technology such as 3D printing.
  • We did a quick search to see the kind of products that can be currently manufactured… …using 3D printers, using a Google Image Search of the same.
  • You see the result here and you can see that pretty much anything from electric cars to iPod covers… …to prosthetic limbs can be manufactured using 3D printers.
  • It changes the value chain configurations across countries… …changes the environmental impact of the manufacturing processes… …creates new environmental and intellectual property right challenges.

Week One: What is Sustainability and Why Should Strategists Care? > The Changing Landscapes of Business > The Changing State of Society

  • The final force that I would like to review is the state of society and politics.
  • As technologies evolve, society has become more apprehensive and worried about their impacts.
  • As Monsanto discovered in Europe much to a chagrin, ignoring public opinion… …related to genetically modified food could lead to significant losses.
  • Fear of GMOs is not the only value that brings people together.
  • The interesting lessons here are that values that society considers important are changing… …and their ability to organise using new technologies is also increasing.

Week One: What is Sustainability and Why Should Strategists Care? > The Changing Landscapes of Business > Traditional Ways of Doing Business

  • New technologies raise new concerns of ethics and possible social and environmental impacts… …as well as challenge the current economic paradigms.
  • That’s not easy because it requires us to develop a perspective which incorporates the views of ethics… …sustainability and markets and social values put together.
  • What kind of challenges are faced by the corporate managers of the 21st century? In other words, what is the connection between the chocolate, the monkey and the phone? If you have seen the introductry video, you’ve heard about the chocolate and the phone.
  • What connects my friend the monkey to the chocolate and the phone? Let’s talk about the chocolate first.
  • The chocolate confectionary industry is worth around US$ 110 billion a year and the demand is growing rapidly.
  • A pound of chocolate calls for harvesting 400 cocoa beans and 10,000 litres of water.
  • The manufacturing of chocolate and the production of cocoa leads to several social and environmental impacts… …including deforestation, destruction of wildlife habitats, climate change, freshwater loss… …and there are even issues related to human rights including child labour.
  • Tomorrow’s challenge is about cell phones and gorillas.
  • So why do I talk about the cell phone today? The phone that you so love has many ingredients that have been sourced from half way around the world.
  • To address these concerns, Apple, Intel and others have got together to create the Conflict Free Sourcing Initiative… …to ensure that key minerals required for the rapid growth of this important industry are sourced in an ethical manner.

Week One: What is Sustainability and Why Should Strategists Care? > The Changing Landscapes of Business > Thought Leader Insights

  • Business faces many challenges today: globalisation, highly … enhanced competition, innovation.
  • Now, that’s something that business says is one of their challenges.
  • The challenge for business has been very well enunciated by the… …say-the World Business Council for a Sustainable Development as eco-efficiency.
  • Business has to begin to think innovatively about to whom it delivers its service.
  • That-what does corporate social responsibility really mean? Its has to be much more than taking a few pennies out of the profit and trying to remedy the causes… …the-the harms that the business caused in the first place.

Week One: What is Sustainability and Why Should Strategists Care? > New Rules of Doing Business > Is There a Business Case for Sustainability?

  • Today social legitimacy, that is, the tacit approval that society gives to a firm to operate in-in its vicinity… …is becoming at least as important if not more important than legal permissions.
  • There are numerous stories of firms being prevented from carrying out… …their lawfully permitted activities in the face of opposition by local communities or citizens.
  • The threats of bankruptcy faced by tobacco firms in the face of tobacco litigation is a case in point.
  • In one such celebrated case against one firm, the jury initially awarded a payment of US $27 billion, enough to wipe off the net worth of the company.
  • There exists a clear and irrefutable relationship between corporate performance and its sustainability strategy.
  • Is there a business case for sustainability? To answer this question, we need to understand how firm level advantages are generated.
  • To summarise on a basic premise of strategy, competitive advantages at the firm level… …are a result of value creation, capture and management activities of the firm.
  • These are most often reflected in a firm’s ability to manage markets, competition, cost, risk and other intangibles… …eventually resulting in reduced cost, improved revenues or other competitive advantages.
  • Sustainability-driven approaches can help firms defend existing markets or increase market shares… …create or access new ones, overcome existing barriers to entry or create new ones for potential competitors.
  • Eco-smart measures may reduce cost of doing business by improving resource and energy utilisation efficiencies… …reducing operating cost and downtimes and reducing potential for liabilities and damage claims.
  • Firms can increase the value derived from inputs by increasing resource utilisation efficiencies… …and extracting as much value as possible from the way stream before final disposal.
  • Risk is mitigated due to reduced potential for liabilities… …better resilience to input cost fluctuations, improved credit worthiness-all of which in turn improve a firm’s access to low cost capital… …protect current investments and assets.
  • Finally, firms using sustainability as a core value may also see benefits in intangible assets… …by way of enhanced corporate reputation or by improving employee recruitment, engagement and retention.
  • How have firms responded? While initial approach has focused on compliance… …the scale, scope and complexity of these responses have increased in the recent decades.
  • We did an analysis of information technology enabled firms based on the data submitted to the carbon disclosure project.
  • The analysis revealed that many firms had incorporated sustainability criteria into their performance evaluation processes.

Week One: What is Sustainability and Why Should Strategists Care? > New Rules of Doing Business > The Emergence of New Rules

  • Strategy is a game of chess in which players make moves and counter moves in a winner-takes-all framework.
  • Borrowing on a very interesting framework developed by Carol Sanford, who also wrote a very interesting book… …The Responsible Business, we ask the question, “What are the basic principles of doing business successfully”? In conventional business school language, it is growing income over expenses… …growing the asset base and getting increasing returns on investment.
  • The traditional ways of doing business involved investing in the economic capital to produce goods and services.
  • While businesses continue to make investments in economic capital in the interest of continued growth and profitability… …they have not been equally adept or proactive in making investments to maintain the social and ecological support systems.
  • While business revenues have grown, social and natural capital have got destroyed.
  • The new game is not between two people and it’s not a winner-take-all game as well.
  • How do you play this game and manage the contradictions and trade-offs… …will determine the future of our organisations, both in terms of longterm survival and sustainable growth.

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