Footprint Blog

New Social Contract For Green Business

Posted in Comment,Government,Sustainability by foodservicefootprint on May 11, 2009

The following article by Bob Lurie appears on the Harvard Business Publishing blog today. We feel it beautifully articulates the shift in emphasis required by business towards sustainable practices.

We’re in an interesting period in history when the relationship businesses have with society is undergoing a fundamental, permanent change. And sustainability, if not the epicenter of that change, certainly exemplifies it.

This new social contract will bring new demands and new relationships for business leaders to navigate around issues of sustainability and environmental resources. From my talks with corporate leaders, I can see that many companies are unprepared. Their corporate cultures, organizational capabilities and processes are not ready to support sustainability as central to their business. If firms don’t change, they will stumble into what will seem to them like unanticipated crises, episodes where they get into trouble time and again. It’s time to recognize the shift, make changes and deliver on both the responsibilities and opportunities that sustainable business practices represent.

Historically, the social license to operate or ‘contract’ has been an agreement between companies and government, the latter acting on behalf of the public. Some of these social contracts, such as those in highly regulated sectors like utilities or pharmaceuticals, are explicit, active, and central to the strategy and operations of the business. In these situations government is an essential actor, conducting a constant conversation with businesses about prices, product features or service terms, costs and the like; in turn, senior executives in these sectors devote considerable attention to embedding regulatory considerations into their business strategies, and managing their relationship with government agencies.

For the vast majority of firms, however, the social contract is implicit and inactive. Businesses do their best to follow the various rules set up by government regulators for everything from worker safety to payroll deductions. Senior management in these sectors does not look to have an active conversation with government; rather, their approach is simply that of static compliance — defined as meeting the requirements of these rules. Once new rules have been understood, and their costs and consequences established, they push responsibility for these activities down in the organization.

This is all changing — for both types of firms — and sustainability is at the center of the shift. One reason is the steady increase in the public’s interest in, and willingness to act on, sustainability, both as citizens and as consumers. Another, perhaps more important reason has been the rise of non governmental organizations (NGOs), like the Sierra Club and The Nature Conservancy that are devoted to challenging and changing businesses practices with respect to the environment, and have the charters and the resources to persist in their mission over decades. For much of the past century, issue-oriented groups tended to be temporary, arising around a single piece of legislation, or correction of a particularly pressing social ill. Today, many NGOs are long-lived, robust, ever-active watchdogs and actors. They consistently step in, pressing business to change, even when current laws are being met and government’s attention is on other issues.

NGOs have pressed government and business to elevate their commitment to sustainability. Taken as a planet, our economies have a long way to go before we change our behaviors, before society and businesses have sustainable practices that make little or no impact on the global ecosystem. This quest will go on for many years — and it will influence the relationship enterprises have with government, NGOs and society at large. It will require more from businesses to meet these challenges. And most companies are not ready to deal with this reality.

Why are they so ill-equipped? Over the last 20 or 30 years, firms have, for the most part, put sustainability issues into “the compliance bucket.” They decided there was no advantage to be had from doing better on environmental issues than what the law required. Many corporations set up compliance organizations to meet established rules, and then went back to business as usual.

Business leaders today must recognize that being in compliance is simply not enough. Until leaders of a firm can say they are engaged in a process of continuous sustainability improvement — akin to continuous improvement and investments in other parts of their business — they are out of step with our changing world.

To overcome this challenge, business leaders will need to treat sustainability as a new dimension of their operating strategy — and not as a drag on their effectiveness. And they will have to end their fragmented treatment of sustainability issues, creating a high-level, centralized view of green business practices with associated responsibility and accountability to making measurable progress on articulated goals.

Because the nature of sustainability is never-ending, those goals will be a moving target. And because firms pursuing these goals will do so under a new social contract, they will be continuously monitored by people who are outside government, with motivation to inspect every aspect of your company’s green record.

For example, when Apple recently unveiled its latest MacBook computer notebooks, it took pains to shout they were green (The world’s greenest family of notebooks”). A website helpfully explains what they mean by this in terms of packaging, materials and energy use and includes a statement about Apple’s commitment to sustainability. That all sounds wonderfully responsible, but it could also be seen as a response in an ongoing dialogue with groups like Greenpeace, which in November ranked Apple below average in its guide to green electronics.

We’re entering a time in which moves like Apple’s are mere table stakes. The question will be not whether you are pursuing such programs, but how much you are doing — for your business and the planet. Don’t be surprised by the new demands.

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