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October 20, 2009 | Volume 3 | Number 9
October 20, 2009
Sustainability: Achieving the Competitive Advantage
By Jessica McKenzie Peterson, MS and Bodhi Rader, MPhil
Have you ever wondered what it means for a company to be green? What it takes to be sustainable, to be innovative, to be competitive? Sustainability is a tool that can engage employees and build the resiliency your organization needs to thrive beyond the economic downturn. Sustainable organizations have been shown to outperform the competition (Goldman Sachs, 2007). This article will introduce the concept of sustainability and show you how to leverage it to improve your organization’s bottom line.
Defining Sustainability
“Sustainable development meets the needs of the present generation without compromising the ability of future generations to meet their needs.” This definition comes from the World Commission on Environment and Development report, Our Common Future (Brundtland et al., 1987) and brings together the idea of intra- and inter-generational equity that is inherent to sustainable strategy. Sustainability is about working and living in a way that responsibly meets immediate needs, but also considers the bigger picture and how our decisions and plans affect the future.
Sustainability involves more than just environmental goals. The triple bottom line examines people, planet, and profit with sustainability as the goal, but the challenge and overarching mission is to achieve a balance between the three. For example, examining only the Gross Domestic Product (GDP) of a country will show its economic health, but provide no indication of the country’s environmental or resource state, or even its social health. A more comprehensive view considers the economy as a subset of the environment. Capitalism in its current form does not truly account for its most valuable and irreplaceable resources, people and the environment, but without the labor and “free services” the environment provides, there would be no economic activity (Lovins, 2001).
Sixty percent of companies believe corporate social responsibility is critical to success and has increased in importance over the past year (IBM, 2009). Sustainable development also has the power to cause a chain reaction. An example of this is identifying an additional value stream by reselling your waste to a company that can use it as a product input as opposed to paying for it to be trashed – this type of sustainable thinking can improve operations and the triple bottom line. Integrating sustainability practices into your core business objectives can drive innovation, save money, and engage your employees and customers. Sustainable organizations plan for the inevitable and serve as good business models, especially in a tough economy, where survival depends on resilience.
Employee Engagement
Sustainability can be a breeding ground for innovation, with employees functioning as the ultimate go-to resource for cost-cutting ideas. The Conference Board (2006) found highly engaged employees outperform disengaged co-workers by 20 to 28 percent. How can you get employees engaged in your organization’s sustainability initiatives? Build an infrastructure that supports innovation, encourages clear, transparent communication, and is exhibited to employees by example from management (Werbach, 2009).
Sustainability practices can serve as an advantage when it comes to hiring and retention, and a pro-environmental recruiting message may also be more attractive to job seekers (Behrend, Baker, and Foster Thompson, 2009). In fact, early adopters of sustainability principles typically attract more conscientious and committed employees because they can relate to the organization’s mission. Especially for younger generations (e.g., Millenials), eliminating conflict between employees’ personal values and those of their employer can help improve engagement levels.
In times of economic uncertainty, when extrinsic rewards like pay and job perks are reduced or frozen, employees search for meaning in their work. Sustainable development can help inspire and engage your workforce through difficult times by helping them feel ownership in the business as well as a personal responsibility for reducing their impact on the environment. Cultivating sustainability provides your employees with an opportunity to serve something larger than themselves and gives your organization a greater purpose beyond profits (Werbach, 2009).
In the book Green Recovery (Winston, 2009), the author introduces a four-point strategy for using green initiatives to enhance business performance: get lean; use value-chain data to cut costs; get creative; and engage employees. Some tips to enhance employee engagement are to provide employees with the resources they need (e.g., time, flexibility) to get creative and engineer solutions that will help your organization’s triple bottom line and reward employees for their creative ideas, while tying rewards directly to outcomes.
Optimizing Organizational Outcomes
Consider looking at your business operations in a holistic manner. That might mean taking responsibility for the impact your organization has beyond its immediate and visible surroundings. A whole-systems view examines where your products’ resources come from, their lifecycles and associated impacts, and their resulting waste stream. Accounting for inputs and their source, as well as your outputs and their end state will force you to view your operations within a larger ecosystem. This type of sustainable thinking will reveal your organization’s footprint and could lead to more efficient and effective use of resources.
A sustainable business model can lead to better operational efficiency in your organization. Decreased resource use and streamlined administrative and/or manufacturing processes may also lead to financial gains and boost productivity. As expected, your employees will be the ones who identify many of these opportunities for improvement, and adopting their suggestions serves to increase employee involvement and recognize their contributions, both of which can enhance individual and organizational outcomes.
Think about the following example: How would a manufacturing plant change its behavior if it had to take responsibility for its own waste in a closed system? If the company put the waste in an on-site landfill, then it would reduce the amount of land available for their own business operations. To account for this, would the company purchase materials based on how those materials will be used and ultimately disposed of, reduce what they need, or design game-changing technological developments? The plant might design its business processes based on biological models (Hawken, Lovins, and Lovins, 1999) or focus on providing a service rather than the sale of goods (i.e., changing the business model from selling cars to a company that provides transportation solutions Lovins, Lovins, and von Weizsacker, 1997).
The Greater Sum
Strategic sustainability is not about adopting a principle or two, but rather a transformational mind shift that will demonstrate its return on investment. Sustainability can be thought of as a responsible business approach that consistently builds value across the organization. In a changing economic, environmental, and social landscape the leading organizations of the future will understand the effects beyond their office walls. These companies will have the courage to ask tough questions about their system-wide impact and use the answers as a means to drive ahead as the new vanguard of their industry.
In the long run, “only companies that make sustainability a goal will achieve competitive advantage – that means rethinking business models as well as products, technologies, and processes” (Nidumolu, Prahalad, and Rangaswami, 2009). The change will require the ability to see beyond short-term gains and this quarter’s returns and focus on creating value for all of your stakeholders – customers, employees, shareholders, and communities. Developing a sustainability framework for your organization not only makes good business sense, but also common sense.
Now that you have a better understanding of sustainability and how it can make your organization more competitive, you may be wondering how to get started. Future articles will focus on strategy, give concrete steps, and provide examples and best practices for making your organization more sustainable.
Brundtland, G., et al. (1987). Our Common Future.
FairRidge Group. (2009, September 24). Building an Organizational Culture of Sustainability.
Gloeckler, G. (2008, November 13). The Millennials Invade the B-Schools.
Goldman Sachs. (2007). Goldman Sachs Environmental Report.
IBM. (2009). IBM Corporate Social Responsibility Study.
Lovins, A. (2001, June). Natural Capitalism. Apertura.
The Conference Board. (2006). The Role of Business in Society: An Agenda for Action.
The Dictionary of Sustainable Development.
Werbach, A. (2009). Strategy for Sustainability: A Business Manifesto.
