The sustainability challenge is often characterised as a threatening tale of impending doom and gloom. But opportunities abound for creative innovators.
Sustainability is shaping up as one of the key management issues of the 21st century. Increasing inequality is leading to social tensions. Prices of key natural commodities are becoming increasingly volatile. And as President Obama recently noted, if we are to prevent catastrophic climate change, a large fraction of our fossil-fuel reserves are effectively unburnable. These are just some of the diverse range of interconnected planetary pressures we are facing.
While some companies have already translated these challenges into their business strategy, most have yet to do so. We argue that by fully engaging their innovation capabilities to address the risks and responsibilities in the context of the environment and society, companies can make their businesses more resilient, discover new opportunities and become more competitive.
The business challenge from societal and environmental trends is becoming impossible to ignore. On the demand side, the global marketplace is undergoing a revolution as populations soar and demographics shift, most markedly outside developed countries. At the same time, unprecedented supply-side challenges are emerging. The call for a radical and rapid shift away from fossil fuels raises issues of energy cost and security, but also creates huge opportunities for technological innovation. Many natural resources are becoming scarcer or harder to source and the erosion of natural capital (water, fertile soils and ecological services such as those provided by bees and forests) is beginning to have major effects on the resilience of supply chains.
As a consequence, the operating environment of business two decades from now will be radically different. Shareholders may see that as a distant world, but we argue that those businesses which foresee the global trajectory and align themselves with the inherent opportunities will prosper, while those which ignore the warning signs will simply fail.
But the vast majority of companies around the world are still playing a waiting game on the sustainability front. Why? There is a responsibility problem – why should a business act unilaterally when governments are not creating the necessary enabling frameworks nationally or internationally? There is a perceived feasibility problem – many fear that the cost of any action would be prohibitive. And for some there is a denial problem – it is just too easy to ignore harsh truths that necessitate radical change and to falsely justify continuing with the status quo.
Denial is tempting because the problems associated with sustainability are inherently complex and long-term in a short-term dominated world. Even the plausible solutions can be scary – often calling for radically different, even unrecognisable, products, partners and modes of operation. So it can be hard to know where to start.
The only way forward is for businesses to acknowledge the problem, to move beyond the still common but outdated CSR approach and to embed sustainability into the core of their strategy, harnessing the creativity and innovative capabilities of their people and partners to support the long-term robustness of both their businesses and the planetary environment.
Those businesses – particularly large corporations – that have made a start on this journey have recognised the challenge and are now actively pursuing the opportunities. While wanting to “do well by doing good,” they also see sustainability as a means of enhancing their reputation, protecting their licence to operate and securing their supply chains. They have spotted opportunities for accessing new markets, developing new products and increasing competitiveness.
For many the strongest motive of all is attracting and retaining the best talent in an increasingly discerning and socially networked generation. These businesses are starting to tap into their innovation by developing exciting new initiatives, collaborations and business models and by applying innovative concepts such as the “circular economy”, “creating shared value”, “inclusive business” and “natural capital valuation”.
Business schools have a key role to play in this, but few have translated the implications of global sustainability into strategic research and education programmes. Business schools excel at providing executives with the methodologies to induce and manage innovation and sustainability represents an opportunity for them as well as for businesses. But to realise that opportunity, business schools need to take a long hard look at their research and educational frameworks, asking themselves whether they are providing the necessary knowledge, education and tools to innovate for the future.
Engaging with business leaders through our work at Cambridge University and the British Antarctic Survey, we have found that by appraising them of the hard facts behind the global trends in a dispassionate way, by sharing examples of organisations which have been able to respond effectively and cost efficiently, by encouraging them to think about how their business creates value in society, and crucially, by providing the space for them to think creatively and courageously about how to drive the necessary change, we have been able to help many of them conceptualise radically new ways of doing business in society that are both profitable and sustainable.
We are seeing the unlocking of creative potential in pursuit of this goal. Now is the time to set the doom and gloom aside and to seize what is arguably the greatest opportunity of our time.
Christoph Loch is dean of the University of Cambridge Judge Business School, Polly Courtice, is director of the University of Cambridge Institute for Sustainability Leadership and Emily Shuckburgh, is head of Open Oceans at the British Antarctic Survey.