When economic historians look back at the present era in a century or two, they might struggle to make sense of the preponderance of a particular word — one that captures the preoccupations of businesspeople in the early 21st century but is devilishly hard to pin down. That word is “sustainability”.
Of course, we all have a general sense of what sustainability refers to. For most of the history of business, it was enough that a business made a profit. As the old phrase has it, the business of business is to stay in business. Sometime in the 20th century, however, the planet got a little more crowded and it became clear that the profit motive alone might not solve every resource allocation problem. It became evident that companies had better aim for something more than just returns on capital invested. A sustainable business is one delivering on that something.
What is it, then?
Part of the answer is about social responsibility: companies should be responsive to employees as well as shareholders, should not harm our common environment, should support civic life rather than enriching tyrants, and so on. But there is more to sustainability, I would argue, than collective responsibility. It is also about what kind of profit motive drives a business. Sustainable businesses are “long-term greedy”: they want to generate prosperity into the distant future, not make a quick buck. And they should create positive economic externalities, not extract economic rent.
Does this all sound a bit abstract? Perhaps, but happily the seven winners of this year’s FT ArcelorMittal Boldness in Business Awards provide concrete examples of what it means for a business to be sustainable in the fullest possible sense. And they show how sustainability in business requires intelligence, invention, courage and verve.
What is required for real sustainability is, in a word, boldness.
Let us start with one of the most straightforward forms of sustainability — the environmental one. Iceland Foods’ commitment to radically reduce — and eventually eliminate — both palm oil from its products and plastic from its packaging is admirable enough, considered in isolation. But it also dispels one of the most pernicious myths about environmental sustainability: that it is a luxury good to be indulged in only by well-to-do consumers and the top-shelf brands that cater to them. Iceland is a value brand, but it is also an excellent business that is in a good position to take responsibility for all the external costs its operations have the potential to create.
Others should follow its example. Bold leadership is not a luxury good, and this year’s award for corporate responsibility and environment recognises that.
One of the most unfortunate facts of human nature (what we now call a “cognitive bias”) is the tendency to see all business situations as zero-sum. “Think win-win,” we are told again and again, but the point never seems to sink in. A good definition of a sustainable business is one that makes whole commercial networks work better — enriching all the participants, rather than separating the winners from the losers.
This magic is found particularly in information businesses, and this year’s developing market award winner, Gro Intelligence, is an information business with immense potential. By gathering disparate sources of agricultural data, and doing the analytic work of turning the data into decision-making tools, it is set to make agriculture businesses more productive. A bold project the judges were pleased to endorse.
Next comes a gritty, literal sense of sustainability: the sheer ability to stick with it. Bold businesspeople cling to their long-term vision for their business, even when short-term conditions are unfriendly.
I was reminded of how hard it is for long-term-oriented businesses to stick to their guns by a comment that Warren Buffett made at a Berkshire Hathaway annual meeting. He was asked by an investor whether Berkshire’s ability to buy high-quality private businesses outright would be maintained when he no longer ran the company. Business owners, the questioner suggested, are drawn to the Buffett mystique.
These opportunities had nothing to do with him, Buffett replied: owners who want to sell their businesses, but want to ensure they will be managed for the long run, have nowhere else to go. Public markets, private equity and everything in between — we live in a short-term world.
Ocado, the recipient of this year’s technology award, has borne the full weight of the market’s short-termism and come out the other side. The company and its founders endured years of pummelling from the markets as sceptics argued that a sufficient number of grocers would not adopt its technology for automating warehouses to facilitate grocery delivery, and the company would remain subscale for ever. (Full disclosure: even the FT’s Lex column under my editorship sided with the sceptics. We were wrong.)
The company stuck to its vision and the customers did appear, in Europe and the US, sending the share price rocketing. At a moment when Britain needs a technology success story, Ocado is providing one.
Next, a somewhat paradoxical meaning of sustainability: the ability to change. Fast Retailing, winner of this year’s drivers of change award, has struck a remarkable balance between price and quality in its clothing. The products are inexpensive but not disposable, not meant to be worn for a season and thrown away, as many brands in the same price range are. Indeed, the quality matches that of many high-priced brands, and is forcing them to adapt.
Fast keeps the pressure on rivals by continuing to invest in technology and efficiency. Quality is maintained because underlying processes change.
One of the most reliable ways to win in business is to stay focused on serving a permanent and unchanging human need — especially when that requires doing things in a new way. There is no human desire more fundamental than that to eat ice cream. The entrepreneurship award this year was, for me, an easy choice. Halo Top, a business started in a lawyer’s kitchen, made a place for itself in a market dominated by big, entrenched brands by delivering a low-calorie, high-protein product that was just better. Sustainable businesses, at a basic level, do not simply ensure customers pay up. They make sure those customers are happy.
Of course, there may be needs that have not yet been satisfied at all, except in dreams: in a nod to this, the judges’ pick for small company was Lilium, which may deliver a low-noise, no-emission air taxi — or, as it is known to the child in all of us, a flying car. A business, or a world, that stops dreaming boldly becomes unsustainable fast, after all.
A final definition of sustainability is one that in my mind is the most important. Truly sustainable businesses — which, I have argued here, are all distinguished by their boldness of spirit — are operated with the recognition that some things are more important than business. There are values to which all commercial endeavours are subordinate.
Sir Tim Berners-Lee, our person of the year, saw how the internet, which he did so much to bring to life, was put to use for the exploitation of individuals rather than their liberation. His latest endeavour, Inrupt, is trying to redesign the web to change this, putting individuals back in charge of their own information.
The judges hope to look back, years into the future, and see that the businesses we have recognised in 2019 are still growing, innovating and striking out for new territory. Bold business is sustainable business.
Person of the Year: Sir Tim Berners-Lee
By designing the world wide web three decades ago, Sir Tim cemented himself as one of the most influential people of the modern era: his creation has had an incalculable impact on our everyday lives. But having grown increasingly concerned at how large interests were exploiting the web’s openness — including for electoral manipulation and cyber crime — the British computer scientist designed a data platform called Solid aimed at returning ownership of data to the users who generate it. In 2018, Sir Tim launched Inrupt, a for-profit company intended to put Solid into operation, maximising the upsides of the web while minimising its downsides. The goal, in Sir Tim’s words, is to “give people complete control of their data”.
Drivers of Change: Fast Retailing
The Japanese group, whose clothing brands include Theory, J Brand and Uniqlo, has grown to become the world’s third-largest casual clothing retailer. It is investing in technology to increase efficiencies: its automation of a Japanese distribution centre enabled 24-hour operations and increased productivity 80-fold. Fast Retailing is now investing nearly $1bn to automate its warehouse and distribution operations worldwide.
Corporate Responsibility/Environment: Iceland Foods
The UK retailer has long been committed to environmental campaigning, removing artificial colourings from its food in the 1980s and banning genetically modified ingredients in the 1990s. More recently, the company started two key environmental initiatives: to reduce plastic use within five years and to stop using palm oil in its own-brand products. Despite a television ban for its political content, Iceland’s Christmas ad about the impact of palm oil — featuring a homeless orangutan called Rang-Tan — received millions of views online.
Entrepreneurship: Halo Top
In 2011, Halo Top founder Justin Woolverton began experimenting in his kitchen to create an ice cream that satisfied his sweet tooth but contained substantially fewer calories than commercial brands. By the end of 2018, Halo Top had a hefty share of the North American market and was generating annual revenues of more than $300m. Halo Top has also started selling its low-calorie ice cream in the UK, Australia and Singapore, and continues to expand internationally.
The UK online supermarket has evolved into a technology group by selling its warehousing and ecommerce system, the Ocado Smart Platform, to other grocery retailers. In Ocado’s warehouses, which are temperature-controlled to store fresh goods, robots collaborate to fetch goods and have the ability to complete a 50-item order in a few minutes. Since 2017, the company has signed deals with leading international retailers in Europe and North America.
Developing Markets: Gro Intelligence
Founded to provide agricultural data about Africa, Gro Intelligence has expanded to focus on global food markets. Its data help users better plan for droughts, invest in more resilient crops and make better-informed choices about loans and investments. Gro uses machine learning to model data such as future crop yields with high accuracy — recently the US Department of Agriculture revised down forecasts for US corn and soyabean production, bringing them closer to Gro’s predictions.
Smaller Company: Lilium
The German start-up is developing electric air taxis that will be low-noise, high-speed and emission-free. In 2017, the company completed a first test flight of its two-seater jet, which executed its signature transition from vertical to horizontal flight. The launch helped Lilium raise more than $100m in funding to develop the aircraft for commercial use. Lilium is aiming for its flying taxi service to be operational by 2025.
Drivers of Change
The UK medical group was approached in 2012 by the parents of an epileptic boy to see if its cannabis-based medicine could be developed as a treatment for his seizures. In 2018, the resulting drug, Epidiolex, was the first cannabis-based medication to be approved by the US Food and Drug Administration.
In 2018, Tim Berners-Lee, founder of the world wide web, launched Inrupt, to enable users to take control of their personal data from big tech. Instead of allowing online services to use their Facebook or Gmail accounts to access their details, Inrupt’s Solid helps users share that information themselves using a personal online data store.
The US food technology company makes plant-based alternatives to animal products, including Just Mayo, an egg-free mayonnaise. The group has also launched Just Egg, a vegan product with the taste and texture of scrambled eggs.
The UK digital bank was founded in 2015, aimed at providing financial services to people “who live their lives on their iPhones”. Monzo is constructing a marketplace where customers can access financial services provided by partner organisations. The company has raised £20m from 36,000 investors via crowdfunding and has more than 1m customers.
AOL co-founder Steve Case started venture capital group Revolution, which since 2013 has invested in innovative US companies not based in New York or California. On his annual “Rise of the Rest” tour, Case visits start-ups across the US, and has raised more than $1bn to invest in them.
Corporate Responsibility / Environment
In 2018, the world’s largest asset manager announced its commitment to “sustainable investing” and launched exchange traded funds that prioritise social, environmental and governance factors. It estimates such ETFs will grow from $25bn to more than $400bn in the next decade.
The German company makes a compound called cardyon, used to create foam for mattresses and furniture. It can produce up to 5,000 tonnes a year of the polymer, made with 20 per cent waste carbon dioxide.
UK-based Neighbourly is an online platform that enables companies and individuals to donate food to local charities, helping UK retailers meet a commitment to reduce food waste by 20 per cent by 2025.
A developer and operator of wind turbines and solar panels, ReNew is India’s largest clean energy producer. Last year it acquired Ostro Energy, and founder Sumant Sinha is eyeing more deals to consolidate India’s fragmented renewables industry.
Two-thirds of the Indian outsourcer’s staff are disabled — unusual for a country where disabled people face significant discrimination. The provider of claims processing, payroll and data management has attracted clients such as IBM, Accenture and SAP, while staff turnover is in single digits.
The Japanese company was founded in 2013 to tackle the problems posed by the estimated 750,000 pieces of debris circling the earth in space. The company’s space mission ELSA-d, where a test launch will aim to capture a satellite, is scheduled for 2020.
The UK medical start-up uses artificial intelligence (AI) to mine and analyse biomedical data in an effort to discover compounds for development as new medical treatments.
The German technology group’s AI-driven enterprise software analyses business processes. The software takes flows of information, such as those related to invoices or logistics, and visualises it in a way that makes inefficiencies easier to spot.
The UK cyber security company’s Enterprise Immune System uses unsupervised machine learning that can establish a baseline of normal activity for any computer network and identify threats, much like the human immune system. Darktrace was valued at $1.65bn in September 2018.
The UK biotechnology company has genetically modified mosquitoes to prevent their offspring reaching adulthood. In May 2018, Oxitec launched a pilot project in the Cayman Islands and has received funding from the Bill & Melinda Gates Foundation.
The company was founded in 2015 to offer renewable energy without the hefty premium charged by rivals. Having raised £60m of funding, it aims to supply 5m UK households within five years.
The UK-based soft drinks company produces high-quality mixers. Since launching its first tonic water in 2005, it has developed a wide range and overtook Schweppes as the UK’s leading mixer supplier in 2017.
The Japanese start-up is an app-based marketplace that enables consumers to sell second-hand goods to one another. It became Japan’s first start-up to be valued at more than $1bn, with 30 per cent of Japan’s population using the service.
Turkish entrepreneur Kerim Ture founded Modanisa in 2011 to fill a gap in the online market for Muslim women looking for modest but fashionable clothing. It sells more than 70,000 products from 500 brands.
The financial services app offers its mostly European users international money transfers, cryptocurrency trading and fee-free currency exchange at the interbank exchange rate. The London-based company had a customer base of 2.8m by the end of 2018, and is expanding into the US and Asia.
India’s largest educational tech company offers app-based learning programmes and test preparation to primary and secondary school pupils. In September 2018 it received a $100m investment for a 5 per cent stake, which it plans to use to expand internationally.
The Brazilian company’s platform connects companies needing to ship goods with trucks with spare capacity. CargoX expects to reach $1bn in revenue by 2021 and plans to bring the technology to a wider global market.
Launched in Kenya in 2014, Tala’s app offers microfinance loans in emerging markets, using data points from a user’s smartphone to assist lending decisions. By October 2018, the company had issued more than $500m in loans, and raised funding from PayPal to expand globally.
The Chinese electronics company makes smartphones aimed at sub-Saharan African consumers. It has adapted to that market by improving battery life, enabling phones to house multiple SIM cards, and recognise local languages.
The Argentine fintech company’s personal finance app is linked to a Mastercard prepaid card. Its widespread adoption is encouraging cash-reliant Argentines to switch to digital banking. Goldman Sachs led a $34m funding round for the group in 2018.
Retailing entirely online, the clothing company was founded with hopes of regenerating the US garment-making industry. The company has gained popularity on the back of the “Made in America” movement.
Goonhilly Earth Station
Once the world’s largest satellite station, the site in south-west England provides telecoms and satellite-tracking services. It is upgrading its antennas to meet deep-space communication requirements, which will enable Goonhilly to communicate with missions to Mars or the Moon by 2020.
The Texan construction tech group was founded to develop tools capable of 3D-printing housing, to lower the time and cost of construction. In 2018, Icon unveiled the first home built to US regulations by the company’s 3D printer, Vulcan; it took 48 hours to print the 350 sq ft building and cost $10,000.
The UK company’s software matches users’ descriptions of symptoms to clinical terms, enabling doctors and patients to identify the disease.
The US-based company enables pharmaceutical companies to decentralise their medical research by conducting clinical trials via smartphones. Patients use their phone to record results and interact with researchers.
List by Louis Leslie
- Lionel Barber
Editor of the Financial Times
- Lakshmi Mittal
Chairman and chief executive of ArcelorMittal, the world’s largest steelmaker
- Anne Méaux
Founder and president of Image Sept, a Paris-based public affairs and media relations company
- Robert Armstrong
Financial Times US finance editor and former head of the Lex column
- Brooke Masters
Financial Times comment and analysis editor and former companies editor
- Edward Bonham Carter
Vice-chairman of Jupiter Fund Management
- Leo Johnson
PwC disruption lead and co-presenter of BBC Radio 4 series FutureProofing
- Brent Hoberman
Chairman and co-founder of Founders Factory, a corporate-backed incubator/accelerator
- Peter Tufano
Professor of finance and Peter Moores dean, Saïd Business School, University of Oxford
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