Will the Real Sustainability Leader Please Stand Up?
S. Sinan Erzurumlu, Associate Professor of Technology and Operations Management
A new generation of entrepreneurs, leaders, and thinkers can shift the management paradigm from traditional business to sustainable business. When I speak with various managers and entrepreneurs (in mining, high tech, clean tech, energy, manufacturing, services), they proudly (and rightfully) mention their sustainability efforts. While some of these efforts make only tiny dents in the sustainability debt, others are very innovative, but still waiting for mass adoption and a shift in thinking and behavior. Even realizing that you have to clean up your act and make this a core discussion in your business model is a significant step.
Instilling a global culture of sustainability is a continuous improvement process, and it will take generations to change our economic values and addictions. Corporate strategy must be modified to stop the economic and political manipulations, represent the real costs of business, and invest equivalently in ecologically smart infrastructure and social value generation. This transformation has to start with leaders adopting the principles of sustainability thinking and generating business model innovations within the sustainability context. Some firms may tout their improvements in operational efficiency as big steps in sustainability – and this is progress, considering where we have been. However, real sustainability leaders should utilize three principles of sustainability to achieve a fundamental transformation.
Environment is not a public good; pollution cannot be free.
It has been extremely cheap, and free in some cases, for businesses to use natural resources. The economic assumptions that nature is an abundant resource and a limitless source for waste have led to treating the environment as a public good–abundant and freely accessible, like air. In the absence of regulation, environmental resources are underpriced and corporations are incentivized to use more than is socially efficient. Sustainable business models are concerned with diverse stakeholders. Our most important stakeholder is Mother Nature, who is also the most silent. Leaders must fully understand the shortcomings of traditional economic assumptions and the long term consequences.
Sustainability thinking is systems thinking.
The traditional linear thinking of economic systems may not hold the organization directly responsible for procurement decisions like resource extraction and after-sales decisions like end-of-life destiny of products. Yet, goods no longer flow in one direction. The supply chain itself is extended in both directions and involves many stakeholders. The true leader must realize diverse interactions and assess the impacts of a business through all stages of a product’s life cycle. Then, she can make decisions with minimum impact for the longevity of the system, not necessarily for one party.
Sustainable solutions require long term decision making.
In a traditional growth-induced and consumption-focused business model, sustainability efforts are accepted if they lead to cost reduction or profitability: short term metrics. Companies link energy efficiency to cost savings; green product differentiation to increased market share; or carbon reductions to avoiding costly regulations. The solutions to the problems we are dealing with require economic and social sacrifices for greater longer term return on investment. Thus, the real sustainability thought leader should evaluate the impact of decisions in the long term.
Entrepreneurial Thought and Action for Sustainability
Sustainability leaders who develop business models including these three principles of sustainability will generate novel ideas. This requires an entrepreneurial mindset. No matter how perplexing the constraints are, the entrepreneurial approach calls for optimism, experimentation and collaboration.
The challenge for business education is to nurture the culture of entrepreneurial sustainability thinking in curriculum design. MBA programs on sustainability should offer entrepreneurial thought and action (ETA) for solving “big and wicked” problems. Educational institutions have to confront the old, debate the new, and make way for the innovative. Sustainability innovations promote an economic and social environment that is going to change consumer behavior, seek a different regulatory framework, and delay financial earnings. That is ambitious. That is going against the Main Street, Washington, and Wall Street.
Are the institutions responsible for educating the next generation of sustainability leaders teaching a new framework for thinking, or are they simply offering to meet the needs for business as usual? I would like to see the former idea taking root in business schools. Anyone who wants to think within this framework must demand a thought and action paradigm that is going against the old economy. This is a major undertaking for business education, and is what every MBA must demand.
This post is adapted from a blog Erzurumlu previously published on Triple Pundit.