From red to black via green

‘You hear it in the city and you hear it on Wall Street,” says Dr Gail Whiteman, director of the sustainability and climate research centre at the Rotterdam School of Management.

‘This is not a time to be investing in such things. The concern is that sustainability issues will be put on the back burner.”

Sustainable strategy

For many business thinkers, however, far from being something to be thrown away to keep business going, the sustainable agenda offers a strategic course of action for industry and investment to take through the recession.

‘During these difficult times, finding a new driver of our economy is going to be critical,” says Professor Javier Carrillo, executive director of the centre for eco-intelligent management at IE Business School in Madrid. ‘I think that the environmental challenge will definitely provide a strategic direction to industry.”

‘I accept that the question of whether the environmental agenda can survive the recession is on people’s minds,” says Patricia Palmiotto, director of the Allwin initiative for corporate citizenship at the Tuck School of Business in the United States, ‘but there is no doubt that paying attention to the cost of energy and environmental impact can be a competitive advantage for business, even in the most difficult times.

One can easily point to the difference between Toyota developing a hybrid car that is selling extremely well and American car manufacturers who chose to continue producing SUVs and are in a desperate situation with a large inventory of vehicles the consumer does not want.”

Palmiotto points to Caterpillar’s decision to embrace sustainability as a key element in both its strategic vision and its branding, and quotes Jody Howard, director of social responsibility for Caterpillar: ‘A successful sustainability programme involves turning the definition of sustainable development away from a kind of standard language and turning it into something that is very specific and meaningful to your own company.

Toward that end, Caterpillar has involved its customers. When the company sponsored 10 customer-focus groups to understand what their needs are, sustainability came to the forefront.
It was [and is] becoming a mainstream part of their customers’ business.

Caterpillar’s customers want energy-efficient, quality equipment, in part so society doesn’t thumb its collective nose at construction and mining projects. They also want good, sustainable products so they can then in turn use them to differentiate themselves when seeking
their own customers.”

Government and compliance
For Carrillo, however, it is not just about responding to the attitudes of customers; the sustainability agenda also chimes in with the new interventionist mood of governments worldwide, particularly in the US.

He points to Barack Obama’s election pledge to invest $150-billion in funding for clean technologies over a 10-year period, and to the previous administration’s $25-billion government loan to the automotive industry, put in place to help car-makers re-tool their factories to meet new fuel-efficiency standards. ‘It is quite clear,”

Carrillo says, ‘that clean technology is at the stage of being an emerging sector and it makes more sense to have a greater role for the public sector. That means public support is necessary.”

‘Compliance is a very big factor in maintaining a focus on the environmental,” says Dr Stephen Brammer, deputy director of the centre for business, organisations and society at the University of Bath School of Management in the United Kingdom. ‘The truth is no business of any size can afford to be non-compliant today. The days of chucking it in the river have gone.

However, I am somewhat sceptical that the recession will lead to large numbers of new radical market opportunities. The patterns of consumption don’t support the idea that the 21st-century consumer is actually using his or her money to support these agendas.”

Investment strategy
When it comes to investment, there is as yet no consensus on whether environmental and community agendas can sit as easily alongside the profit motive during a recession as they have during the upswing.

However, there is a strong argument that an examination of the so-called triple bottom line (people, planet, profit) might give investors some reassurance.

‘Investments that are made by examining the triple bottom line are more resilient to financial shocks,” argues Whiteman. ‘Look at the example of Triodos Bank in the Netherlands. It invests money according to triple bottom line principles and hasn’t suffered any financial collapse.

A lot of the credit crunch comes down to the fact that bad investments were dressed up to look good and that no one went beneath the surface to check. You can’t make this mistake if you take a triple bottom line approach because you have to go underneath and try to figure if things are being done in a sustainable way.”

Corporate social responsibility (CSR)
Regarding the broader elements of CSR, one thing that is likely to disappear is philanthropic giving.
‘You can’t give away your money when you are laying off employees,” says Brammer. ‘It lacks empathy and I am sure these programmes will be cut back or reoriented.

‘On the other hand, one of the things about recession is that it creates a lot of slack in organisations as they are no longer working at capacity. This means that one of the resources to become plentiful is labour.

Companies will want to use this resource strategically and I think you will see organisations support employees who volunteer to contribute to the community, say one day a week during the quiet spells.

Not only will this help to retain and motivate the skilled labour that the organisation cannot afford to let go, it will also maintain and develop its presence in the community without spending any cash.”—

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