Blake Borgeson, in blog form

suspected facts. validated opinions.

umair to business: be sustainable

with 3 comments

Whenever Umair Haque, whom I’ve blogged about here before, saves up some thoughts and posts them and titles them a manifesto, people take notice these.  There’s Fred Wilson’s post from a couple days ago promising to really digest the suggestions; there’s Michael Lewkowitz, whom I didn’t know until today, and who sounds like a sharp vc up in Canada; there’s me, writing this post.  Hey, I count.

I didn’t plan on writing two posts about this, but there was so much to think about once I got into the topic that splitting up the two big questions Umair brings up seemed like the smart thing to do.

I’ll get right to the point.  Here’s another link to Umair’s post, if you’d like to read it first: A Manifesto for the Next Industrial Revolution.  The end of his post gets into suggestions for big sustainable opportunities to pursue, which goes beyond what I think I can talk about in a single post.  This post is about how an existing business can think about sustainability.

How can Businesses Make the World Better?

This question assumes, as Umair strongly believes, that economic progress doesn’t appear to be lining up with improving welfare and prosperity for everyone, as many of us have either hoped or assumed (or for cynics, doubted) it would.

The world is getting phenomenally richer – but the costs of that wealth seem to be endemic poverty for vast swathes of the world’s population, the poisoning of the water we drink, the pollution of the air we breathe, and the fraying of the social and cultural fabric that binds us together.

I agree with him regarding many aspects, (including allocating environmental costs), but regardless I don’t feel like you have to agree 100% with the above statement to appreciate a discussion of how to improve a system that could clearly stand some rethinking.

Restructure your Thinking around Sustainability

The first way to make the world better is a DNA (philosophy, mindset, fundamental strategy in Umair’s vocabulary) shift to sustainability–not just environmental, but people sustainability and market sustainability as well.  Umair says below that technology alone will not achieve a sustainable economy, and I’ll give him that, though as he admits, technological advancement will continue to play a critical role making the world better.  He just calls the DNA shift harder, and he may be right, since it’s a departure from the present course of most businesses.

Even if we invent a magic energy or food source tomorrow, it does the world little good if it’s in the hands of a Bill Gates 2.0 – the amount of new value that’s created is minimized. Conversely, it also does us little good if it’s in the hands of a Ford 2.0, who’ll just push-market next-generation gas guzzlers that put us squarely back into an energy trap.

The real problem is that the industrial economy is riddled with incentives to rip your head off, sell you lemons, maximize so-called “profit” at all costs, and exert power against you – not for you. That’s why it seems that pain, suffering, and value destruction are deeply embedded in the very DNA of our rusting, industrial-era economic system itself.

And that means that though technology is necessary, it’s not sufficient. What’s harder – and what truly unlocks new value – is new DNA. The fundamental question new DNA must answer is this: how do we organize and manage resources so they’re not depleted, crushed, strip-mined, and slashed-and-burned?

We need company and organizational DNA to get reinvented with a long-term view towards creating sustainable businesses and a sustainable world.  For a terrific perspective on that idea, Yvon Choinard’s book about starting and running one of the most sustainable companies out there (patagonia) really opens your eyes to what kind of a shift in mindset Umair is talking about.

Why be Sustainable?  Is it a Moral Imperative?

One reason to go the sustainable route is if you believe it’s a moral imperative–that it’s actually unethical for a business to operate knowingly in a way that is not sustainable, even if it’s legal.  However, as one of the commenters on Umair’s post points out, I think it’s going to be difficult for businesses to come together to agree with that until a new generation of business leaders, raised with all this talk of sustainability, takes hold.  That means you’re putting yourself at a competitive disadvantage by being sustainable, which means that, until the government steps in and regulates industries across the board, allocating environmental and social costs more effectively, sustainable companies are going to be on the down-and-out.

Should businesses sacrifice themselves for the ethical opinions of its leaders, even when not asked by the law? That’s a tough question for a private company.  As for public companies, in the US, leaders get taken to court for acting counter to the interests of shareholders.  To me, this means that the moral imperative is instead for both companies and individuals to push our government to reform the regulatory environment as quickly as possible, towards more effectively lining up with the realities of life on earth as we understand them now.

Long-term competitive advantage.

So how should business leaders, investors, and entrepreneurs see sustainability in our current business environment?  As a source of long term competitive advantage.  Work with politicians, if possible, to help them understand the costs and concerns associated with your business that aren’t accounted for in today’s regulatory environment.  Educate customers as to what needs fixing in your industry, what you’re doing about it, and how they can help, by voting at the ballot and with their purchasing decisions.

And think long-term.  Allocate costs correctly yourself in preparation for the day, hopefully not too long in coming, when the regulators force companies to do so.  Brag about it to your customers.  When you know where the business environment is headed, you can swim with the current instead of against it, and prepare yourself to be at an advantage when things settle out.

What does this have to do with most companies?

Loads of companies, especially in the internet space, can remain blissfully ignorant of greenhouse gases, global warming, and starving people elsewhere in the world with no consequences.  What should these companies and entrepreneurs make of all this talk about sustainability?

I think sustainability in the broader sense, beyond the environmental sustainability most people discuss, is about being honest about what you know–with yourself, your employees, and your customers.

Here are a few standard dishonest tactics:

  • manipulation (hiding important facts for your benefit)
  • bait and switch (say, introducing a new opt-out advertising mechanism without warning, like beacon into facebook)
  • push marketing a product that you know destroys wealth or value in the long run (umair’s ford 2.0 example, though I know too little about ford’s history to point a finger specifically at them)

If you wouldn’t be comfortable explaining to an audience of friends and family why you made the strategic decision you did, to me that’s not a sustainable strategy.  To agree with that, you have to believe that in the end, the truth will out, and that trust matters.  This broader view of sustainability loops back into my previous post about employing “be good” as part of your company strategy.

In my next post I’ll look at the second big question Umair discusses: How should we go about solving the world’s big problems?  I’ve been thinking about it a lot recently, so it should be interesting to try to put into words.

Please comment if you like.

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Written by blakeweb

June 25, 2008 at 5:17 pm

3 Responses

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  1. I think you make a good point about sustainability and the difficulty for business leaders when they are stuck between the duty to shareholders and the personal desire to work toward sustainability.

    Certainly government regulation is one way of approaching the issue, but I wonder if maybe there’s also hope through businesses who have the money and the market presence to create a value out of sustainability for customers.

    So, perhaps today it is more profitable to make a widget without regard to sustainability, but if a company like Google, who doesn’t sell widgets, can use their market presence and influence to instill the value of sustainability in the purchasers of widgets, then the competitive advantage of widget making might change for the better.

    Dan Graham

    June 25, 2008 at 10:11 pm

  2. This post was long, but i believe that i have to disagree with the block, “The world is getting phenomenally richer – but the costs of that wealth seem to be endemic poverty for vast swathes of the world’s population, the poisoning of the water we drink, the pollution of the air we breathe, and the fraying of the social and cultural fabric that binds us together.”

    I do not believe this is the case. Beside the, i believe, unique case of climate change, the world would have an essentially constant amount of these negative elements regardless of technology if one takes into account the consistent increase of population density worldwide, and the consistent increase of communication

    i.e. the world is more televised, and history was written by the people who didn’t catch cholera from their well…

    Matt

    June 26, 2008 at 2:28 am

  3. @Dan, thanks, and I think your suggestion for another way of moving sustainability forward is definitely a good one.

    If pressed, I’d probably lump Google’s backing of those sustainable widgets partially into the philanthropy/morality view of business sustainability, and partially into Google looking out for its own long-term interests, as part of what makes it Google in consumers’ minds is taking a lead on sustainability issues.

    @Matt, yeah, I don’t agree with that first quote exactly as Umair worded it either, which I didn’t talk much about. Rather than wealth generation necessarily having all those bad things listed as a by-product, I think the issue is more that certain costs are not being allocated correctly, allowing businesses to sometimes profit from something like loopholes, profiting while contributing negative long term value.

    I think you’re very right about communication increasing the SENSE that there’s a lot wrong with the world. And yeah, from the studies I’ve read about, it sounds like we’re actually making pretty incredible progress on a lot of the big problems in the world. Enough so that it’s tempting to say that all economic growth definitely increases living standards for everyone across the board–but that’s where I think you’ll make a mistake unless you look closely: I think there are still loopholes we need to work on closing up.

    blakeweb

    June 26, 2008 at 11:51 am


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