Is “sustainable growth” an oxymoron? Can your business achieve growth and pay attention to the impact that its growth will have on the world tomorrow? Not just playing to the crowd with eco-washing marketing bollocks, but creating growth while meeting the seemingly competing needs of the consumer today and our world tomorrow? Jeff Clark weighs up the argument.
Is sustainability the enemy of growth? Depending on your personal ethos, you may respond, “Obviously, yes” or “Of course not.”
To help form my own opinion on whether a business can be both sustainable and grow, I attended a debate hosted by Lux Research. It was a real debate, not like the ones we often see during political campaigns, with well-credentialed teams assigned to argue each side – a green team saying “Yes, you can have both” and a red team saying “No, they’re diametrically opposed.” They did an excellent job of digging into the arguments on both sides.
What is Sustainability?
Defining sustainability was not a point of contention. Though this may seem like a squishy term to most of us, the conclusion is that sustainability is the ability to meet our current needs without jeopardizing the needs of future generations. The often-quoted maxim of indigenous Americans is to think about the impact on descendants seven generations from today.
That’s difficult in the modern age. Given the amount of change that has happened in the past seven generations, we often think that new technology and new ways of thinking will bail us out of whatever mess we make today. We solved the ozone layer problem, cleaned up our rivers, expanded civil rights, and we’ll fix another social ill tomorrow.
We’re also wedded to the concept of growth, which since the industrial revolution (and before) has been about extracting resources to make things that we sell to make more money to raise our standard of living.
How Do You Define Growth?
This is not a new term, but it does have several dimensions. The common dimension is short-term growth measured by quarterly earnings, year-year revenue and profit, and Gross Domestic Product (GDP) at the macro level. The debate on growth vs. sustainability rested on this tension between short-term statistics and long-term sustainability.
Publicly traded businesses are under tremendous pressure from markets to deliver on short-term earnings and profits. Even if they opt for steady, slow growth, it is still measured by short-term metrics. Businesses will often go private when faced with the need to make structural changes to improve their long-term prospects due to this pressure.
If you shift your focus to long-term growth, it is easier to see how you can balance growth and sustainability. We make choices every day that are focused on long-term growth, such as raising children, saving for retirement, or nurturing a garden. If we just focused on short-term results, we would fail.
Growth & Sustainability in a Business
Can a business grow and be sustainable? Absolutely. Companies such as Microsoft or Salesforce are making commitments to net-zero carbon emissions and minimizing waste. Sometimes the claims of sustainability are greenwashing, but it is possible for a company with little physical product to power their processes with renewable energy and manage their waste output.
Can a lithium mining company be sustainable? Unlikely. Even if a company is involved in creating resources for products required for us to live sustainably, such as batteries for electric vehicles, they will struggle to be sustainable themselves. Do they purchase carbon offsets to look good on an ESG (Environmental, Social and Governance) balance sheet? If that’s all they do, that’s greenwashing.
Do we give them credit for contributing to economy-wide sustainability? That is where policy makers must do their job.
Growth & Sustainability on a Macro Level
“Sustainability has to be the enemy of growth, but we must choose sustainability,” said the red team. They argue that humans are wired to accumulate things, status, and power. For example, we love when our neighbor says, “Wow, that’s a nice Tesla you bought.” Hard to argue with that. Our challenge is that technology has enabled us to accelerate our acquisition of things, status, and power to the detriment of a sustainable lifestyle.
Therefore, sustainability is the process of managing our consumption against our base instincts. Do we just let the climate heat up and destroy food production, fill the ocean up with more plastics than fish, and let the seas rise to overwhelm Miami, Boston, New York, New Orleans, and Norfolk Naval Station? How do we negate the hidden costs of consumption?
We Need the Right Incentives
Every macro-level problem is the result of bad incentives. Fossil fuel companies still get subsidies to drill and extract oil and gas, despite being highly profitable businesses. Mining companies still extract minerals without paying for the right to use Federal lands or to clean-up afterwards. Motorists use the roads, while gas taxes or tolls don’t cover maintenance. These incentives made sense decades ago, but not today.
To achieve true sustainability, policy makers must change incentives and establish the rules and regulations that enable individuals and companies to manage consumption. Then business growth will be driven by:
- New technologies and services that are unleashed to help the economy transition to clean energy and zero waste
- Businesses that make choices to reduce energy consumption and physical waste to improve their bottom line
- The transition of energy consumption to renewable, no-carbon electricity that will be even cheaper than fossil fuels
It is difficult to know how this transition affects GDP. GDP goes up when we clean up oil spills and save lives during a pandemic. We need metrics that gauge both our short-term health and long-term growth, so we can paint a balanced picture of growth and sustainability.
The Choice for Your Business
Business leaders need to manage for today’s success but also think about the long term. Whether we avoid excessive climate change or other existential threats, the economy will be in a state of dramatic transition.
What opportunities can you capitalize on? Will your business sustain growth through market shifts? Can you be profitable as the costs of goods, labor, and insurance increase? See Winning During Changing Times amid our Rockstar Street Knowledge.
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