Sustainable Business Transformation

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Posts Tagged ‘Ecological Economics’

HPA Perspective on Sustainability: FAQs – 4

Posted by Hemant Puthli on March 25, 2010

This is the fourth in a series of 6 posts on our perspective on sustainability. Our first post focused on the HPA definition of sustainability while the second explained what we mean by ’social relevance’, ‘environmental responsiveness’ and ‘economic viability’. The third dealt with the notion of ‘Common Good’ in contrast to ‘Self-Interest’, and why the pursuit of the Common Good leads to better sustainability.

This post discusses the challenges along the path to sustainability in a competitive situation and also elaborates upon the key areas of difference between partnerships and competitive relationships.

Are you suggesting that in a poker game winning players should start losing on purpose so that they can win eventually? How does sustainability work in a competitive situation? Why should a business yield any ground to competition? What is the common good when it comes to competitors?

For any given player in a poker game, the game represents a group of competitors, not an ecosystem of stakeholders acting in partnership with that specific player. A poker game, like all competitive games, is about winning and losing i.e., a zero-sum game. Such games are designed to result in winners and losers – everybody cannot win! Otherwise, where’s the fun? Zero-sum games hone the spirit of competitiveness and the ‘killer instinct’. Real life is neither a closed system nor is it close-ended in time, whereas games have a definite beginning and a definite end, a fixed set of players, clearly laid out rules and a finite, pre-defined number of possible outcomes. Zero-sum need not apply in all real-life situations. Unfortunately, though, not everyone sees that, and people tend to default to zero-sum thinking. Through our work, we hope to bring about an attitudinal shift that makes people look for win-win first. By default, every situation can result in a potential win-win outcome for all, unless there is evidence that is has got to be win-lose. This is one of our key messages.

Win-Win Partnerships Are Sustainable

Partnerships are based on interdependence. It’s not about one side winning and the other losing – that simply won’t work. In a partnership everybody must have a win, by and large, or else the partnership is not tenable. You may have micro-situations where someone wins (or wins more) and someone else loses (or wins less) and that’s OK. But if one partner wins almost all the time while the other loses almost all the time, the partnership is just not sustainable – it defies the very interdependence it is based on. This is empirically self-evident and does not need to be proved as a theorem using deductive logic. The business stakeholder ecosystem is a value network of interdependent partners, not competitors. Mature and responsible players will look to negotiate a win-win outcome in situations where partners have different needs and bring different agendas to the table.

That said, let’s go back to the poker game analogy. Let’s envisage a very real situation, in which a few friends meet on weekends and play poker. This can continue ad infinitum as long as it doesn’t happen that a single player consistently wins and eventually leaves the others broke. In a card game there are two factors that determine the outcome, broadly speaking – the cards one is dealt and the skill with which one plays them. A player cannot control what cards are dealt to them and you could call this the luck factor. If a player starts to do that, it is called cheating and we’ve already talked about why that’s not sustainable. What a player can control is their own card play, but not the cards that arrive in their hand in a given deal. Hence it is a statistical near-impossibility that one player wins all the time, assuming fair play and assuming a more or less even distribution of skills around the table. This is also how it works in competitive scenarios.

Sustainability does not mean that a better player should allow others to win. Players should follow rules. If one player’s skills are outstanding and they end up winning most of the time through fair means, notwithstanding the luck factor, then they should look to play in their own league if they want to keep enjoying the game. If they play with significantly lower-skilled players, they will take away all the wealth and others will go bust. Game over.

In business this is the equivalent of one player dominating the market by leveraging their ‘sustainable competitive advantage’ and edging out competitors. They don’t yield any ground consciously, but over time, but they could become complacent and the other players could overcome barriers, make a comeback and give them a run for their money. Life is open-ended and keeps going on indefinitely and today’s loser may become tomorrow’s winner. Games, like novels and movies, are close-ended and finite.

The common good in a competitive situation will be evident in issues that impact the long-term growth of the industry and market as a whole. That’s where competitors may collaborate on initiatives to consolidate and stabilize the economics of that industry and to improve and grow the market. Or they may simply share best practices to improve efficiency in non-competitive areas. Note how automobile manufacturers in the US came together to approach the Government for help recently. Also note how Toyota’s performance is different from, say GM’s, thanks in part to their green initiatives, while other automakers simply went on a downward spiral, thanks in part to their alignment with the vested interests of oil companies.

To summarize, we are saying that when it comes to partnership, it is most sustainable to ask the question “What’s in it for me?” after answering the question “What’s in it for my partner?” as compared to either not asking “What’s in it for me?” at all (i.e., charity), or only asking “What’s in it for me?” (i.e., primitive self-interest).

Our next post will look at the sustainability theme from an investor’s perspective and will explore how it plays out for the shareholders of an enterprise that embarks on a sustainable business transformation journey.

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Bill Gates on energy: Innovating to zero!

Posted by Hemant Puthli on February 24, 2010

(source: TED)

At TED2010, Bill Gates unveils his vision for the world’s energy future, describing the need for “miracles” to avoid planetary catastrophe and explaining why he’s backing a dramatically different type of nuclear reactor.

The necessary goal? Zero carbon emissions globally by 2050.

Posted in Environment, Strategy, Technology | Tagged: , , , | Leave a Comment »

HPA Perspective on Sustainability: FAQs – 3

Posted by Hemant Puthli on February 1, 2010

This is the third in a series of 6 posts on our perspective on sustainability, and deals with the notion of ‘Common Good’ in contrast to ‘Self-Interest’, and why the pursuit of the Common Good leads to better sustainability. Our first post focused on our definition of sustainability while the second went into details on what exactly we mean by ’social relevance’, ‘environmental responsiveness’ and ‘economic viability’.

Why should anyone want to focus on the so-called ‘Common Good’? What is wrong with plain old ‘Self-interest’? Is one approach sustainable and not the other?

Interesting question, because it helps get to the very root of the matter. Self-interest is a very interesting principle. It is the most natural, the most Darwinian if you like, principle that you see in nature. Seen in the context of humans, it has the potential to evolve from its more primitive and instinctive version i.e., seeking to derive benefit to self by directly accessing value, to a more mature and rational version i.e., seeking to derive benefit to self through value returned by contribution to the ecosystem around self. Animals are not sapient beings and cannot possibly behave in a manner that reflects the latter version, but humans have an opportunity to transcend instinct, act rationally and move towards a better world. In its more evolved form, the principle of Self-interest becomes synonymous with the principle of Common Good – so it is no different, in essence. Do bear in mind that nowhere have we touched upon the concept of charity or philanthropy. Self-interest alone is good enough and will support sustainability, provided it sublimates into its more evolved form. This line of thinking is consistent with age-old homilies such as: ‘You reap what you sow’ or ‘As you give, so you get’ or ‘What goes around comes around’, which are simplified versions of similar thoughts.

In order to test whether a strategy or policy or an approach or a principle, let’s call it X, is sustainable, one may simply ask the question: ‘If everyone were to follow or practise X would it lead to a more prosperous, harmonious and better world?’ and if the answer is in the affirmative, then we may conclude that X is a sustainable idea. While on old aphorisms here’s another adage that resonates with this test: ‘Do unto others as you would have others do unto you’. If everyone were to act in the interest of common good it is likely to result in a feeling of abundance in the long run, whereas if everyone acted out of primitive self-interest it is likely to result in a feeling of scarcity, given the same amount of wealth in the system.


Sustainability Continuum


Apply the sustainability test to other impulses such as Greed or Cheating, and verify the results for yourself. Greed is not a sustainable strategy, and neither is Cheating – the global economic crisis bears testimony to that. It is possible that a few have benefited from it in the short run, and we are not passing moral judgement on them here. All we’re saying is that it is not sustainable. Again, let’s be clear that this is about the plain and simple economics of longevity, not about morality or religion!

The next post in this series will discuss the challenge of sustainability in a competitive situation and will elaborate upon the difference between partnerships and competitive relationships.

Posted in Economics, Environment, Society, Strategy | Tagged: , , , , | 8 Comments »

HPA Perspective on Sustainability: FAQs – 2

Posted by Hemant Puthli on December 1, 2009

This is the second in a series of 6 posts on our perspective on sustainability, and deals with a set of questions around what we mean by ‘social relevance’, ‘environmental responsiveness’ and ‘economic viability’, and how vital it is for businesses seeking a path to prosperity to aim at these goals. (The first post in this series dealt with questions about our definition of sustainability and how it may be similar to, yet different from, other connotations associated with the term.)

You talk about ‘being socially relevant, environmentally responsive and economically viable’. What do these terms mean? How is this any different from Corporate Social Responsible (CSR) plus Green IT plus traditional profitability, all rolled into one? Isn’t it simpler to talk about concepts that are already known, using words that people already understand?

We’d love to use words that people already understand. After all, making ourselves understood is the first thing we need to do, if we are to be successful in our business goals as Trusted Advisers to our clients. Trouble is, the ideas we are talking about have not established their own vocabulary yet, and in many cases, are just slightly different from similar sounding concepts, and so we made up our own terminology as we thought-through issues around sustainability. We hope our terminology sticks! Let’s take these three terms one by one and then get to the other related questions.

First let’s set the context by mapping all stakeholder communities that make up the ecosystem of a business enterprise. We use the term stakeholder here in the same sense as the ‘Stakeholder Theory’ propounded by R. Edward Freeman in the 1980s and it is useful to clarify this because sometimes people confuse stakeholders to mean (only) shareholders. In our context, a stakeholder is any entity (could be a legal entity such as a business, a not-for-profit organization, an institution, a cooperative, or just a community or group of people) touched or impacted by the business. Increasing globalization of the creation and delivery of goods and services is adding to the diversity and complexity of the types of entities in the stakeholder ecosystem. As you can see from the diagram (below), the stakeholder ecosystem of a business enterprise has a core and a periphery, surrounded by the society in which the enterprise functions and the world at large.


Enterprise Stakeholder Ecosystem

Enterprise Stakeholder Ecosystem

Being socially relevant means constantly striving to anticipate and fulfil specific needs of all stakeholder communities in the ecosystem — including first, the customer community, followed by other stakeholders in the core ecosystem of the business: its stockholders, its alliance partners and suppliers and its employees. Being socially relevant also means constantly striving to meaningfully engage, partner with and contribute to participants in the peripheral ecosystem within which the business functions — comprising industry associations, market institutions, the media, special interest groups or collectives formed by communities that its operations involve or impact, and the various institutions that form part of the legal and regulatory framework within which the business conducts its affairs. For a large globalized business, this could represent a much wider scope in terms of size, scale, diversity and complexity.

Being environmentally responsive means constantly striving to increase the level of awareness within the business ecosystem concerning environmental issues such as climate change, energy conservation, waste management, etc., so as to lead to a commitment of resources by the business towards improving conditions in the locations where it operates (or has other interests) or at the very least, neutralizing the impact of the business on the environmental conditions at those locations.

Being economically viable means constantly striving to remain profitable in the short as well as the long run. It is obvious that economic viability is vital for success, since a business cannot effectively achieve its goals while its survival is constantly threatened by financial problems. However, businesses that narrowly focus only on their own profitability in purely ‘single bottom line’ terms, to the exclusion of the other goals, or, worse still, to the actual detriment of their host society (or societies, as in the case of globalized businesses) are unlikely to prosper in the long run.

Social relevance and CSR do appear to be similar, and to a large extent the activities of a business that strives to stay socially relevant may not appear to be very different from what they might have been doing by way of CSR. The important thing is the attitude of the business: while CSR is essentially based on some kind of altruistic or charitable notion, social relevance is based on the belief that pursuing the common good of the stakeholder ecosystem will drive sustainable profitability. The roots of CSR type of thinking go back to the feudal concept of noblesse oblige. In the post-Industrialization era this has translated to the notion that prosperous businesses – the ‘new nobility’ of free market economics, are morally obliged to help underprivileged communities. We are not saying this is wrong, or even that it is not sustainable: we are only saying that it is a comparatively less sustainable approach than one where businesses see themselves as partners of, and not as patrons of / donors to, communities in their ecosystem for mutual benefit. (For more on this please see earlier HPA posts — one on Charity 2.0 and another containing an embedded video clip of a TED talk by Jacqueline Novogratz.)

Green initiatives have typically put environmental issues ahead of everything else, and Green IT, as the name implies, tends to focus on how to make the IT function as a whole more eco-friendly. While this is not a bad thing as such we believe that the emphasis should be on a holistic, three-dimensional approach to sustainability rather than a one-dimensional one. There is a lot of learning that could be borrowed from Green IT and we are not suggesting that Green IT initiatives must be abandoned, just that they be re-aligned to the broader and more holistic idea of ‘Sustainable Business Technology’.

As to why X is not the sum of A+B+C, I would say that the new definition of profitability (and please do look up the Wikipedia entry for triple bottom line for more on this) is a function of the lasting impact of the business on its ecosystem and the economic benefits accrued to the societies that host the business. There continue to be discussions and debates on quantification and measurement of economic impact of social and environmental efforts even today and a large part of the body of knowledge in this area is still evolving as we speak, but there is little doubt that it is an idea whose time has come and is here to stay. A silo-ed approach does not produce the same results.

The next post in this series will deal with the notion of ‘Common Good’ in contrast to ‘Self-Interest’, and why the pursuit of the Common Good leads to better sustainability.


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A World Without Oil?

Posted by Hemant Puthli on November 24, 2009

From TED: a talk by Rob Hopkins, founder of the Transition movement – a community-driven approach to eliminate dependence on fossil fuel, on how to prepare ourselves for life without oil.

We need to start thinking along these lines – worst-case scenarios have a tendency to manifest themselves in reality, more often than not!

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HPA Perspective on Sustainability: FAQs – 1

Posted by Hemant Puthli on November 7, 2009

Several pertinent questions often come up in discussions on the closely related subjects of ‘Sustainable Business Transformation’ and ‘Sustainable Business Technology’, which form the main theme of our work. What follows below is an attempt to consolidate them into sets of related questions, which have been answered in an interview format so as to capture the spirit of the live (and lively) discussions that we have had with clients and interested parties.

This is the first of 6 posts and deals with a set of questions about HPA’s perspective on sustainability and how it may be similar to, yet different from, other connotations associated with the term.

The concept of sustainability has been around for many decades, so why are you talking about it now as though it is something new? What’s new in what you’re talking about? What’s different about what you’re calling Sustainable Business Transformation through Sustainable Business Technology? Is this something you’ve invented?

‘Sustainability’ has been around for a long time, agreed. Neither have we coined the word nor have we been the first to talk about it in terms of business management (and won’t be the last either). Michael Porter introduced the concept of sustainable competitive advantage in the 1980s along with several other ideas that have dominated management thinking over the last couple of decades. We are not suggesting that those ideas are obsolete and need to be replaced with the apparently new ideas that we are putting forward — on the contrary, we are building on the theme and adapting traditional management thinking around sustainability to reflect current priorities. In a way, we are ‘marking-to-market’ the legacy of ideas around sustainable business and infusing into them some current thinking from other streams, which we shall talk about in a moment. So, in a sense we are saying that those concepts need to be updated and refreshed, but not replaced. Refreshment keeps good ideas alive, relevant and vibrant!

The current thinking mentioned a moment ago is, again, not all that new either and nor is it all our own work, but has its roots in studies on sustainability carried out by socio-economists way back in the 1970s. Environmentalists and economists have been talking about sustainable development for almost as long as management thinkers have been talking about sustainable business, perhaps even longer. As an aside, I would encourage you to look up the Wikipedia portal on sustainable development (the Wikipedia page on sustainable development would be a good starting point) which traces the history of sustainable development and outlines its scope and approach.

So, as you have correctly pointed out, sustainability is not a new thing in either business management or socio-economic or environmental conservation circles. But for a long time these have been like parallel tracks running in parallel universes. In more recent times, pressure from environmentalists and others, exerted on countries and businesses to get smart about the other definitions of ‘sustainability’, has compelled contemporary management thinkers — academicians, consultants and practitioners alike, to see things from a different perspective. So much so that some harsh critics unfairly accuse these pressure groups of having hijacked the meaning of sustainability to serve their own ideological pursuits. It is almost as though the word means different things to different people, which is ironic because it is not at all difficult to synthesize these apparently diverse notions into a single set of concepts and principles.

Ideas like the ‘people-planet-profit’ approach and the ‘triple bottom line’ try to bring all those seemingly disparate views of sustainability together into an integrated and, if you like, holistic definition, which we believe will gain traction with businesses as those ideas crystallize on one hand and businesses become more aware on the other.

The three great crises the world is dealing with as we speak: the great economic crisis (manifesting in the slowdown / recession over the last year or two), the great environmental crisis (manifesting in significant climatic change and unprecedented natural calamities in recent years) and the great socio-political crisis (manifesting in the ‘conflict of civilizations’ and the threat of terror strikes), have underscored the need to meld economic, environmental and social / political perspectives into a new definition of sustainable business. Each of these three crises reflects a fault line in each of the ‘three pillars’ respectively i.e., economic, environmental and social. On the plus side, there are tremendously important lessons to be learned from these crises and we aspire to distill some of them and pass the benefit of our learning to our clients.

Now, if you were to leave this aside for a moment and look at the history of Business Technology, you will observe that it has always quickly adapted itself to serve emerging business imperatives. When management thinkers talked about BPR, for instance, Business Technology moved quickly to support that trend. Some may even argue that packaged ERP software is what drove the genesis of BPR, but that’s a moot point. So this is nothing new either — the fact that technology trends support and drive business trends. That’s technology’s job!

To summarize, what we’re saying is: (a) businesses will start thinking about sustainability in terms of a more holistic and multi-dimensional definition as compared to traditional management thinking, and (b) technology will do its job, as it always does, which is to support business in envisioning and planning its future: in this case, a sustainable future. This is somewhat new stuff … in the sense that we don’t know of too many management professionals out there today addressing the issue of Sustainable Business Technology as an enabler to, if not the driver of, the Sustainable Business Transformation journey. It is new but not all invented by us, as you can see from the number of references we make to other sources on this topic. We are only bringing our unique perspective on this, through our own ideation.

Long answer, but hopefully it clarifies the issue regarding what’s new and what’s not and why what we’re talking about here is a bit different.

The next post in this series will deal with what we mean by being ‘social relevant, environmentally responsive and economically viable’ and why these are important goals for businesses seeking a path to prosperity.

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Global Warning

Posted by Hemant Puthli on October 27, 2009

The Warning

If “global warming” doesn’t kill us, then “global war” will.

The Background

The new book entitled “SuperFreakonomics: Global Cooling, Patriotic Prostitutes, and Why Suicide Bombers Should Buy Life Insurance” by Steven D. Levitt and Stephen J. Dubner seems to have stirred up a hornet’s nest in the communities centered around the subject of ecological economics. Apparently the authors have injected a provocatively contrarian view into an already heated debate on why and how to control carbon emissions, by suggesting that this may not be necessary after all.  Andrew Winston, himself a noted author on the subject of climate change, very neatly sums up the state of play as regards the controversy in his recent post “SuperFreaknomics Ignores the Business Case for Sustainability” at his HarvardBusiness.org blog.

The Context

Andrew Winston’s post lays out a fair and reasonable assessment of the various positions around the controversy and presents a sound rationale as to why the focus must be on the business case for sustainability, and why the shift to a low-carbon economy is beneficial even without considering its impact on restoring the environmental balance. However, some of the reasons that he offers to support the latter argument (i.e., benefits other than mitigating climate change risks) involve perspectives that are mostly American rather than global. The post concludes with the following paragraphs:

As many have repeatedly argued, we also place ourselves at great risk globally by continuing to pour money into oil markets. We send hundreds of billions of dollars a year to parts of the world that don’t like us very much. And we place ourselves at personal risk — the National Academy of Sciences just estimated, conservatively, that fossil fuels cost $120 billion per year in health costs and cause 20,000 premature deaths (that’s more than six 9/11s if you’re counting).

So while we find new ways to pour attention on “contrarians” and have a debate that most of the rest of the world has already stopped having, we risk our health, fall further and further behind the countries we compete with (China and Germany, for example, in renewables), and become more indebted to our enemies.

Solving climate change is not really about asking people to hold hands and sing “Kumbaya,” but about political will and making it easier for business to create the low-carbon solutions we all need. Regardless of the climate science, the benefits of action and the costs of inaction for business are astronomical — and worth superfreaking out about.

While I really appreciated and agreed with the content in the earlier paragraphs of the post, I was a bit disturbed by a couple of phrases in these last few paragraphs, such as “… parts of the world that don’t like us very much” and “… (become more indebted to) our enemies”. Was this necessary? Is this one of the benefits that Andrew Winston believes is important enough for global citizens to favor control of carbon emissions?

The Issue

Clearly, in his opinion it does merit consideration, else there would have been no mention of these so-called benefits along with many other benefits that justify carbon control. Not only is this disappointing but also dangerous, for reasons that my comment to the post (reproduced below) highlights:

Thank you for a sane and rational assessment of the various discussions to date on what seems to have become a highly controversial and polarized subject. It’s time people like you brought a mature and balanced approach to the climate change round table, and I hope voices such as yours are being heard in the relevant quarters. We (i.e. mankind) have already lost a lot of time and we simply cannot afford to lose more, especially on the inane polemics provoked by contrarians.

I was just a tad disappointed, however, with your comments towards the end, especially in the third and second paragraphs from the bottom. Statements like “We send hundreds of billions of dollars a year to parts of the world that don’t like us very much” smack of an “us-and-them” standpoint on world affairs and therefore don’t have a place within a global perspective on a global problem. You take a distinctly American / Western Hemisphere position when you say something like that and I do appreciate the sense of patriotism, as it were, implicit in the underlying sentiment. However, there’s a thin line between patriotism and jingoism, generally speaking, and clearly there’s no place for the latter when it comes to developing solutions for a planet in crisis. If there are parts of the world that don’t like “us” very much, then it is up to “us” to find out why and try and fix it, to the extent we can. There are already many divisive forces that want to deepen the chasm between the “us” and the “them” that you implicitly refer to in that statement, and one must be careful not to play into those hands. President Obama’s vision of a more inclusive foreign policy and his approach towards global diplomacy are highly welcome in this regard.

The fact that you are sending hundreds of billions of dollars to parts of the world that don’t like you very much should not, taken on its own stand-alone merit, be a reason for you to be less dependent on oil. There are already abundant and adequately strong reasons for weaning yourself away from dependency on fossil fuels, as you have cogently argued already (in this post as well as elsewhere, in your body of work), and including this one weakens the argument rather than strengthens it. The global socio-political landscape is yet another dimension to the global environmental problem, though sadly not many are focusing on this while addressing climate change issues. IMHO, it is only an integrated view that will work, or else we will end up trying to fix one problem at the expense of exacerbating the other.

Talking about “parts of the world that don’t like us” and “our enemies” is very 20th century / cold-war / Bush-era kind of talk. The new global diplomacy is about inclusiveness, about engagement and partnerships, about forging new relationships with allies and adversaries alike, in areas where collaborative action is critical for the preservation of life on the planet as we know it. And leveraging the collegial spirit of these new relationships to resolve conflicting agendas in other areas that are perhaps bilateral and/or less critical at a global level.

Summary

The world can end in many ways – with a whimper (deterioration of the environment, over a period of time) or with a bang (war between the have’s and the have-not’s, in a shorter span of time). Our prime interest is in not letting the world end, any which way. Environmental balance as a goal is merely a means to a greater end. So is world peace. Neither makes sense in itself / by itself / for its own sake, if we can’t have the other as well.

Post Script (added Oct 28)

Andrew Winston’s response appeared a few hours later (time-zone difference adjusted). And this is what it said:

Thanks to all for your comments. Hemant, you make a good and fair point about my language on ‘us’. I was perhaps being too casual in my tone and agree that we need cross-border cooperation on a grand scale to handle a problem as thorny and global as climate change. Regardless of where the hundreds of billions of money for oil goes (to U.S. ‘enemies’ or not), it’s a waste of resources that we could use to build infrastructure and invest in the long-term health of our economy and education…or whatever your priorities might be. We can build a more profitable economy by basing it on resources with zero variable cost (renewables). On this point, see this week’s cover story on how we can get to 100% renewables for all our energy by 2030 — it’s not only possible, it’s economic.

to which I wrote back:

Thank you, Andrew. I appreciate your acknowledging my point – it is refreshing to see that, given that the zeitgeist consists of provocative contrarians with hard stands and closed minds, as your post and its linked contents point out. I do hope delegates to Copenhagen later this year demonstrate a level of maturity in working towards the common good, and eschewing such inane polemics and self-centric political chicanery that this book has stoked.

 

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Taking “Green Shoots” Literally

Posted by Hemant Puthli on September 4, 2009

Food for thought from TED Talks …

As we reboot the world’s economy, Geoff Mulgan poses a question: Instead of sending bailout money to doomed old industries, why not use stimulus funds to bootstrap some new, socially responsible companies — and make the world a little bit better?

Hope the right people are listening!

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Convergence: Evolution of Sustainable Business

Posted by Hemant Puthli on August 26, 2009

The diagram below represents the three generations of evolution of organizations and corporations, ending with convergence, in the 3rd generation.

HPA - Evolution of Sustainable Business

Historically, through the Industrial and post-Industrial era, we have seen the rise (and rise) of the traditional ‘profit-oriented’ corporations whose main objective was to create wealth for its stockholders and investors. Several such corporations also felt a moral obligation to give back to society, and accordingly funded charitable initiatives to help and support various elements of society, mainly the underprivileged communities. In more recent times (especially post WW II), we saw the emergence of the traditional ‘purpose-oriented’ organization whose main focus was on social development and/or environmental protection. In the organized sector, some of these were Government-funded donors of ‘aid’ while others were Non-Government Organizations (NGOs) funded privately. In the unorganized sector, individuals, associations, clubs etc. took up social and environmental activism towards the same or similar objectives albeit at a smaller scale and perhaps more locally focused.

The second generation (mostly in the present time) is manifesting two trends: (a) the move towards efficiency and competitiveness on the part of the purpose-oriented organizations, and (b) the move towards responsible citizenship on the part of profit-oriented corporations. Purpose-oriented organizations are focusing on cost management, productivity and other parameters of efficiency and effectiveness (‘cheaper / faster / better’) that have typically been characteristics of the traditional approach, culture and discipline of mainstream business. The emergence of the ‘social enterprise’ and ‘social entrepreneurship’ is a key milestone in this journey of evolution. Social enterprises are just like other enterprises, except that they focus on social causes and serve ‘customers’ of a different type. On the other hand, profit-oriented corporations are taking on more responsibility for their actions and for the impact of their operations on the environment as well as their host societies in locations where they operate. This is visible through their Corporate Social Responsibility (CSR) programs and ‘Green’ initiatives (in syncretic co-existence, but seldom integrated with the mainstream business), which  are signs of a growing awareness and the sense of urgency to respond to challenges in these key areas, on the part of the corporate sector.

In a not-too-distant future, we will see a confluence of these two streams of evolution, converging into a single type of organization / enterprise — the sustainable business. The sustainable business will seek to make a profit, but through a purpose. It will try to be socially relevant, environmentally responsive and economically viable all at once, in a cohesive fashion. It will develop its own way of integrating what were hitherto seen as diverse and contradictory objectives, into the holistic goal of sustainability.

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