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We get the Business Case, but let’s talk about the Business logic for Sustainability

If anyone were to ask the late American economist Milton Friedman what the purpose of business is, he would probably lean back on his nappa leather arm chair and retort, in a throaty Brooklyn accent, “to make a profit, dummy”! For the better part of four hundred years, since arguments in favour of economic liberalism were advanced during the Enlightenment, human beings have been looking to maximise profit. To accumulate wealth. To buy that new shiny G-wagon. Profit-maximisation has become the dominant logic of business, and much of human existence.

The Dominant Logic Phenomenon

Before we get carried away with the wonderfully potent odour of profit and financial liberation, let’s explore the idea of a dominant logic for a moment. In academic circles, a dominant logic simply describes the manner in which a firm or society organises much of its activity in order to be successful. Different periods have been dominated by a specific logic for success. In subsistence societies, the dominant logic was to survive. In agricultural societies, the dominant logic was production. In the rose-tinted world of capitalism, the dominant logic is to be profitable. This logic was especially poignant in the post-World War II era, when capitalism went through a golden age.

While accumulation and grandeur were the norm in the restoration of a post-war world, it might be time to reflect on the society we exist in today. Let’s lean back on our own nappa leather (or pleather) arm chairs and figure out if “success”, today, purely means profit.

A Society in Flux

In 2013, Indonesia-based Asia Pulp & Paper committed to a no-deforestation policy. This came after a protracted, decade-long campaign waged by green groups. Rhett Butler, forestry expert and mongabay.com, said: “The paper products giant may be abandoning business as usual for a very different approach – one that could change how forests are managed worldwide”. In 2015, Oxfam launched its ‘Behind the Brands’ campaign, which encouraged consumers to use their scorecard to tell large food and beverage companies exactly what needed to change in their supply chains. Kellogg and General Mills were identified as the worst offenders in harmful food production practices that contribute to climate change. Shortly after being cited, both companies committed to strengthened climate polices. In 2017, Hong Kong-based NGO Students and Scholars Against Corporate Misbehaviour (SACOM) launched a protest against technology giant, Apple. SACOM accused Apple’s suppliers of conducting corrupt trade union elections where workers were allegedly forced to vote for an assigned candidate with open ballot. “The union suppresses worker demands when labour disputes happen”, a representative of the group explained. Furthermore, the group claimed that Apple’s manufacturers were found to use student interns as young as 16-years-old to replace regular workers at large scale.

These cases of civic mobilisation could be interpreted as being symptomatic of a broader shift away from the “profit over everything” rhetoric previously croaked by the likes of Milton Friedman. Society is gaining a heightened consciousness of issues of resource longevity, ethical socio-economic labour practices and sustainable production processes. Shareholder activists are taking notice too, recognising the long-term profit implications of frivolous resource usage and the reputational risk of being targeted by labour groups. The dominant logic that has underpinned capitalism for much of the last century seems to be decaying in the court of public opinion.

Sustainability, a new Dominant Logic?

The term sustainability, derived from the Latin sustinere, can mean to maintain, support or endure. In the context of development, the Brundtland Commission of the United Nations explained that “sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs”. Today, big business must grapple with managing operations and resources, in a way that does not compromise the future condition of its financial, social and ecological environment.

The dominant logic of sustainability means organisations pose the question “How do we find solutions to the potential impact our business has on our people, planet and profit”, and develop a strategy that addresses that question. One way of creating synergy between the three P’s, is through integrated thinking.

Integrated thinking is described as “the active consideration by an organisation of the relationships between its various operating and functional units and the capitals that the organisation uses or affects” [1]. Integrated thinking, if fully embraced internally by organisations, can lead to integrated decision-making and actions that consider the creation of value over the short, medium- and long-term. Companies can capacitate themselves to sustinere, by developing a dominant logic that improves, let alone preserves, their people, planet and profit.

In the era of social justice warriors and Al Gore-inspired climate change recitals, companies can no longer use sustainability as a reactive strategy to reduce the risks of law suits and clean-up costs from environmental damage. Sustainability, and integrated thinking, need to become proactive, solution-focused strategy rather than an operational tactic – a new dominant logic for the complexities of an ever-changing world.

 

Reference

[1] “Integrated Thinking” defined by the International <Integrated Reporting> Framework.