Defining the Next Chapter of Business Sustainability by David Grayson

David Grayson CBE is the Emeritus Professor of Corporate Responsibility at Cranfield School of Management, the leading UK university for business sustainability, and Chairman of the Board at Carers UK. From co-founding PNE Group, an initiative to support individuals across the North East to enter self-employment, David Grayson has proven himself not only as a business leader, but as a leading advocate for sustainable business too. Since founding PNE Group in 1980, David has held the position as CEO of Prince’s Youth Business Trust and Managing Director of Business in the Community, and more recently, as the director of the Doughty Centre for Corporate Responsibility at the Cranfield School of Management.

His most recent book, All In – The Future of Business Leadership, co-written with Chris Coulter and Mark Lee, explores the essential attributes of high-impact corporate sustainability leadership and describes how companies can combine and apply those characteristics for future success. In the following guest blog, David shares an excerpt from the book, highlighting examples of best practice from leading corporate organisations, and summarises the blog with consideration to start-ups and SMEs looking to incorporate sustainable business models.

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Forty years ago this summer, I moved to Newcastle and met David Irwin. Pretty quickly, we started talking about where the new jobs and economic activity would come from the North East. Our conversations led in the summer of 1980 to us giving up our jobs with multinational companies, and starting Project North East – now PNE Group. Our goal was through action-research and practical pilots, to test out new approaches to job and enterprise promotion. We wanted to create an enabling environment that would give people making their own jobs, the best possible chance of succeeding. Today, entrepreneurs wanting the best possible chance of success and aspiring to continue into the indefinite future, need to embed sustainability. In other words, to manage their social, environmental and economic impacts. This means mitigating risks by minimising their negative impacts – but crucially also optimising opportunities through maximising positive impacts. In a new book “All In – The Future of Business Leadership”, which I have co-authored with Chris Coulter and Mark Lee, we look at how companies like IKEA, Nike, Patagonia, Unilever and Walmart are going All In for sustainability. Our message, however, is just as relevant to small businesses and for entrepreneurs starting new enterprises, as this extract from All In argues.

– David Grayson

 

We expect the hallmark of the Regenerative Era of leadership that will take hold between now and 2030 will be the widespread adoption of circular, regenerative or net positive business models—systems of commerce that take complete accountability for products and services at every stage from sourcing through to end of life, and which contribute more to the environment and society than they take.

There have been experiments with such business models already, some of which we learned more about during the interviews conducted for All In. Ian Cheshire, the former Kingfisher Chief Executive talked about how and why Kingfisher’s Net Positive[1] was designed to commit the company to “transforming our business to have a restorative impact on the environment” through aspirations like creating “more forest than we use.”[2] Cheshire told us the company’s effort to become Net Positive under his leadership required a whole new way of thinking:

…We came from a different angle which was a bit more of a future scan effort about how things might change. I think what we tied it into was [whether we] could think about different business models and different ways of working that would generate new opportunities for the business and our customers. That is what led us into experimenting on ideas around the sharing economy; trying to redesign products so they could be maybe sold as a service rather than one-off.[3]

Cheshire suggested urgency and a competitive rationale for regenerative approaches as well:

I think the key is being able to model a twenty-year out view of the world and say: ‘Will my business still be around in this shape or form? If it looks under threat, what can I do now to get ahead of it – because undoubtedly the leaders in these sectors will do better.’[4]

Similarly, Erik Fyrwald of Syngenta discussed how that company’s Good Growth Plan aims to preserve and improve farmer livelihoods and agricultural yields via six commitments that include: “Rescue more farmland” and “Help biodiversity flourish.”[5] Like Kingfisher’s Net Positive ambitions, Syngenta’s Plan provides an example of the kind of regenerative approach that we believe must become the future business norm.

What is the regenerative difference, the new thing inherent to the approaches of both Kingfisher and Syngenta? The maxim attributed in various forms to world scouting movement founder Robert Baden-Powell captures the intent of regenerative and net positive approaches: “Leave this world a little better than you found it.”[6] While simple to say, this is hellishly difficult in practice – the kind of difficulty described by Rick Ridgeway of Patagonia when he framed the challenge his company faces in trying to build a regenerative business model while producing consumer goods in a consumer economy. But difficult is not impossible, and making regenerative ambitions public (a form of Advocacy for such business models) helps make them tangible enough to pursue. This sentiment was captured by Cheshire when he described Kingfisher Net Positive as essential to communicate to the company’s employees “…next generation leaders…what would make them proud to work at Kingfisher…something that would fulfil our purpose and give them a real challenge, and that increasingly crystalized into the idea of don’t just be less evil or have less impacts, but go one step beyond.”[7] Fyrwald similarly attributed Syngenta’s Good Growth Plan with making “a real difference in delivering sustainable growth, revenue, and profits that are also having a sustainable impact on the environment and people.”[8]

The Regenerative Era will be enabled by organizations like the Ellen MacArthur Foundation and its thought leadership on the circular economy, and Forum for the Future and the tremendous effort it is applying to defining and developing net positive as a practical concept.

 

For Public Benefit

We share the view of Marcello Palazzi of the Progressio Foundation, who has written:

Just like different assets classes constitute the investment universe, we see the business universe being greatly enriched by the emergence of the B Corps as a new class of corporations leading the quest to grow a true well-being economy.[9] This new class of companies are trying to redefine the purpose of business by including “public benefit and positive impact on society, workers, the community and the environment in addition to profit as…legally defined goals.[10]

While the number of benefit corporations – often referred to as B Corporations or B Corps thanks to the success of the B Corp certification[11] – existing today is relatively small (estimated variously at a few thousand, mostly in the US), and B Corps themselves tend to be predominantly entrepreneurial start-ups and smaller firms, we are intrigued by their potential and by what they represent – the notion that corporate charters (a means of expressing Purpose) can be written or re-written to better balance shareholder and societal interest.

In explicitly recognizing a range of stakeholders’ interests and committing to external verification of performance, B Corps are trailblazers in doing business more inclusively and sustainably. They are proving successful in conventional financial and broader market terms too—so much so that a number of them have proven attractive acquisition targets for several Leaders Survey ranked businesses like Unilever as discussed in Chapter 8. Such acquisitions are happening outside of the Leaders Survey universe as well, for example, SC Johnson’s acquisition of Ecover and Method, and Procter & Gamble’s purchase of supplements brand New Chapter.

Jonathan Trimble (CEO of advertising agency and B Corp, 18 Feet & Rising) and Katie Hill of B Lab UK suggest such acquisitions are happening because:

New metrics of deal measurement are in play and organizations are making investments with one eye on consumer trends, one eye on innovation and talent, and both eyes on living out the tenets of their oft-stated corporate social responsibility pledges.[12]

We believe Corporate Sustainability leaders see B Corp acquisitions as laboratories for new ways of doing business as well as strong cultural additions. Perhaps as a sign of things to come, Unilever has bought Sundial Brands, a $240 million portfolio of personal care brands serving the growing new majority multicultural and millennial market. The deal included the establishment of a New Voices Fund with an initial investment of $50 million to empower women of color entrepreneurs. This has been described as an inspiring example of putting the B Corp Declaration of Interdependence (which states that leaders of a global economy who use business as a force for good must act with the understanding that: “We are responsible for each other and future generations”) into practice. It may equally be a smart extension of corporate venturing with an eye on long-term value-creation. Perhaps in future we will see sustainability leadership companies rotating staff between B Corp subsidiaries and other business units, to spread B Corp culture and ideals and broaden employee horizons. They may also decide to test new collaborative approaches with civil society organizations and public sector agencies through B Corp subsidiaries.

Whilst attaining and retaining B Corp status is just one route to becoming a purposeful business (which only a handful of large companies like Natura, Danone and Patagonia have yet pursued[13]), we expect that the mindset, values and some of the innovative practices of B Corps will become more widespread amongst corporate sustainability leaders. We also see similar commitment to balance financial and social performance in other societal-orientated businesses that are not formal B Corps, such as many multi-generational family-owned businesses, which often possess a strong spirit of stewardship.

Finally, whether a B Corp or otherwise, we would be remiss to not to mention the boundless potential of the many kinds of disrupters now emerging. Here, we generally mean start-ups and small and medium-size-enterprises (companies that many studies show enjoy higher societal trust than multinational corporations). We note and admire companies created with entirely new and more sustainable business models with the intent of upending what has gone before them (most notably, Tesla, with its vow to remake mobility and transport, but also, for example, the “buy one, give one” models behind retailers like TOMS for shoes and Warby Parker for eyewear). There are even what we might call ‘disruption collaborations,’ as typified by the January 2018 announcement by Amazon, Berkshire Hathaway and JP Morgan Chase that, out of sheer frustration at the high cost and uncertain efficacy of the US health care system, they will “form an independent health care company for their employees in the United States” which will be “free from profit-making incentives and constraints” in order to test whether their collective acumen and size can produce different and better health outcomes[14]. As we can see, while B Corps are a uniquely identifiable type of disrupter, lightning shifts are happening economy wide. This will continue to be a major influence on the journey to 2030.

 

Extract from “All In: The Future of Business Leadership” by David Grayson, Chris Coulter and Mark Lee, published by Routledge, June 2018. Price £29.99. More details at: www.AllInBook.net. PNE Group blog readers can obtain a 30% discount on All In between now and the end of August by quoting the code AIC230 on the Routledge website.

 

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References 

[1] www.kingfisher.com/sustainability/index.asp?pageid=173 accessed Jan 9 2018

[2] www.kingfisher.com/sustainability/index.asp?pageid=185 accessed Jan 9 2018

[3] Source – Authors’ Interview, Oct 30 2017

[4] ibid

[5] www.syngenta.com/what-we-do/the-good-growth-plan accessed Jan 9 2018

[6] Letters of Note http://www.lettersofnote.com/2010/11/to-boy-scouts.html accessed Jan 14 2018

[7] Authors interview Oct 30 2017

[8] Authors interview Oct 10 2017

[9] Palazzi M.,  Global Ambassador,  Towards a new business civilization B Corporations January 2018

[10] http://benefitcorp.net/faq accessed Jan 14 2018

[11] www.bcorporation.net accessed Jan 13 2018

[12] Ibid

[13] Major multinationals such as Campbell’s Soup, Danone, Unilever and several global accounting firms have joined the B-Corp Multinational and Public Markets Advisory Council: http://www.bcorporation.net/what-are-b-corps/the-non-profit-behind-b-corps/standards-advisory-council accessed Jan 5 2018

[14] https://www.nytimes.com/2018/01/30/technology/amazon-berkshire-hathaway-jpmorgan-health-care.html accessed Feb 4 2018