An absurd question, don’t you think? And yet relevant in the context of current events and our seeming collective disconnect with reality.
I eavesdropped by way of ongoing blog on the two-day sustainability conference conducted last week by the American Institute of Certified Public Accountants at North Carolina State University. It was relevant that the AICPA should conduct such a conference, as sustainability is very much a bottom-line issue. And I was reminded that North Carolina is the same state whose legislature succumbed to the demands of its real estate developers to ignore data on climate change and sea level rise so as not to kill the golden goose of escalating shoreline real estate development possibilities, no matter how ill-advised. Hopefully, some of the conference’s wisdom will wear off on the legislature, if belatedly.
As is appropriate to an organization of auditors, the conference spoke to the risks of ‘green-washing’, and the imperative of measurable and verifiable key performance indicators. It provided the necessary checklists of key considerations and factors. All very good, and much needed. But, it got me to wonder: how do we bridge the gap between the intent of sustainability, assuming we agree on what that really means, and the real agendas of our private and public institutions?
Of particular note was the fact that US companies, while accelerating their focus on ‘sustainability’ programs and public reporting, lag other advanced economies. Not surprising. Like the North Carolina legislature, the bulk of US business seems content to ‘fake it while they can make it’, and then move on to whatever paradigm follows.
Let’s start with ‘The Bottom-Line’ (or fund balance for the government/NGO sector), and that all-important measure of corporate sustainability, referred to by auditors as ‘going concern’. How does the tragedy of the Bangladesh factory(ies) or the reality of Foxconn factor into The Bottom-Line? If the bottom-line of many US companies is dependent on the ‘economies’ of production afforded by working conditions and minimalist regulatory nuisances in these third world economic environments, how sustainable are those bottom-lines as the social and economic and political consequences of these environments come home to roost? If you move textile production from New England to North Carolina to Mexico to China to Bangladesh, and Bangladesh becomes too ‘hot’ politically, what’s the next stop on the magical mystery tour? The Congo? When the Bangladeshis get ‘uppity’ about submitting to indentured servitude, where next do you outsource your production? And when you run out of planet? Mars won’t be ready for another 500 years.
If the projections of climate change suggest the growing probability that your factory in Bangkok or Bangladesh is likely to experience repeated power-washing by mother nature, how long will you continue to invest in that ‘low cost’ labor market or make it strategic in your supply chain strategy?
What’s the benefit of a business presence in China when it becomes increasingly difficult to hire managers to go there or retain them there? Are you going to bet that China can solve its imposing energy and water and food and social problems because it put on a glitzy Olympics? Does your business plan include a contingent exit strategy for when things may get nasty in Beijing, which sits on the edge of an approaching desert, or Shanghai, which is threatened by sea level rise?
If you’re a processed food manufacturer, how vulnerable is your bottom line to the growing awareness of more Americans who cannot afford adequate health service that your product may be highly seductive junk? And if you had to evolve your product mix to items that are more healthful and sustainable, what would that do to your bottom line?
If your bottom line is really based on arbitraging the US economy with low-cost third world production, how long is that likely to last in a domestic economy that shows decreasing vitality due to aging demographics, labor mobility ossification, and income stratification? And if that same economy is the driver for your investment in BRICs and other evolving economies that presume to feed off it, how secure are they? Will the evolving economies be any more secure from cross-border and internal economic infections than the more evolved economies? Or is this just wishful thinking because ‘we really don’t want to go there’. Do you double-down and take bigger risks because the risks you’ve taken are unsustainable, or do you recognize reality and recalibrate your expectations to what is sustainable, even at the risk of disappointing the cognoscenti of Wall Street?
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Speaking of key performance indicators (KPIs in wonk-speak), I attended a briefing on the Connecticut economy a few weeks ago. The speaker was a well-regarded regional economist who dissected with great clarity the US economy and the state of Connecticut’s economy. We have many disadvantages in this state when compared to other parts of the US, particularly the states with more rapid economic growth and employment. But what troubled me about the analysis was that the comparison was solely on economic’ KPIs. By most other measures, the states exhibiting the greatest ‘economic’ growth lag significantly in almost all other measures: health, education, safety, environmental protection, social stability. If Connecticut’s economic status is unsustainable in its current formulation, are the more vibrant economies any less vulnerable by these other measures? What’s the trade-off? What’s the sustainable mix? How do we get there from here?
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My wife was recently introduced to a old home-brew concoction for making window cleaner from basic household stuff at a fraction of the leading store-bought brand, and without the need to wear a haz-mat suit when using. It’s an old, well-known household formula. Not ‘new-and-improved’. What if more families discovered the joys of various home-brews and ignored the plethora of the unnecessary? What if the sensibility of the ‘consumer society’ became ‘conserv-ative’ in the literal meaning of the term, and eschewed the senseless excesses of a wasteful society? How vulnerable would be how many corporate bottom-lines in their addiction to our consumptive excesses? (Yes, I know. This line of reasoning is philosophical nonsense, Or might necessity at the personal ‘bottom-line’ gradually make it compelling sooner than we might want to think?)
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The too typical executive will shrug this off as being just a part of business risk-taking, for which he is richly rewarded. But the difference between professional risk-taking and organizational gambling masked as risk-taking is understanding the risks and making calculated, deliberate trade-offs with a clear awareness of consequences.
That US businesses as a group, in the world’s largest economy, lag in an appreciation and meaningful embrace of sustainability as a management discipline is a telling indicator of our future prospects as a society.
Sustainability. Exactly what is it? And do we really care? As management professionals? As investors? As consumers? As people?
Sustainability. Is there an App for that?
Onward.
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Integrated Man 