Published on February 27th, 2013 | by Chris Milton0
What is Sustainability?
Is that such a terrible thing to say, to say that a business ought to create more than it absorbs? Not just in terms of money, but in terms of non-financial impacts: social cohesion, or the environment, for example.
Let’s look at three examples. and perhaps it will be made clear.
I have a business selling widgets. I have an $80,000 turnover but my costs are $100,000. The largest part of my costs is salaries, at $60,0000, and the second largest is debt repayment which of $20,000.
This business is not making enough money to cover its costs. Its largest customer is asking for a boost in production but to meet that it will have to take out a further loan to invest in machinery. This may increase the volumes handled, but it does not make the business any more financially sustainable.
Now look at it from an agricultural perspective.
I own a farm and that farm produces 700 apples a day. This brings in enough money to feed me and my family and we have no debts. However my main customer wants me to produce 900 apples a day and the only way I can do this is through “enhancing” my soil to make it more productive. The upside is that if I do this I can produce over 1200 apples a day, the downside is that I can only produce that number of apples per day for a few years before the soil starts to degrade.
Again, this is unsustainable. It’s going for the quick financial win and leaving the externalities to be sorted out another day. Focussing just on money leads to warped perspectives, but things like soil quality cannot be expressed solely in commercial terms because this is a resource you have to preserve and conserve, so there is no return on investment, just a return on leaving well alone.
Finally, let’s imagine you’re head of a growing entrepreneurial business. You do business, you make trades, you form partnerships. This is the world of business. You tap your laptop, answer your mobile phone, ride on the bus. But it’s all consuming resources: not just the natural resources of oil and rare earth metals, but also the impoverished manpower of people working in slave like conditions to dig the stuff out of the ground for you.
Is this sustainable? Not just that to make a profit today you have to dig up limited natural resources without knowing what will take their place in the future. But also in order for you to have those tools at your fingertips wars are being fought (in the DR Congo) and cultures eliminated (indigenous people around the world) … just so you can hold a smart phone in your hand.
What is sustainability?
There’s no hyperbole in this: it is the supply chain straight and true. If you take more than you create than your business model is unsustainable .
You might as well ask whether a business should survive if it doesn’t make a profit. No it shouldn’t .. the very purpose of a business is to make a profit because the definition of a business is that is creates more value than it absorbs
The same goes for sustainability, except you have to replace money from your calculations with concerns which are more important than money, but less talked about.
Think about how the business nourishes the community which it’s part of, brings value to the political debate and– above all — preserves and enhances the human rights of all its stakeholders. If you cannot put a tick in all those boxes, you’re not sustainable.
That’s not supposed to be easy. It’s hard, very very hard. But if you can embrace and accept it then you’re on your road to being sustainable. If not, then go back to the start and think again.
At its heart sustainability is all about resources. You cannot Take more than you Give unless you want to follow an unsustainable model of business.
But our entire business culture is fundamentally and unsustainably founded upon generating wealth, which means taking more than is given (making a profit).
So, is it doomed, like the proverbial politician’s career, to fail. Not really, but we have to re-examine what our priorities are and engage with them in our day to day lives.
For example, do we want financial profit at all costs? If no, then move to the box marked social enterprise.
This is why sustainability is so simple any businessman can understand it. But with that understanding comes a realisation that the predominant business model of today is in itself unsustainable.
If you want to have a net positive business which will continue to grow long after you have let it fly, then you need to invest in the soil within which that business grows. This is the people, the culture, the natural environment within which your commercial enterprise exists.
But the moment you believe that you can degrade any of these in order to make money, that is the moment you have beome unsustainable.