In my last post I looked at some of the theories that support incorporating core purpose and company values at the heart of a business. Below is a summary of what I found: whilst really just a teaser, I’m happy to discuss further with anyone who is interested in what they read!
Over the summer I interviewed leading sustainability-focused companies to investigate where and how the theories matched up against what was going on in practice. These companies included
- Vitsœ, which makes shelving that de-clutters your house and your mind but doesn’t clutter the planet as it’s designed to adapt and last for a very very long time.
- Café Direct, which supplies quality coffee directly from the growers, focusing on improving the lives of growers and creating environmentally and socially sustainable small-holder communities.
- Adnams, which uses the power of its people to reduce or remove any negative impacts from brewing exceptionally tasty beer.
- Chipotle, which aims to serve its customers food that has been raised or grown responsibly (naturally raised), as well as supporting family farms and their communities.
- Interface, well known for its ambitious plans first to achieve ‘Mission Zero’ in its ascent of Mount Sustainability and then, ultimately, regenerative industrial processes.
- Patagonia, the outdoor clothing company that created the organic cotton market, which uses corporate profits to support environmental activism and is challenging some of the systemic issues responsible for encouraging inevitably unsustainable business activity.
I also interviewed companies that are not so well known for having a sustainability focus, very large corporations where sustainability efforts are beset by the challenges inherent in scale or public ownership, and even a company with an explicitly focus on profit, usually thought to be in direct conflict with sustainability initiatives. These companies included Coca Cola Enterprises, Toyota, Cisco and private equity house, Doughty Hanson.
By looking at those companies doing the most that they possibly could, but also those that face operational and strategic situations often considered as barriers to sustainability initiatives, I hoped to get a wide overview of what can support sustainability as well as profitability.
The Why: Origins of corporate sustainability values
I touched on the origins of sustainability values in my last blog, but I think it’s worth mentioning it again. Sustainability need not be the focal point that ultimately leads a company to try to become sustainable or responsible. Many of the companies interviewed revealed that having strong non-profit specific values in place allowed them to evolve and more easily incorporate sustainability into their values. They began by developing the values that were core to their business offering, educating themselves as they worked at these, and growing their understanding of what was central to their success; financially and as what sort of businesses they wanted to be. Over time, these values developed to include a desire to be sustainable too.
The How: Corporate communities with common purpose
Values assist the corporate community in working towards a common purpose: like-minded individuals and investors are attracted, creating a community that is better equipped to achieve mutually desired and desirable goals.
Doughty Hanson reported a constant increase of investors approaching them with evermore sophisticated ESG queries – the fact that they had a dedicated team meant that investor requirements and business approach could align. Adnams CEO Andy Wood talked of investors with common values coalescing around Adnams and its values. Patagonia, Interface and Vitsœ all made special note of the importance of an individual’s values when recruiting new employees.
However, the business must provide the conditions for a reliable culture that supports these shared values, and be prepared that, at times, these conditions may appear to be supported at the expense of shareholder value (thought of narrowly, in terms of short-term profit).
The How: Long-term thinking
Companies existing for reasons beyond profit will use funds to keep doing what they believe they are there to do. Values-inspired sustainability strategies encourage cathedral-building mentality: sustainably minded companies plough earnings back into the business, cultivating rigour, resilience, and the ability to adapt to future conditions.
Vitsœ invests everything it can back into its business – it makes decision that it realises do not make ‘commercial sense’, except of course decisions must make commercial sense or the business wouldn’t exist anymore. No, they don’t make commercial sense within our current system, stripping everything that we can out of a company and still expecting it to prosper and grow. Café Direct also places emphasis on achieving its business goals (supporting small holder coffee growers) rather than profiting. Vitsœ and Café Direct can behave in this way, partly because their ownership structures allow them to. But what of much larger corporations with shareholders expecting returns on their investments, where the company is nothing more than a means of extracting wealth for themselves? As soon as they are able to think more than a year or two into the future, investors too can reap benefits similar to those of their more short-term minded colleagues. Toyota R&D cycles can run over decades. Development for hybrid vehicles began in the early 70s, and yet hybrid sales now make a significant contribution to maintaining Toyota’s position as the number 1 car manufacturer in the world. Cisco is betting on a future where resources simply cannot be wasted anymore and therefore putting the thinking work in now, working with the Ellen MacArthur Foundation to explore the ways in which a true circular business system can be set up. Even Doughty Hanson, with holding periods of between three and seven years for the companies within its portfolio, is able to generate sufficiently significant value enhancements from its sustainability efforts. Investors are able to see benefit from buying into this sustainability-incorporating approach to business building.
Sustainability values gave the companies I interviewed the opportunity to think about their needs as companies as well as those of society and the environment. Combining these values with audacious goals, these companies have created mindsets existing in the present, but with an eye always on the future.
In the next blog I will look at three further strategies that values-focussed businesses seem to employ to support both sustainability and the bottom line.