Political polarization over what constitutes sustainable business practices is at a fever pitch, making it even more difficult for leaders to divine the correct path forward.
The answer, of course, is simple.
Just do the right thing.
Of course, in the real world, doing the right thing can be complicated.
Take the respondents to the 2023 “Sustainable Investment Survey” from financial data/software firm PitchBook. Those who have integrated sustainable investment principles into their portfolios grew from 30% in 2021 to 37% in 2023. Meanwhile, survey respondents with no plans to integrate sustainable investment practices also grew – from 9% in 2021 to 17% in 2023.
This reminds me of an earlier time, back when people derisively called “tree huggers” wanted to save every tree that ever existed, while some in business simply wanted to make as much money as possible and let the trees worry about themselves. At least, that’s what the headlines seemed to imply.
That’s when Daniel C. Esty and Andrew Winston came out with the book Green to Gold: How Smart Companies Use Environmental Strategy to Innovate, Create Value and Build Competitive Advantage. Through numerous case studies and practical examples, they argued that businesses could transform environmental challenges into opportunities for innovation, cost savings and improved customer relationships.
The same can be said about the current trend of ESG – environment, social, governance.
For a moment, just ignore the politicized acronym and think about what constitutes good business practices.
Taking care of the environment by, say, reducing waste and carbon dioxide emissions makes business sense. Less waste means fewer inputs, and inputs cost money. Innovative and efficient systems that emit less carbon dioxide use less energy – again saving money.
Managing relationships with employees, suppliers, customers and the communities you operate in – the “social” part – is simply good business.
Accurate, transparent accounting, audits, internal controls, shareholders rights, integrity and ethics – the “governance” part – is, again, simply good business.
So, let’s get back to those investment professionals surveyed above, the ones who are running gung-ho toward sustainable investing or equally gung-ho away. Who is doing the right thing? Without knowing the underlying investments, it’s impossible to say.
But I can say this, the case Esty and Winston made in Green to Gold stands today. Sustainable business practices do not ignore the underlying financials – in fact, financials are often at their core. And if you do ignore the financials, your business runs the risk of bankruptcy – truly a non-sustainable business model.
After all, today’s younger consumers and students – the people who will be buying the bulk of what we in business provide – care about what happens in the future. So, as business leaders, we must do our due diligence, innovate to use fewer inputs to produce more outputs, take care of our people and act with transparency, accuracy and ethics.
If we do that, the rest will take care of itself.
Jim Tompkins, Chairman of Tompkins Ventures, is an international authority on designing and implementing end-to-end supply chains. Over five decades, he has designed countless industrial facilities and supply chain solutions, enhancing the growth of numerous companies. He previously built Tompkins International from a backyard startup into an international consulting and implementation firm. Jim earned his B.S., M.S. and Ph.D. in Industrial Engineering from Purdue University.