Friday, 15 August 2014

Sustainability rising- the 'Third-Wave' organisations.

What I find most interesting about corporate sustainability is that since it is something that is currently evolving we can actually see the different stages the corporations are in, in terms of how they are responding to this challenge. There is quite a significant proportion of them who are still in plain denial of climate change and the fact that sooner rather than later, they will need to change to continue thriving in the market. Some of the key drivers demanding this change is-
  • Resource scarcity- Production of goods needs resources. If companies continue to treat environmental resources as free goods open to exploitation, they will find themselves in a situation where they will be forced to cut down and use substitutes since there will be no resources left to exploit. You will be surprised as to how many companies are relatively myopic in this respect.
  • Stakeholder pressure- Increasingly, stakeholders are treating sustainable organisations as ones with a low risk element and unsustainable organisations as otherwise. It only makes sense. With a higher rate of consumer awareness and government interventions, why will an investor want to invest in a company which is not willing to keep up with the times? Isn't proactive organisational change one of the key drivers to success? 
  • Consumer awareness and reputation risks- There have been some disastrous episodes in the past where a company has been irresponsible towards its environmental and social responsibilities and has had to face the music in the form of widespread protests and a slap to its reputation. One of the most prominent examples being BP's oil spill in 2010. The environmental, social and economic consequences of the spill are so widespread that it is impossible to ever repair the damage. BP has already spent hefty amounts of money on settlements and has had to spend even more money to try re-build their reputation. One of the measures included changing the company's logo to one which symbolizes their new and improved "green" values. It's hard to say exactly how many consumers they have managed to convince. 
BP's logo- Before and after.
  • Government intervention- Developed nations have definitely taken the lead in trying to regulate the environmental and social impact of companies. Developing nations are not far behind though. After years of draining and polluting water supplies in India, Coca-cola's plants across several locations have been shut down. Local communities including farmers have on numerous occasions accused the company of presenting false and misleading environmental assessments to carry on business-as-usual. Increased consumer awareness is forcing companies to re-think their strategy and be careful regarding sloppy usage of resources. 
So how are companies reacting to these drivers of change? (Dunphy et al., 2007) summarised this very efficiently in this diagram-

As depicted in the diagram, the 'Third Wave' organisations are the ones to watch out for. They are using sustainability not just as a means of 'greenwashing' or regulatory compliance or mere reputation building, but are actively integrating sustainability in how they operate and using it as a means of how they define themselves.

Go Lite is a company that comes to mind. By using environmentally friendly materials in their products such as recycled polyester and nylon, it aims to mitigate almost 100% of its environmental impact ( Patagonia has a similar approach of using recyclable materials. Perhaps the one campaign that defined Patagonia's unique business model was this ad-

At first glance you would think that this company is suicidal. How will they sustain themselves if they are actually discouraging consumers to frequently come back and purchase their products? Nevertheless, you'd be surprised as to how much this campaign caught on. It was certainly eye-catching- it had the shock factor to it. Additionally, it intrigued consumers. Here is a company that is boldly discouraging the consumerism culture. Word got around and eventually there was a significant section of their target market that actually admired the company's values and were motivated to express how the ad changed their attitudes-

So here is a legitimately honest pursuit of conducting business in the right way. I am hopeful that they have inspired other companies to adopt similar business models. Although the untraditional approach may seem unnerving to some, it will do companies good to realize that being the first to jump in the 'Third-Wave' bandwagon has its advantages too. This poster should certainly serve as motivation!-

No comments:

Post a Comment