Updated: Apr 5
Many companies have some form of a sustainability program in place. However, many also lack deeper consideration as to how sustainability can enhance a company’s business model. What, then, does it take to transform sustainability into a competitive advantage?
When I co-founded my company in Hong Kong in 2007, there was not yet much momentum around sustainability and Corporate Social Responsibility (CSR). I was fascinated by the concept of double-bottom-line accountability, where businesses could both meet a market need and simultaneously achieve social sector objectives. I built my business model and our corporate culture on these principles, which have been a driver of our success over the past 13 years.
In 2010, The Wall Street Journal published “The Case Against Corporate Social Responsibility,” which critiqued the idea that companies have a duty to address social ills. It argued that this idea was not just flawed, but that it also detracted from real solutions to these problems. I exchanged research with the article’s author, and while we agreed to disagree, I concluded that companies with a strong ethical culture can make high-stakes decisions where the underlying rationale is not limited to profitability. As Peter Drucker once noted, “Profit for a company is like oxygen for a person. If you don’t have enough of it, you’re out of the game. But if you think your life is about breathing, you’re really missing something.”
In our current environment, I believe the world at large has woken up to the fact that no single organization can achieve a significant impact on its own. Formal and informal partnerships continue to flourish, and co-collaboration across geographies and industry sectors is increasing, from government agencies to investors to nonprofit organizations to private-sector companies. This is the future. I’m finding that many businesses are shifting from a cursory view of sustainability to a more nuanced understanding of what they can achieve.
The methodology an organization uses to develop a CSR program depends on where it is in its life cycle. Established businesses may identify Sustainable Development Goals (SDGs) that align with their core business models and the products and services they offer. For example, it would strengthen both branding and operational synergies for a law firm to focus on pro bono legal services or for a financial institution to focus on microfinance or financial education. My team at Lyrium reviewed one of our multinational clients’ charitable donation process and transformed it into a CSR program where the majority of its donations were reviewed against SDG goals that were aligned with its mission.
For startup ventures and scale-ups, this presents much more of a greenfield opportunity, where they can build or adapt their business models around a cause. I find that this resonates more strongly with younger demographics, such as millennials and Generation Z, and it also provides a rallying point for employees and builds an additional purpose into their existing roles.
There are multifarious ways organizations can use sustainability to build a competitive advantage. One example is Bluefield Technologies, a microsatellite technology company that is revolutionizing methane monitoring. Emissions data comprises a significant amount of critical, highly sought-after information, which Bluefield is able to capture from millions of emitters around the globe. Through its methane-tracking satellites, the company processes the data in real time and delivers change detection analytics to its private, public and governmental sectors clients. In our conversations, we were able to dive deep into a discussion on the causes behind climate change, the risks and challenges it presents, the financial cost to the global economy, and possible solutions within the context of Bluefield’s business model.
Another organization, established upon the principles of sustainability and social impact, is the Climate Reality Project, founded by former U.S. vice president Al Gore. The idea behind this nonprofit is to drive climate action through capacity building. It trains volunteers across the globe who are then able to drive sustainability initiatives in their local communities. I recently completed a mentoring initiative under the Climate Reality Leadership Corps, where I worked with a talented group of climate volunteers from a diverse background (corporations, startups, financial institutions, students and nonprofits) to discuss action planning for the future.
What both these entities have in common is a mission greater than themselves that contributes significantly to both their business models and their desired sustainability goals. Based on my experiences with both, I propose five tactics companies of any size can model to differentiate themselves from their competitors:
1. Review SDGs aligned with your business model. Invest the time to determine which SDGs make the most sense based on your strategy, markets, customers and revenue model. Look at white space opportunities to both strengthen your business and make a social or environmental impact.
2. Consider implementation. Decide how you will make this practical and actionable. All too often, sustainability is used merely as a marketing tool. How can you do more to be different?
3. Explore partnerships to achieve impact. Identify like-minded organizations or influencers with the same cause that you can partner with for greater impact.
4. Measure and monitor. If you can’t measure it, you won’t know whether you are making progress in the right areas. Look at SDG reporting or how you can quantify your sustainability initiatives along with your financial analysis.
5. Build communities for scalability. Look beyond a profit motive. Expand your impact by engaging employees to volunteer or building communities around key impact areas.
By expanding your existing sustainability program into areas that are core to your business model, you can gain an edge over your competitors and industry peers in terms of market penetration, client and employee branding, and community development. In doing so, you will create key points of differentiation and enhance your competitive advantage.
As published in Forbes.