Sustainability: the term is used today in an inflationary way. Nonetheless, it is at the heart of our work. How sustainable is sustainable enough? There are major differences depending on the industry. We take a closer look at selected sectors.
Sustainable action means using the available resources responsibly. This includes social (employees, partners, customers, etc.), natural (raw materials, energy, etc.) and financial resources. Ideally, this so-called triple bottom line is balanced. Wikipedia also defines sustainability as a principle of action for the use of resources, in which the preservation of the essential characteristics, stability and natural regenerative capacity of the respective system is in the foreground.
The basis of entrepreneurship
Is this not an old concept? Aren’t these the defining characteristics which makes a good entrepreneur? A responsible entrepreneur normally orients his company for the long term. This only works if he does not make excessive use of any resources – neither raw materials, capital nor his employees. Why does this concept seem more relevant today than ever? More importantly, why has it not been followed for so long?
The answer is obvious: the economy could assume an abundance of social and ecological capital. So, focussing on financial returns became the only goal. But now natural resources are becoming scarce. Global social differences are becoming more and more obvious, not least due to the spread of social media.
UN sustainability goals: After all, they are fixed
Suddenly, the international community has to define 17 sustainability goals in order to re-integrate the values that used to apply into political, entrepreneurial and social action. After all, the sustainability goals have found their way into the strategies of companies and organizations. But what about their achievement?
Many companies have outsourced their social and ecological responsibility to Corporate Social Responsibility (CSR) departments. Critical voices say that these satellite departments primarily serve to calm the bad conscience and to polish the company’s image. Dr. Randolph Kent of the Humanitarian Futures Program believes that many of these CSR departments will soon lose their raison d’être as sustainability returns to the core of corporate strategy. Companies such as Danone and Philips (global) or Migros and Coop (Switzerland) are regarded as role models in this respect. But there is still a long way to go before this mindset (again) prevails in other industries.
Financial sector: different standards
In the financial sector, there are now various providers of sustainable financial products. But the different interpretations of sustainability seem problematic here. If we look at products for developing countries, unfortunately many financial instruments are still limited to microcredits for companies or individuals. The conditions for such loans are often rigorous and the interest rates impudently high – perhaps justified in view of the risk, but definitely not in the interests of the cause. Because: Only the borrower runs the risk.
To what extent is it socially responsible when microcredit funds charge farmers in developing countries up to 50% interest per year? This despite the fact that the default rate is very low and the logistics of the loans have been digitised? In these cases it is also useless if the borrower’s income doubles from two to four dollars a day, as long as he cannot cover his costs. In the end, only the investors have earned – under the guise of sustainability.
But there are role models who implement a truly sustainable structure. Foundations say goodbye to purely donation-based business and become impact investors who also take risks. Banks such as Lombard&Odier see sustainability as an opportunity for a new business model. Even pension funds are looking for ways to invest more of their resources in truly sustainable projects. However, projects of a matching size are often still lacking.
Development organizations: Slow transformation
State development agencies, INGO’s and NGOs are also searching for ways for achieving sustainability goals more efficiently. The focus is often on financial profitability. Only if existing projects are financially self-sustaining, funds can be used for new initiatives. This in turn leads to the necessary scaling of proven concepts.
For many organizations, the step from a purely donation-oriented to an impact-oriented organization is difficult. Often structures, knowledge and capital are missing.
However, many are prepared to take a step forward. WWF, for example, launched an Impact Investment Program a few years ago, Catholic Relief Services is working intensively on the financial perspectives of its projects. Even development organisations such as the Swiss SDC are developing ideas to use their financial resources more effectively.
Conclusion: System change necessary
As natural as the concept of sustainability may has been, it requires a systematic change in different sectors to reach it again. The private sector needs to move back towards a more long-term approach. This may initially be associated with smaller profits. But fair development for all stakeholders and longterm profits are only possible, if the private sector is taking risks again. The NGO sector must give greater attention to financial sustainability. The accumulated amount of global donations is just not enough to reach the SDGs by 2030.
Consumers have the lever in their hands. Their purchasing and investment behaviour has the strongest influence on the orientation of companies and organisations. This means that we all have to make the difference!
What do you think? Discuss with us directly or on social media.
- About the impact of micro credits (in German): www.spiegel.de/wirtschaft/unternehmen/mikrokredite-untersuchungen-stellen-wirksamkeit-in-frage-a-937020.html
- The perspective of Lombard&Odier: https://www.lombardodier.com/on-off?utm_campaign=20181108-welcome-to-the-sustainability-re
Source: nexus ch