Sustainability starts in the unlikeliest of places
Sustainability starts in the unlikeliest of places

Recently, a New York Times op-ed by Greg Smith took hold of the business community and the public at large. In the piece, entitled, “Why I Am Leaving Goldman Sachs,” the author comes to terms with the fact that the core values of the company that he started with 12 years prior have fundamentally changed for the worse. In Smith’s words, “I attend derivatives sales meetings where not one single minute is spent asking questions about how we can help clients. It’s purely about how we can make the most possible money off of them.” He goes on to criticize current Goldman Sachs CEO, Lloyd Blankfein, and President Gary Cohen, saying that they, “lost hold of the firm’s culture on their watch.” Effectively, returning value to shareholders at Goldman Sachs took precedence over doing the right thing for clients.

Although Smith’s experience may be isolated (though it is doubtful), culture can have a dramatic effect on the future of a business. A recent Planet Money podcast looked at the fate of Countrywide Financial—one of the largest mortgage brokers prior to the financial collapse. Countrywide was plagued by a toxic culture wherein 1/3 of all employees left after their first year, all while it’s stock price and shareholder returns continued to soar.In the case of Countrywide, the corporate culture certainly contributed to a devil-may-care attitude in which subprime loans were taken on in an extraordinarily reckless fashion—eventually leading to massive losses and thousands of foreclosed homes. 

As sustainability moves from the breakroom to the boardroom, there is a natural tendency to treat the programs and initiatives coming under the sustainability umbrella the same way other business ventures are treated: examined for return on investment.  In fact, taking a cue from the accounting world, Puma released a widely touted environmental profit and loss statement last year—the first of its kind.

Focusing on the financials behind sustainability is not a bad thing. In fact, it likely marks a mainstreaming and embedding of the concept into all business processes. However, as we go from green teams to CSOs, it is important that businesses avoid the culture gap, wherein the profitability becomes such a compelling story that the quaint “doing the right thing for the planet” narrative gets tossed to the wayside.

The business case is certainly an easier sell to most boards than a values argument. (See: The Board Buy-in: Presenting the sustainability business case to the board and Better Decisions, Real Value: The Business Case for Sustainability). However, ensuring that a culture of responsibility—to the planet, to society, to shareholders—is ever-present can help businesses keep employees engaged in sustainability programs as well as giving leverage to less financially compelling initiatives. 

Take the case of Fairtrade, for example. While Fairtrade can present a compelling business rationale, such as in the example of Tate & Lyle, which worried about securing its sugar supply chain, in many cases a move to Fairtrade is also undertaken because of how it fits with a company’s core values. Although there is certainly consumer demand for Fairtrade products, part of the rationale behind the move to Fairtrade is done because of values concerns more than profitability.

Yes, companies can increase their margins by being more sustainable and efficient. No one denies that; however, we must be wary of only making decisions about sustainability based on profitability. Corporate values should still have a place at the table. While a powerpoint presentation to the board should certainly speak in monetary terms, it should also mention how a particular initiative feeds back into the company’s values—even if only as one bullet out of four-hundred. In that way, it helps keep the culture trap at bay, ensuring that even as the business case for sustainability takes a front seat, the less tangible aspects of “doing the right thing” will be along for the ride and not forgotten about.

Don't forget to register for the webinar, The Board Buy-in: Presenting the sustainability business case to the board on April 17th.

For more, check out Sustainability forever? Embedding sustainability in your brand and culture and A review of sustainability and corporate culture.

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