Business sustainability has come a long way, but problems such as climate change, water scarcity, species extinction, and many others continue to worsen. Fresh thought leadership from Andrew Hoffman at the Erb Institute is pivoting the thinking on how companies can and will create market shifts that will enable new forms of business sustainability. Sustainability 1.0 supported a “greening of the market.” However worthwhile, these measures will “not actually solve the root problems it was meant to address. Our world continues to become less, not more, sustainable.”

Sustainability 2.0 is next phase of business sustainability. This phase is a call for a transformation of how businesses operate, “discarding such outdated notions as treating the environment as a limitless source of materials and sink for waste, seeing economic value as the only measure of nature’s worth, encouraging unbridled consumption, and considering perpetual economic growth as even possible.”

How will this happen? First, corporations need to rethink their business strategies to play a stronger role in guiding the sustainability of the systems of which they are a part. Second, the business model itself will undergo reconceptualization. Market transformation not only compels more systemic business strategies but also challenges traditional ways of conceiving business itself. It demands new conceptions of corporate purpose, notions of consumption, and models and metrics of business success.

Link to the full article in SSIR here

The era of corporations integrating sustainable practices is being surpassed by a new age of corporations actively transforming the market to make it more sustainable.

Article authored by Andrew Hoffman, Erb Institute | Business for Sustainability.  Published in the Stanford Social Innovation Review, Spring 2018.

Professor Hoffman’s article has received tremendous commentary (shared below). Hoffman shares thoughtful feedback and a summation below.

I want to thank everyone who contributed comments to this article. I have often felt frustrated when comments sections become caustic debates among people who do not want to listen. But these comments were truly constructive in augmenting the points made in the article and in my own mind. Thank you for that. As a summary, here are some themes that I saw emerge:

The first theme is the point that business alone cannot drive the shift to market transformation. As Glenn Pricket from The Nature Conservancy points out, “we need change agents inside business itself. But we need a broader groundswell of public pressure to change the way we humans create, buy and sell things, to put ourselves on a livable path. That will require political engagement. Leaders—be they in business, NGOs, academia, faith, or politics—need to speak up!”

A second theme, which is encouraging, is that some within business are already embarked on this shift. Patti Pope, CEO of CMS Energy, points out that “we refer to our version of ‘conscious capitalism’ as our ‘triple bottom line.’ Our most recent public commitment demonstrates our thinking: 80% carbon emissions reduction and zero coal by 2040 – a decade ahead of the Paris Climate Accord requirements.” Kevin Self at Schneider Electric, adds that “we continually talk about energy becoming more Decarbonized, more Digitized and more Decentralized!” and he sees business opportunity as “both the private sector AND public sector (college campuses, municipalities, cities, states) who ALL believe that this is the right path forward – and they are looking to companies like Schneider to assist in this journey.” Tad Dritz cringes when he hears about “‘sustainability’ efforts because they are misnamed” and sees “a new, real phase of sustainability … one where companies employing unsustainable models go out of business because they can no longer compete in a society that demands more of them.” Aron Cramer, from BSR, adds that market transformation needs to focus on “basic purpose, alignment with social expectations and needs” and that “the good news for all of us dedicated to sustainable business is that today’s fast-changing world means that we are pushing on an open door.”

A third theme is the need for new forms of education that will help business’ continue the shift. Dave Stangis argues that “Regardless of the tags we use to describe the next iteration of ‘business as we know it’ (Sustainability 2.0, 3.0, the Fourth Industrial Revolution, the Purpose-driven Enterprise, etc), the facts are clear. Generating business-, societal- and planetary-value in the 21st century requires a new set of skills at the front-line, in the C-suite and among board directors.” Dede Hapner, formerly of PG&E, adds that “business schools need to prepare students to be effective and successful. Offering courses and experiences on how to build effective collaborations with a range of stakeholders, lobbying, media skills, etc. would be useful and powerful.”

A fourth theme is to keep emphasizing the importance of government regulation. Former EPA Administrator, Gina McCarthy points out that “environmental regulations are designed to correct market failures and they have worked well when done right.” But, she adds, “when the market itself drives transformation that eliminates the inequity that required government intervention – then we can all call it a real – and sustainable – win.” She also sees hope that, while there is a lull at the federal level, this shift will come from the “cities and states who are stepping up.” Mark Weick, from Dow, adds that “market transformation – and sustainability 2.0 – is going to require not only technology and business strategy shifts, but also the more difficult shifts in public policy and human culture.”

On this point, Georg Kell, Chairman of the Board at Arabesque Partners, is skeptical, fearing “wishful thinking” in the article and that “markets and business do not function in isolation. Regulatory frameworks, finance markets and consumer preferences are shaping trajectories…we need smart regulations and educated consumers if we are going to fully address the climate change issue.” Tom Lyon adds that systemic change “requires changing the rules and institutions that govern the market” and he warns that “the track record of industry associations in self-regulating their way to change is spotty at best.” Randy Mueller is also “skeptical of CSR initiatives for as long as companies may integrate them a la carte” and “we’ll need to do more and do better going forward.”

Finally, Megan DeYoung adds two important and helpful additions to the article. First, we need to “create ‘societal boundaries’ alongside ‘planetary boundaries’ to generate a more holistic set of KPIs.” Clementine Klijberg concurs, seeing Sustainable Development “as a more holistic approach to sustainability that goes beyond environmental issues to include social challenges as well.” Second, “corporate sustainability discussions typically focus on large corporations. But start-ups have great – possibly greater – potential to take a giant leap forward,” particularly “purpose-driven companies and in companies founded by women and minorities.”

Once again, thank you to everyone who commented and joined in the process of further clarifying and articulating the next phase of business sustainability that all the were in agreement must happen.

Andrew J. Hoffman
Holcim (US) Professor of Sustainable Enterprise
Ross School of Business/School of Environment and Sustainability
University of Michigan