The Fifth Imperative: How Sustainability Makes Companies More Agile
Sustainability is the fifth imperative companies have faced since World War II. But, unlike the four preceding imperatives, sustainability requires companies change both how they create value and for whom they create value. The good news for companies? Embracing sustainability can lead to an unexpected and long-lasting benefit: enhanced agility. Here's how and why.
The actions companies take to embrace sustainability (create the business case for embracing sustainability, craft their sustainability strategy, implement their sustainability strategy, measure their sustainability performance, and engage with stakeholders) can lead to an unexpected and long-lasting benefit: enhanced corporate agility. To understand how, first we must understand why. A business imperative is a new circumstance in the economic environment that requires radical changes in a business's operations at every level. If changes are not made, the business cannot continue to create value consistent with previous levels; in extreme cases, the business cannot survive. Since WWII, business has adapted to at least five postwar business imperatives: quality, business process reengineering (BPR), globalization, the Internet, sustainability. All five have necessitated significant changes to core processes and methods of supply-chain management. Each imperative has driven and continues to drive economic growth. Each one, and the transformations it ushered in, disrupted the competitive balance within industries and even across borders. But the similarities between sustainability and its four predecessor imperatives end here. What sets apart the sustainability imperative is that it also requires changing whom businesses must create value for in order to continue to operate. Traditionally, investors and employees made up the core beneficiaries of companies' efforts. Now, sustainability elevates the role of stakeholders whose interests were earlier considered tangential to business. Society and the earth writ large must now be co-beneficiaries of business activity, along with investors. For example,
- Local community leaders expect companies to provide value to (or, at minimum, not extract value from) the citizens living in the areas where a company’s local operations are based.
- Nongovernmental organizations expect compensation for serving as guides through the jungle of regulations designed to protect people and the environment.
- Numerous governments levy fees on companies’ carbon emissions as a lever to force companies to reduce their impact on the environment.
- Other stakeholder groups abound, with their own agendas and demands.
With their voices amplified by social media, their sphere of influence growing, and their constant attention required to meet the scope of global challenges, the likelihood that this broad set of stakeholders will spark and shape the next business imperative appears high.
Curiously, companies can develop an ability to move faster by taking on the additional responsibility of meeting the sustainability needs and interests of this larger group of stakeholders. These companies are engaging with stakeholders to gather feedback about their current sustainability performance while positioning themselves to receive advice from the stakeholders likely to shape the next imperative after sustainability. And to prepare themselves to respond to this early guidance, companies are taking two steps. They are empowering their employees to act on their behalf today and tomorrow. And they are working with their suppliers to both bring their sustainability performance up to stakeholders' expectations and equipping suppliers to remain aligned with new expected behaviors adopted by the company in response to stakeholders' advice and guidance.