Sloan Mgmt Review highlights a New York Times article on Walmart’s toughening stance on environmental sustainability. It also points out the inherent conflict in this – that W. relies on selling ‘stuff’ in vast quantities. Yet even so, their leverage over suppliers may make them a very effective ‘Environmental Protection Agency’.
This is an intrisically unsustainable activity, but the headline reminds me of some discussions with the David Bent of Forum for the Future, which is working hard to help businesses ‘make the case’ for including sustainability in their strategies and investment. FftF takes a broad view of this, based on its ‘Five Capitals’ model, which covers what it describes as Natural, Human, Social, Manufactured and Financial ‘capitals’.
To include this in an organisation’s strategic business management, the strategy dynamics approach would treat these just as any other accumulating asset-stocks, making the model considerably more usable and amenable to forming the foundation of any business case. The key structure as regards environmental sustainability is the three-stock chain from [a] natural resources, to [b] manufactured goods, to [c] waste. The chain can work in two ways.
- For ‘consumables’ like oil the natural resource is depleted and moves straight to an accumulation of waste.
- For ‘durables’ like metals the natural resource is converted into manufactured goods and then into waste.
The distinction is not absolute, since some items are durable for such a short time [e.g. clothing] that on the time-scale of sustainability issues they are effectively consumable. The value of the structure is the clarity it brings to the key movements in the system – as in all policy and strategy issues, it’s the flow-rates that are critical, i.e. tons per year moving forward and back between these three states.
It’s pretty easy to build on this core model of the environmental system of which a business is a part to work out how changes in strategy might make its activity more sustainability-compliant [if not totally so] and deliver investor benefits.