Shape and innovate: How to master the sustainability two-step

In my 10 years at Forum for the Future, I have seen a shift in the mindsets of senior executives at leading companies. In the early 2000s, their attitude was summed up by the word "responsibility": Companies had a responsibility to minimize their negative impact on the world.

But it turns out that unsustainable development has a negative impact on business as well, with resource shortages affecting the long-term viability of supply chains. That's why leading companies now talk in terms of "sustainability."

Today, the prevailing attitude is this: Doing nothing presents real risks. Acting now opens up opportunity. Executives in leading companies are realizing that long-term value creation requires a dynamic, successful society. To create this, the global economy must operate within environmental limits while ensuring people have the capability to act by developing their skills and providing the support of institutions and other social foundations. But creating these conditions is too much for one company alone.

The next frontier

That's why when I look at leading companies, I see them exploring the next frontier. They are learning a new dance, which I call #theBIGshift two-step of "shape and innovate." They are both shaping the context around them and innovating their core business offer for commercial success.

Look at Nike. The Road to Zero coalition will shape the supply chain so there are no more hazardous chemicals in the company's products by 2020. Internally, Nike is training designers and developers so it can produce the best apparel and shoes without hazardous chemicals, which in turn benefits Nike's shareholders.

Change agents in companies tell me that learning this new dance is difficult. The "shape" step often means collaborating with competitors and finding leverage points in a complex, confusing world. Usually, large companies are adept at incremental improvements on existing products or services. But this particular "innovate" step is about long-term disruption; it means being prepared to cannibalize today's sales for a more successful tomorrow. Developers of breakthrough innovations in big companies struggle to nurture those advancements while protecting them from the momentum of business-as-usual.

Learning the two-step

So what do I expect from businesses as they try to learn this two-step? First, companies are at different stages of awareness about the risks of unsustainable business, and will act accordingly. The unaware will remain laggards. The aware will watch the leaders for stories of success, and then join in.

Curious companies will start to experiment with different collaborations. The experimenters will get more systematic. Today's leaders will see it is in their own interest to help other companies to make a similar journey.

Second, there will be consolidation of best practice through collaboration. There's a definite need for this: I know of at least three attempts to come up with ways to report on sustainability, including GRI and Integrated Reporting, although I hear of moves to negotiate a combined standard. Similarly, I know of at least four (still-behind-closed-doors) attempts to establish a widely accepted definition of "sustainable business" that will set expectations for what is "good enough." The same is true for labor standards, packaging and more.

Any young field has a period of diversity followed by a shakedown, in which a dominant version comes out on top. Sometimes the winner simply beats the others; sometimes they all merge. The same will happen with today's dizzying variety of collaborations within sectors.

Finally, there is the need to innovate to win. After all, companies need to create shareholder value. I expect leading businesses to gather many players who can help originate, develop and then scale innovations. You can refer to this as "stakeholder engagement," but that seems too sterile to me. They are orchestrating an "innovation ecosystem" — this is what will emerge from their shape-and-innovate dance. And this will be how companies win in our connected, interactive, collaborative world. They will lead "the big shift" to build long-term value together.

Dancing photo by joyfuldesigns via Shutterstock