In 2004 PepsiCo managed to increase its share earnings by 13 percent, and surpass Coca-Cola in terms of market cap for the first time in history. The secret is found in the overlap between increased market share and the healthier lifestyle habits of the general public, says author Andrew W. Savitz, who was the head of PwC's sustainability division for ten years, and is now striking out on his own.
These are just two examples illustrating what happens when companies find the common ground between their business interests (the shareholders) and the interests of the general public (the stakeholders). Savitz and Karl Weber call this overlap "the sustainability sweet spot."
"Every action you take in business has two components: an impact on profits and an impact on the world," the authors argue, staking out a path to where profitability and social benefits blend. "This is the spot where companies who want to remain successful in the long term should aim for."
The book points to empirical evidence demonstrating that the share price of companies listed in the Dow Jones Sustainability Index, and the FTSE4Good Indexes, have outperformed various other indexes. Further, companies who belong to the World Business Council for Sustainable Development have outperformed their respective national stock exchanges by 15 to 25 percent over the past three years.
The claim that sustainability is increasingly equated with good business, is underpinned by a quote of UBS’ investment bankers: "Environmental performance indicators appear to be a good indicator of strong operational performance. Strong environmental indicators in the presence of below-average profitability may signal an investment opportunity in our view."
Savitz and Weber outline three fundamental ways to improve the management of your business: Protect it, run it and grow it. They give simple but effective examples of how this works, showing what companies can do to benefit from resource and operational efficiencies, innovations and new business models. "We want the readers to see that they can do this too."
The Triple Bottom Line is written in a way that makes the logic of sustainable development seem easy and evident. One simply forgets what a hard sell it once was. "The aim of this book is to translate complex sustainability jargon into something that everyone in the company can understand, from the boardroom to the factory floor. An important target group is the middle management section of large companies, who have a hard time looking up from their numerical goals to see that by integrating social and environmental factors into their core calculations they will reach still further," says Savitz. "I believe sustainable development is only a transition phase similar to quality thinking or systems thinking. One hundred years from now, company bottom lines will include the three pillars of sustainable development (economic, environmental and social) in a totally seamless manner."
What makes this book different from other, more evangelical counterparts is the fact that the companies who today are emerging as forerunners of the sustainability movement are not portrayed as all time saints. It shows where many of them are actually coming from, not shying off from mentioning GE’s repeated clashes with the environmental movement in the pre-Ecomagination era, for example.
Or how Monsanto went wrong in its push to bioengineer crops in the 1990s -- by failing to engage proactively with the stakeholders. Peter Raven an acknowledged biodiversity advocate says today of Monsanto: "(The company) is in a unique position to contribute to the global future." If used right, bioengineering could potentially end world poverty.
The book notes that sustainability is not always a win-win, imposing additional costs or redirecting money away from shareholders and toward other stakeholders.
Weber and Savitz make the crucial point that sustainable development is about business, and not philanthropy. It is not simply an add on. To succeed, sustainable development must be an integral part of a company’s core business. And this does not just apply to big businesses -- but follows all the way down the supply chain. As Savitz himself expresses it: "All companies need to realize that 'Sustainability will be opening in a theatre near you.’ - and that no-one will get away from doing something about it."
Sustainability is becoming a fundamental principle of sound management, and one that is easy to overlook or take for granted in a world where the financial bottom line is often treated as the only measure of success. The book shows that even well run companies with good intentions, and with years of success behind them can fall hard if they ignore the principles of sustainability.
But what is different in today’s business environment -- as opposed to 20, 50 or a 100 years ago -- making sustainability a crucial factor to twenty first century business success? To understand that, you will have to read the book.
The Triple Bottom Line provides a useful mix of examples to prove the business case for sustainable development, with easy to follow models demonstrating how it all works. It helps companies of today -- big and small - understand why and how the transformation to a sustainable world is taking place, and identify how they themselves can become a part of it.
This book review has been reprinted courtesy of the World Business Council for Sustainable Development.