Aron Cramer on the New Push for 'Sustainable Excellence'

Two Steps Forward

Aron Cramer on the New Push for 'Sustainable Excellence'

Aron Cramer, president of BSR, is one of the leading voices in the world of corporate social responsibility, having led his global organization to its position of preeminence on that topic. In the run-up to BSR's annual conference -- and on the occasion of the publication of his new book, "Sustainable Excellence" -- executive editor Joel Makower caught up with Cramer to talk about innovation, China, the oil companies, and the state of the art of sustainability.

Joel Makower: To begin, tell me about your new book's title, "Sustainable Excellence." What does that mean beyond the usual terms "sustainability" or "corporate social responsibility"?

Aron Cramer: "Sustainable excellence" is the best way for companies to think about CSR or sustainability as the concepts move into the mainstream of business. Our book advances the idea that companies cannot achieve excellence without integrating sustainability into their fundamental business strategies, and that they will not achieve sustainability goals without approaching them in a hard-headed way that focuses on excellence.

There are several reasons for this. Many of them are familiar to GreenBiz readers: the rise of natural resource constraints, radical transparency, the distinct needs of emerging markets, and changing consumer attitudes, amongst other things. The book tells the story of how more and more global companies, up to CEO and board level, are thinking seriously about these concepts.

Given that sustainability questions are considered strategic matters for business, it is essential that they be approached with a seriousness of purpose that delivers great results, both for companies, and for the wider world. This way of thinking represents an important evolution, and is the best way to capture the full potential of the sustainable business movement. In fact, we close with the belief that, in 10 years, these ideas will be so widely adopted that "sustainable excellence" will be thought of simply as "excellence."

JM: In the book, you encourage companies to "think big," with strategies "that meet big global challenges." How well do you think companies are doing in thinking more boldly about creating business value from sustainability, and what would it take to accelerate this?

AC: More companies are thinking big than ever before, which is great. One of the positive -- though certainly unintended -- impacts of the great recession is that companies are more focused on how sustainability can deliver value, and advance their overall strategy. For me and BSR, which has always aimed to mainstream corporate responsibility, this is great news. On a case-by-case basis, there are many examples of this happening, from familiar cases like GE, to the recent announcement by Nestle to create a new business unit focused exclusively on "nutriceuticals," to "pure play" companies like Method, which make sustainability the defining feature of their strategy.

Despite lots of examples, this transition is not yet systematic. To make that happen, two things can make a fundamental difference. First, economic measures and incentives need to change. Too many things, from water to carbon to biodiversity, continue to be considered "externalities," and public markets continue to promote short-term thinking. This needs to change for companies to feel more confident about reorienting their investments.

Second, the current emphasis on a consumption-based economy needs to shift. As BSR has pointed out in its paper on the subject [PDF], finding ways to inspire and encourage consumers to change their purchasing and product use patterns is also crucial.

There is a lot that business can do on its own, under the existing system. More fundamental progress can be made, however, by changing market rules and consumer actions -- and businesses focused on sustainability should contribute to these changes.

JM: You also talk a lot about innovation, which, as you know, is a big theme this year -- at the GreenBiz Innovation Forum as well as the upcoming 2010 BSR Conference, which has an innovation theme. You talk about how "short-term thinking distracts business leaders from investing in the innovation" for a low-carbon economy. What's needed to change this short-term mindset, and what can companies do in the mean time to align their innovation and sustainability agendas?

AC: We have made Innovation one of the central themes of the upcoming BSR Conference in New York, November 3-5. At the conference, we will be presenting corporate executives and inspiring thinkers from outside business who are embracing the concept that sustainability is actually one of the great innovation challenges business has ever had. We are trying to accelerate a shift in thinking in recent years, as companies have come to see sustainability as a means of value creation as much as value protection.

At the conference, as well as more generally, I think that one of the keys to maximizing innovation is how companies communicate with new audiences. Much of the world's growth -- and business opportunity -- are found in big emerging economies. Unfortunately, this is also where there is the greatest potential for increasing our collective footprint to truly unsustainable levels. It makes no sense, on either an economic or human level, to step back from those markets.

This means that new approaches are needed. Many companies, like Nike, ANZ Bank, and P&G are opening up their strategy and innovation processes to community and other voices. Done right, this delivers two benefits. First, it can identify market needs and opportunities that companies might not otherwise see. Second, it can ensure that the results of innovation processes are embraced by the communities they are intended for. This kind of thinking marries stakeholder concepts with open innovation -- crowdsourcing sustainability, if you will.

JM: We've recently seen the travails of oil companies in meeting society's social and environmental expectations. In your book, you write about sustainable excellence being central to the future success of Shell, Brazil's Petrobras, and other oil companies, along with other extractive companies, like mining giant Freeport McMoRan. Can you see a pathway for oil and mining companies to ever be truly sustainable?

AC: True sustainability almost certainly depends on a rapid and massive switch to lower-carbon energy. In some ways, industry incumbents are well-placed to lead this transition, given their R&D budgets, technological expertise, and ability to leverage infrastructure. They are also prisoners of the successes of the past century's reliance on carbon-based energy, so they may be vulnerable either to disruptive technologies, or rapid market shifts due to environmental or supply concerns.

The best scenario for them is probably also the best scenario for all of us: a rapid and orderly transition to an energy system that achieves the goals articulated by most countries by the middle of the century. Energy companies that invest in new technology, achieve significant efficiencies to reduce demand, and contribute to policy frameworks that accelerate these transitions can be a crucial part of the solution.

JM: BSR is playing a catalytic role in China, where it has two offices and works with multinational companies there trying to be socially responsible. What have you learned about sustainability in China?

AC: The rise of sustainability in China is one of the most positive developments in my 15 years at BSR. It's why we now have 30 people in three offices in Greater China (Beijing, Guangzhou and Hong Kong). And we devote considerable attention to China in Sustainable Excellence. There is an actively engaged community of government officials, companies, and civil society organizations focused on the topic. And let's face it, we won't have a more sustainable world without a more sustainable China.

Just as Chinese companies have looked to learn from companies and others outside the country on other aspects of business, we see huge interest on the part of Chinese companies in learning how their businesses can improve by embracing sustainability. Some of the reasons for this are the same in China as elsewhere: natural resource constraints (especially water and energy); public pressure (as when product safety becomes an issue), and the opportunities presented by innovation, like the well-known case of BYD Auto, which aims to be a global champion in electric cars. There are also ways that China is very different. State owned companies are under a directive from the central government to embrace CSR; this is not something one sees in the US, for example. And Chinese companies "going out" to the rest of the world face unfamiliar operating environments, and in many cases, outright hostility. This can be offset by a focus on CSR.

I think we will continue to see China embrace sustainability. As with other aspects of China's integration with the rest of the world, some of it will be very similar to what companies in other countries do, and some of it will be "CSR with Chinese characteristics," as best illustrated by the limits of free expression on the Chinese internet.

6. At the end of the day, are you hopeful that business is headed in the right direction?

AC: I am an optimist by nature, so I have to say yes. It is immensely gratifying to see how sustainability has become a global phenomenon that every serious company considers. At the same time, by all objective measures, the world's economy is not on a sustainable path: climate change is accelerating, and the Millennium Development Goals are likely to be unmet in 2015. These are the ultimate measures of our success. Businesspeople love to meet a challenge, and we have a massive challenge in front of us. Business is more focused, and more serious, than ever before, and I have great hopes that this will be translated into a transformed economy -- sustainable excellence is the key to making this happen.