Solving the sustainable business paradox

Sustainable business models benefit the world and the bottom line, influencing strategic business decisions and uncovering new market opportunities.

| 25 Nov 2021

At the AGSM @ UNSW Business School 2021 Professional Forum: Responsible Management in an Accelerating World, leaders from the corporate, for-purpose, government and start-up sectors shared their insights and expertise and considered how responsible management is influencing strategic business decisions and uncovering new market opportunities. 

Building sustainability into the bottom line 

With changing consumer preferences and priorities, it’s becoming clearer that potentially competing goals – doing well for shareholders and doing good for people and the planet – can now overlap. 

Magnus Gittins, Director, AGSM Executive Education
Magnus Gittins, Director, AGSM Executive Education

During the How Sustainable is Your Business Model? panel discussion, facilitated by Magnus Gittins, Director, AGSM Executive Education, panellists considered how to identify different environmental, social and governance (ESG) credentials and how these impacts help organisations make better decisions about supplier partnerships.

“We talk about investors, consumers and employees, as well as the backdrop of regulations that are driving behaviours,” said Frances Atkins, Co-Founder of Givvable, (AGSM MBAE 2019). 

“And then you also have contractual counterparty requirements – one customer requiring their counterparty to do something along these lines, otherwise

they won’t do business. So, the pressure is filtering through, and I think it’s driving real change in this area.”

And much of that change needs to come from more sustainable business models underpinned by responsible management. There is demand for these business models at all organisational levels – starting at the top with investors.

Frances Atkins, Co-Founder of Givvable, (AGSM MBAE 2019)
Frances Atkins, Co-Founder of Givvable, (AGSM MBAE 2019)

“You have investors making enquiries around the environmental and social governance of your business, and you need to be able to demonstrate what practises you have in place to advance certain objectives,” Frances said.

“If you don't, you may not meet their investment criteria or their mandate any longer, and you won't have access to that capital.

“Capital markets have always considered risk, and this is one aspect. When companies have failed in the area of environmental issues, it has impacted their financial or share price performance. It’s now relatively clear that good ESG business practises correlate to less risk to the financial performance from a capital market perspective.”

Jeroen Boersma, Head of Research & Innovation at Brighte, Advisor at Vow, and AGSM Adjunct Faculty, pointed out that the toilet paper delivery company Who Gives a Crap is a good example of the overlap of doing good and doing well. 

Since 2012, the company has been making 100% recycled paper products and donating 50% of its profits to building toilets in developing nations. In September 2021, the company raised $41.5 million in its first-ever funding round.

“It’s one of the first times we’ve seen a significant amount of investment into a company that does not just squeeze out the profits,” Jeroen said. “This company knows it needs to have a bigger goal than just revenue and profits. And investors are starting to see that as something they want to be part of.

“By actually walking the talk, they show there is real merit beyond making profits – by making the world a better place.”

Building trust to build change

Stakeholders from all sides want companies to start practicing more responsible management by building more sustainability into their business models. 

Penny Joseph, Head of Resilience and Climate Change Adaption at Sydney Water, (AGSM MBAE 2019)
Penny Joseph, Head of Resilience and Climate Change Adaption at Sydney Water, (AGSM MBAE 2019)

But Penny Joseph, Head of Resilience and Climate Change Adaption at Sydney Water, (AGSM MBAE 2019), noted customers will need to trust in goods and services that may differ from what they’re used to. Only then can businesses do their best work – and remain profitable to uphold their responsibilities to shareholders.

“Establishing trust between customers and the organisation is probably the most important factor in driving a change agenda,” she said. 

Penny gave the example of convincing citizens to use recycled water, which has been challenging despite it being the same as rainwater that’s gone through the natural water cycle. Established technology and proven benefits aren’t worth much if uptake is low.

“Building that trust is more important than developing the technology,” she said. 

“Around the world, big cities are starting to drink recycled water. And the technology has existed for decades. But the key challenge is how do you actually build trust with customers? It really leads you to a multidisciplinary approach that's required to address these issues because the customer engagement, the people, are more important than the technology.”

As an advisor at Vow, a company seeking to transform the food system by creating artificial meat products, Jeroen also stated that it is difficult to convince consumers that these new edible products have all the benefits of traditional steaks and burgers – a key sustainability hurdle to overcome. 

“We know agriculture is one of the largest contributors to greenhouse gases in the atmosphere,” he said. “But how do you convince people that a product has the same health and taste benefits that you would expect from meat in a supermarket?” 

He said it’s just as important to gain trust from consumers who might not be as concerned about sustainability as we are. 

“They don’t always have the financial means or even the ability to focus on this – they’re worried about themselves, their jobs or their families. If we can win their trust, we can help them improve their lives, and achieve better climate outcomes as well.”

Risky business can be good business

Ignoring ESG considerations and the importance of a sustainable business model can pose a risk to success. So how do companies ensure they don’t fall into these potential pitfalls? By taking risks.

Jeroen Boersma, Head of Research & Innovation at Brighte, Advisor at Vow, and AGSM Adjunct Faculty
Jeroen Boersma, Head of Research & Innovation at Brighte, Advisor at Vow, and AGSM Adjunct Faculty

“One of the key obstacles, along with time, is risk,” Jeroen said of addressing ESG concepts. 

“As far as I can see, many businesses have bought into the idea and many get it, but can they take enough risks? Are they willing enough to make these changes very quickly? And do they have the tools and innovation, the technology, and the leadership capability to make these changes quick enough?

“Everyone should be thinking, can we do this earlier than we initially thought? What do we need to change? How can we think out of the box? We need to enable people to take more risk and do it in less time.”

Numbers don’t lie

Implementing responsible management to help your organisation build a more sustainable business model is one thing. But being able to measure and track the status of those goals is the only way for leaders to know if their business is actually making any progress.

“Because we have these influences and pressures coming from different directions, it's translated into things like contractual requirements, regulations, KPIs, targets – these are things that hold people accountable,” Frances said. 

“And when you're accountable, you need to be able to demonstrate your progress and measure it and compare it. And so businesses are actually starting to take action. There's still some lip service out there, but you're going to be found out pretty quickly if you continue down that path.”

Jeroen said using metrics to support a solid purpose and vision within companies has been a key topic he’s covered with some of his AGSM Full-Time MBA students this year.

“How do you use data to define your priorities and see where the biggest change is? One of the most complicated things about these issues is how to make our human minds grasp where the biggest changes need to be made. Constant analysis can focus our efforts in the right direction.”

 

To watch the on-demand recording of the AGSM 2021 Professional Forum: Responsible Management in an Accelerating World, click here

To learn more about AGSM @ UNSW Business School’s redesigned MBA program, click here