Business Today

Sustainability is not a buzzword

Adam Werbach's advice is very timely, writes Somnath Dasgupta.

Somnath Dasgupta | Print Edition: Feb 6, 2011

Strategy for Sustainability
Author: Adam Werbach
Publisher: Harvard
Business Press
Pages: 226 Price: Rs 750

The combined share of India and China in the world economy will grow three-fold to 34 per cent by the year 2030, with India's share alone increasing from two per cent to 10 per cent. But India has a demographic edge over China, in that it will have a larger "young workforce". Such forecasts for India have become commonplace over the past couple of years, but they are one aspect of the growth picture.

The other, and more important, aspect is what India will have to do to actually get there. Build expressways, railroads and ports like mad, dig up vast forested areas to get at the minerals that lie beneath them, burn more petroleum products, tackle an urban explosion and so on.

Unchecked, this growth could turn India into an economic powerhouse that is also an environmental wasteland, much like what has already happened across large swathes of China. Excessive checks could cripple big industry and deprive India of the scale it needs to tackle its problems. Over the past few years, there has been a standoff between the two sides of the argument, and the situation has taken a violent turn in many places, with land acquirers pitted against the land losers.

Adam Werbach
Adam Werbach
Adam Werbach did not write this book (his second) with India in mind, although he nowadays tracks happenings in India (follow him on twitter @adamwerbach). Nor is sustainability a new term. Some companies, such as ITC under Y.C. Deveshwar have been working on sustainability for a decade now. Others such as Sajjan Jindal's JSW Steel got some key bits right when it came to land acquisition.

But the book should be a valuable tool for companies in India - a tool that goes beyond charity-type corporate social responsibility or CSR. Werbach,37, tells companies how to work out a strategy for sustainability, and he is no B-school theorist. At 23, he was elected president of the Sierra Club, the oldest environmental organisation in the United States. Later, he founded Act Now to offer consultancy on sustainability strategies. Things got confusing for his fans when he did some pioneering work within Walmart, the world's largest retailer and also the arch foe of the environmental movement. He was also on the board of Greenpeace. Three years ago, Act Now merged into Saatchi & Saatchi to form the advertising and communication giant's new sustainability arm, Saatchi & Saatchi S.

The Four Components So what exactly is sustainability? Werbach, who was in India recently, told BT: "The easiest definition is, there is environmental and green, and there is sustainability, which includes social, economic and cultural factors as well as the environment." Werbach refers to this as the Blue movement- the Earth is mostly blue, mostly water. The components are co-equal: all of them play an equally important role. Sustainability in a business context is long-term profitability. CSR, according to Werbach, is very frequently about philanthrophy and about social licence, and it sits away from the core of the business. "It's about being perceived better and about giving donations to offset the bad things you do," he says.

The book offers quite a few strategy tools. First, set a North Star goal. "A North Star goal is bigger than a BHAG, what Jim Collins calls a Big Hairy Audacious Goal, because it ties in societal change and a social purpose into a business goal," he says. For India, he says, the first priority for the next 30 years is the 600 million people who do not have an adequate standard of living. That is the economic and social goal. The environment is going to come second.

But, can protecting the environment and maintaining the natural resources be a way to encourage development? Werbach says this is a competitive challenge that India will face in the global world, because the country can develop itself by destroying all its natural resources, and find itself struggling 30 years from now. "You do not have the societal licence to grow unless you maintain the natural assets of India…In my very basic knowledge of the issue, companies have been foolish, they have moved far too quickly, they have not been able to gauge local concerns adequately," Werbach says.

At Saatchi, Werbach works inside the organisation to make the company's own practices better, and advises clients on how to make sustainability the core of their business model. The approaches can be different. With Walmart, the work was internal. With Vestas, the largest wind company in the world, it is marketing work. "For us, sustainability is not just a philanthropic or CSR activity, it's a business opportunity," says Werbach.

Monitor cash flow, not earnings
But how can a company make sustainability the core of its business if its managers are focused on their stock options, and the CEO on its share price? Werbach says he prefers to look at cash flow rather than earnings. "Earnings have become so complex and so gamed that it is hard to see the long-term potential," he says.

Quite frequently, a company will begin its strategy for sustainability during a time of duress and challenge, when it is being attacked by economic as well as societal forces at the same time. But if a company makes capital investments in sustainability with long-term viability in mind, it is generally rewarded.

A product, he says, could die tomorrow but the brand does not. Werbach was once hired by a music company to help it develop its sustainability strategies. "I basically said, 'Okay here's what you do, you go digital, you stop selling CDs. You will be the first record company to do this'," he recalls telling them. Two things happened: The officials laughed. And Werbach got fired.

"What they really wanted was to make CD covers out of recycled materials, when I was trying to tell them, 'Do something radical, your business is in total crisis!'," he recalls. Werbach's book is a good guide for Indian companies tackling demand rates that are the envy of their western counterparts, but stymied by environmental protests. Instead of having to slow to a crawl like the Rajdhani Express in north India's winter fog, they can rework their strategies to make societal concerns as well as employee lives part of their growth. And profits.

As for Werbach, there's just one thing that could confuse his followers: Is he now part of the Establishment? He ducks that neatly. "I don't think I'll ever be established," he laughs.

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