Sunday, 28 October 2012

Socially Sustainable Business

There is much talk of the environment when business leaders talk about sustainability, dismissing the topic entirely as a fad, such as the green movement last year or the fair-trade one in the years gone by. Yes, we use solar energy, we have replaced all our incandescent light bulbs, we have a CSR program that plants trees and so on. These are all in all good actions, but they do not strike at the heart of the matter. Businesses need to ask what does sustainability means to their business. A manufacturing business has inevitably environmental obligations in order to follow a path of sustainable manufacturing, but what about a service provider? Sourcing solar power to run their computers isn't really addressing the issue, the one that is addressing the sustainable question is its power supplier, not the service business. Beyond environmental sustainability are two other aspects, economic and social sustainability. The first is ensuring that there is no economic exploitation of its human and social resources, in fact long term sustainability can only really be achieved if the resources in question perceive the sharing of economic gain as being fair... else the worst case scenario being the recent violence erupt at the Maruti car plant in north India. However, it is the social sustainability I wish to address in this post. How can a business be socially sustainable and moreover what are the incentives for being so.

What is social sustainability anyway?

The wikipedia definition is social development that retains equal access to social resources for future generations. It addresses labour laws, human rights and the likes. This is all well, but what does it means effectively? Of course, employees have rights, and many businesses do give them those rights, but yet there is something missing. The fundamental essence of social sustainability for a business is ensuring that society's perception of that business remains positive. CSR actions, efficient energy use, green energy sourcing is all in vain if society (your current and future employees/suppliers/clients) has a perception of being robbed by the product/service your business offers. This is a very subtle concept. It is one that is at best marginal on the short term and at worst catastrophic on the long term! Why should businesses sit up and pay attention? A recent survey in the US shows that 78% of internet users and a growing trend, research products online before making a purchase. The internet connectivity provided by social media is quickly tipping the balance in favour of a more and more pro-active consumer giving little scope for old-tactic marketing campaigns in order to sell a product. This gives raise to two evidences: (i) the need for sustainable marketing (see my previous post on this); and (ii) the need for social sustainability. Businesses cannot hid in the age of the internet. They have to adapt and revisit their strategy for long term success.

How does one achieve social sustainability?

Having established that social sustainability can only be achieved by ensuring society's positive perception and moreover, having understood that it is not possible to hide in today's internet age, it is self-evident that one needs to be sincere in giving fair adage to your stakeholders. How so? The general trend in the last decade has been to find the most competitive suppliers in order to maintain and in most cases maximise profits. In simple economics, buy at the cheapest rate and sell at the highest. Business need to revise this strategy, for it is leading invariably to catastrophic results in the long term. This strategy has been so well executed in China, that their own consumer market has suffered catastrophic negative social perceptions on a global scale in the last few years, re-evaluating many businesses' plans to set up shop in that country. (See the contaminated milk story, the poisoned toys, the Apple sweatshop... and many more). This is the fundamental weakness of capitalism today, and unsustainable in the long term. Businesses need to focus long term by adopting an old and mostly forgotten raison d'ĂȘtre for any business. Traditionally, business artisans in ancient times engaged themselves in their chosen trade because they were good at it and because they actually enjoyed it. The most successful among them where those that had the best skills, producing the best quality. They did not strive to find the cheapest manufacturing process, but rather they strived to improve the quality at the most competitive price. That, in my knowledge, is the way to be socially sustainable.

Adding value at no extra cost.  Businesses aspiring to be socially sustainable need to adopt a new thinking process which is to strive to add value to their product/services while retaining competitive pricing. The rest will happen automatically. From this single goal flows all other socially sustainable actions. Let me explore the repercussions on the various stake-holders. -- The employees first, to add value in any form and yet retain cost margins, a business needs empowered employees, employees ennobled to the goal.... the whole gamut of socially responsible management can be explored to achieve this symbiosis. -- The suppliers need to follow suit, poor service/material from their end will only result in loosing business, however they can also be encouraged by engaging and valuing their contribution to the business' product/service value. Empowering them and especially giving them credit for their contribution is the surest way to achieve sustainability on the long term. -- The client/consumer is the slowest to react, positive perception is a slow maturing tree, but once fully grown is not easily uprooted. Communication is key, and it is ever so important to be impartial and sincere. Blog and social media are best suited for this, and the communication should strive to educate and uplift the awareness of the reader, ie to empower the client. The bottom line is that in order for a business to achieve social sustainability it is imperative that it aspires to achieve the best quality at the most competitive price as an end in itself rather than a means to profits. This should not be confused with the natural requirement for a business to strive for financial stability, for any business that is not achieving reasonable profits isn't economically sustainable.