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Leading in turbulent times

corporate governance

How to stay profitable in an age of sustainability

11 March 2022 • by Patrick Reinmoeller in Leading in turbulent times

It often feels like there is a conflict between delivering profits, securing your organization’s financial interests, and achieving sustainability goals. However, it is possible to balance people, profit, and planet while ensuring...

It often feels like there is a conflict between delivering profits, securing your organization’s financial interests, and achieving sustainability goals. However, it is possible to balance people, profit, and planet while ensuring your firm’s success.

The first step in this process is to shift the way you think about approaching these goals simultaneously.

Shifting your mindset

In an IMD webinar on this issue, we asked participants whether their organizations were pursuing both profitability and sustainability as something to be achieved together (a “both/and” mentality) or if they were viewing them as conflicting efforts (a “profits vs. sustainable goals” mentality), and 73% of participants indicated that they were striving to achieve both. However, when you dig a little deeper, it becomes evident that there is more to this shift than initially meets the eye.

Most firms take one of two approaches to reaching these goals. The first approach is to start with becoming profitable, with the idea that once you become profitable you will have the time and resources available to start thinking about sustainability. The second approach, which we are starting to see more of, is to start with an idea that is rooted in sustainability, such as a product or system that contributes to making the world a better place, and then figure out later how to monetize it.

The critical shift in thinking happens when you stop thinking of these approaches as linear, but rather, cyclical. You are seeking profits which will give you more resources for sustainability goals, but you should also seek to find ways your sustainability goals can contribute to the bottom line of the firm. This essentially creates a positive feedback loop where both goals are supporting the other. Sustainability goals provide leverage for generating funds, and that profitability allows for more resources to go towards sustainability.

Challenges

There are a variety of challenges that stand in the way of shifting your company towards a new way of thinking, including people, skills and capabilities, resources, processes, and routines. It is a big task to get people to shift the way they think, retrain how they work and reallocate resources to make them more available for sustainability efforts.

There are also often external pressures that may force you to abandon your sustainability efforts. It is difficult when writing quarterly reports to shareholders to explain the long-term payoffs that sustainability brings. For this reason, firms that aren’t listed, such as family-owned firms, have an easier time making these shifts.

It’s important to realize that when you are successful in making the shifts necessary to integrate sustainability into your profit plans there can be some immediate payoffs. In a recent survey of executives by Fortune, the number one disruptor cited by CEOs was labor shortages. In the so-called “great resignation”, people have cited a lack of relevance and meaning in their jobs. Sustainability plays a key role in attracting people to your company and maintaining their loyalty.

Lessons from the pandemic

Making this huge shift can seem daunting, but you only need to look at what happened during the pandemic to understand that the possibilities you haven’t yet conceived of do exist. When COVID-19 started sweeping the globe, many companies and public services came together to find solutions. Companies that seemingly had no health-related aspects to their business were able to shift their operations, such as alcohol companies who began making hand sanitizer, manufacturers who made masks, and companies that made plastics creating parts for ventilators.

These companies were displaying a sensitivity to the greater need in a very visible way. Companies that can internalize this lesson should be also able to continue to find relevant ways to contribute to society, and are also more likely to be attuned to the needs of their customers.

Ask yourself: what resources do you have that could be re-purposed in pursuit of sustainability? This requires the suspension of preconceived notions about what your organizational supply chain can and cannot do. This is innovation, and it will be the key to developing a cyclical model of profits, people, and planet.

Leading in turbulent times

How to stay profitable in an age of sustainability

Professor Patrick Reinmoeller

 Register below 

Even before the pandemic, the pursuit of profitability appeared to be in crisis as demands for sustainability grew. Two years into the new normal, some companies are struggling to balance the books while achieving their sustainability targets.

In this webinar, Professor Patrick Reinmoeller will explore how innovation can help you strike the right balance between these two seemingly competing goals.

Register for the webinar on 10 March, 12:00 (CET)

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