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All About Sustainability
What is sustainability?
Sustainability is about not compromising future opportunities. The standard description of sustainable development is "meeting today's needs without compromising the ability of future generations to meet theirs". It is about ensuring that business stakeholders are all able to continue to contribute and benefit from an organisation. While it has traditionally been considered to be a very long term concern, shortening business cycles and catalytic information flows have brought long term risks, like environemtnal pollution or unethical governance, in to immediate prominence. Sustainability focuses on business success by serving the needs of shareholders, customers, employees, suppliers and community. Sustainable businesses make money.
The Triple Bottom Line
Increasingly businesses are building value by expanding the focus of their strategic intent. Sustainable businesses focus on three broad components: economic, social and environmental also referred to as "people, planet and profits".
Business processes are consequently refined such that sustainability is concerned with transparency, accountability and engagement.
Other terms used to refer to sustainability include: corporate social responsibility (CSR), corporate citizenship, SRI (Socially Responsible Investment - normally refers to mutual fund investing).
Why invest in sustainability?
GRI Equity invests in sustainability simply because it provides a simple, effective approach to sustaining profitability and reducing risk to all stakeholders.
The financial drivers to sustainability include normal performance drivers like revenue, cost and capital, but the importance is increased of other financial drivers like risk management, human capital, reputation and brand value.
Consumers globally are unwilling to accept excuses for immoral or even inconsiderate behaviour by large businesses. While small community businesses may be able to reflect local culture, businesses which have grown beyond the single proprietor stage are increasingly exposed to the risk of customers deserting the brand if it is found to abuse its market position. The first rule of business is to serve customers - and today's market demands human values to be upheld by businesses, as they are by people - negative impacts on environment, employees, community are not acceptable.
The business case for sustainable investment is now proved. While statistics can be used to backup opposing points of view, it is now accepted wisdom among all leaders of business and government that there is no alternative to sustainable development. While there are still opportunities to profit from ignorant consumers and regulators, the accelerating rate of information capture, analysis and distribution combined with falling price of information, is rapidly removing these opportunities. Traditional models, relying on central control, hierarchy and size are becoming defunct while sustainable models, often reflecting natural systems (which have prospered magnificently), can deliver comparable benefits for lower total costs by building interdependent, cooperative, nimble networks of businesses and consumers.
How to invest in sustainability?
Individuals may invest in sustainability by seeking SRI funds and cooperative banking suppliers. They may also redirect consumption to more healthy and sustainable options, like organic food and energy efficient buildings.
Fiduciaries, like banks, pension and insurance companies and fund managers, may refine their investment focus to screen for sustainability criteria and develop their systems to improve transparency and accountability and lower costs.
While investment in listed companies, either directly or through an SRI fund, enhances the value of sustainable businesses, the capital is rarely applied directly to the business but is paid to another investor. Investing new capital in companies has a direct impact on the industrial landscape because it is used directly to develop businesses.
To consider investment with GRI Equity, please see our fund's principal features. Further documentation will be sent upon expression of interest. Thank you.
Sustainability Credentials
Consumers, including investors buying financial products, often rely on third party references to demonstrate performance. Industrial certifications, like ISO 9000, are a valuable way of screening. Sustainability certifications, like ISO 14001, SA 8000 and Forest Stewardship Council are increasingly widespread, relevant and valuable. Additional marks are used, like recyle logos, organic certifications and bio labeling. And particularly relevant today is informal and formal community membership, in which reputations may be discovered quickly.
Some of the standard screens are not suitable for all markets, especially emerging markets. However, they are still a valuable guide for management in developing business and demonstrated initiative in these markets becomes the standard.
Verification and compliance may not be possible. It is questionable, for example, whether audits of carbon credits is possible given the lack of expertise and experience among the auditors! Or whether organic certifications are comparable. It is because of this that informal community networks become valuable in screening. As sustainability criteria become minimum standards (which is already the case for many) these informal methods will become less important. However, a culture of sustainability will always have an informal process because it recognises the chaordic nature of markets and understands that the flexibility that is provided by informal systems is necessary for change and development - rigid structures fail over time.
Sustainable Business Models
These may be related to the way the business is conducted or the nature of the good or service.
Normal corporate structures are suitable for the development of a sustainable business model. Flatter structures, ESOPs, intelligent use of technology, and similar operating improvements, as well as good governance, community and environment records reflect sustainable initiatives.
Alternative corporate structures, like membership and cooperatives, also directly support sustainability. Normal corporates may be run with sustainable principles or not, but it is more difficult to find moral hazard in sustainable structures.
The second category of sustainable business model is of sustainable good or service. This might include alternative energy, micro-finance, eco-tourism, organics, barter, complimentary medicine and so on.