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Sustainability points of view

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1. Superior performance for shareholders is not mutually exclusive to delivering value to a wider stakeholder group.

Business has come to the forefront of modern life, as a result of increasing market liberalisation and privatisation across the globe. The role of business in global society is undergoing change. Some argue that business should take on wider social and environmental responsibilities, while others argue that business is not best suited or capable of assuming this role.

Sustainability: advantaged or disadvantaged?

Download or view a presentation regarding this debate:

Innovys believe that good management is about matching internal resources and capabilities to external opportunities and threats. If society has a set of abstract needs which are no longer met by government or other actors, then there will be an expectation for the new 'lead actors' to assume these responsibilities. It is our view that organisations integrating Sustainability within their corporate strategy will increasingly exhibit superior risk management capabilities.

Increasingly Sustainability - and its many similar cousins, such as Corporate Social Responsibility etc. - will be seen as the characteristic of a company with true relationships with its customers. Brands and logos are not dead, but they need to move towards true customer intimacy quickly, if they are to be of any significant value.

2. Simplicity causes problems. Life is wonderfully complex.

Is Sustainability the same as Corporate Social Responsibility or business ethics? Are all stakeholders always equally important to a business?

The Sustainability agenda is often held back by the use and abuse of business language. In the field of Socially Responsible Investing, some commentators state that these funds are automatically disadvantaged as they restrict or exclude certain industries, such as tobacco, from their universe. An alternative perspective however, is that these funds are selecting against these industries and in favour of others based upon the potential risk-reward profiles. The tobacco industry still has the shadow of lawsuits increasing the potential of risk to future cash flows.

Numbers can also cloud the picture. We are still struggling to find a way to measure happiness and other intangibles. While Gross Domestic Product (GDP) goes up, all surveys seem to say that we are less happy than we used to be. How do we quantify the benefits of BP's leading edge thinking regarding the Sustainability agenda? How do we measure a company's performance relative to peers in terms of the Triple Bottom Line?

Innovys believe in bringing a rigorous analytical approach to this debate. We want to use maths to expose the myths! In our opinion, the time is close at hand  when it will be possible to say that company X scores 7 out of 10 for its Sustainability performance. Competitors will understand the basis for the score and how they can close the gap or exceed that performance.

3. Government is definitely not impotent; it still has an important role.

Increasingly it will  be possible to understand the Sustainability performance of companies. However we need to know whether this is sustainable enough?

Issues such as global climate change are bigger than all individual players. Markets can play a powerful role in addressing these problems, but not if the rules of the system are flawed. For example, subsidies in certain industries can make natural resources more attractive than recycling operations or alternative uses.

Governments need to make sure the rules are pointing in the right direction. They should prevent costs being externalised - leaving society to pay, in the form of pollution and other damage.