Thursday, 9 May 2013

Sustainable Development: or sustainable growth

There are very different definitions of 'sustainable growth'.

One definition is that it's all about companies being able to grow at a sustained rate:

Sustainable Growth
In simple terms and with reference to a business, sustainable growth is the realistically attainable growth that a company could maintain without running into problems. A business that grows too quickly may find it difficult to fund the growth. A business that grows too slowly or not at all may stagnate. Finding the optimum growth rate is the goal. A sustainable growth rate (SGR) is the maximum growth rate that a company can sustain without having to increase financial leverage. In essence, finding a company's sustainable growth rate answers the question: how much can this company grow before it must borrow money?

And this understanding is at the heart of companies' long-term strategies - worldwide:

Hochland AG buys “Grünländer” brand from Bechtel Group

Hochland AG has taken over the hard cheese and sliced cheese brand “Grünländer” from the Bechtel Group. 

Sustainable growth perspectives
This contract allows Hochland AG to broaden its brand portfolio with the addition of the brand “Grünländer”, which has shown dynamic growth in the German cheese market in recent years. This gives the Allgäu-based company access to a further brand in the hard cheese and sliced cheese sector, which has by far the highest sales in the cheese market...  The company, based in Heimenkirch, sees considerable growth opportunities in the marketing of “Grünländer” in its core strategic sales regions of Eastern Europe, especially Poland, Russia and Romania. Hochland AG... 

But the Financial Times is a little more nuanced:


By Andrew Hill May 17, 2011 
Financial meltdown and economic recession have shaken the foundations of companies. Yet arguably the most shocking blow to their ideological underpinnings came from the least likely direction.
In March 2009, in an interview with the Financial Times on the future of capitalism, Jack Welch said: “On the face of it, shareholder value is the dumbest idea in the world. Shareholder value is a result, not a strategy ... Your main constituencies are your employees, your customers and your products.”
As chief executive of General Electric, the largest US industrial group, until 2001, Mr Welch was the doyen of double-digit earnings increases and high priest of the primacy of shareholder value. If ever there was a master of growth – steady, unshakeable, quarter-on-quarter growth – it was Mr Welch. Yet here he was dismissing the pursuit of shareholder value as “dumb”. What were companies to make of that?
Growth sounds great. The upward-slanting graph has become an aspiration, a symbol of success in every corporate PowerPoint presentation ever produced. But Richard Whittington, professor of strategy at Oxford University’s Saïd Business School, points out that it is “desirable but dangerous... it’s double-edged – and I think we fetishise it.”
But Mr Welch’s belated realisation of the perils of the growth quest offered hope to some companies. For Paul Polman, who took over as Unilever’s chief executive in the teeth of the financial crisis, two months before Mr Welch’s stunning declaration, economic turmoil provided cover to recalibrate expectations. The food and consumer products company stopped offering “guidance” on its next quarter to shareholders and analysts, froze salaries and protected cash. Under Mr Polman, it also went back and re-examined the premise on which a large multinational does business, building an operating framework based on longer-term growth projections, not quarterly reporting.
The buzzword of modern corporate strategy, as practised by Unilever and others, issustainability. Using a narrow definition, this is still linked to environmental goals, but increasingly companies are aiming for sustainable growth. This may be simply an ability to continue building the company without artificially straining for growth.
It is a difficult balance to strike...Enlightened companies are realising they will damage their own interests if they pursue unsustainable growth...
Echoing Mr Welch, Umair Haque, author of The New Capitalist Manifesto, argues that “industrial-era growth ... is ‘dumb’. It is growth that is ultimately (not just environmentally) unsustainable because it is locally, globally, and economically self-destructive.”
Instead, he says, “constructive capitalists” – he cites Apple, Nike, Lego and Tata, among others – are renouncing the idea that “profit always requires economic harm”. They are finding other ways to create a virtuous circle of growth.
Mr Kramer argues that the development of an alternative to “Welchian” growth is not just a reaction to the financial and economic turmoil. “[The crisis] provided good examples of companies doing things in a short-sighted way, but it’s a trend that has been emerging and growing over the past decade,” he says.
For it to stick, however, will require an extraordinary reworking of the relationship between companies and their owners and customers – particularly in developed-world economies where shareholders are still comforted by the sight of those optimistic, upward-pointing graphs.
Mastering growth was hard enough before these new forces took hold; it is about to become harder still.

The accountants Deloitte is also more nuanced:
Deloitte Dbriefs | Sustainable Business Growth: An Oxymoron?
Deloitte | Sustainability 2.0 | Using sustainability to drive business innovation and growth | Peter Capozucca | William Sarni

But if 'sustainable growth' is to be defined as "using a narrow definition, this is still linked to environmental goals"according to the European Commission:

Sustainable growth - for a resource efficient, greener and more competitive economy
Shoots of grass growing from a computer keyboard © iStockphoto
Sustainable growth means:
> building a more competitive low-carbon economythat makes efficient, sustainable use of resources
> protecting the environment, reducing emissions and preventing biodiversity loss
capitalising on Europe's leadership in developing new green technologies and production methods
> introducing efficient smart electricity grids
harnessing EU-scale networks to give our businesses (especially small manufacturing firms) an additional competitive advantage
improving the business environment, in particular for SMEs
helping consumers make well-informed choices.

And the Guardian:


Companies are far too comfortable with their existing business models to leverage the crucial systemic change that is needed for sustainable progression
MDG : A farmer pushes a bicycle as he visits a rice paddy field, outside Hanoi , Vietnam
Businesses need to push harder if thy are to meet the challenges of climate change head on Photograph: Kham/Reuters
Why are progressive companies so timid when it comes to addressing the key sustainability challenges of our age?
I ask this question because any rational response to the social, environmental and economic challenges we face today would put us on something akin to a war footing.
Yet businesses, along with every part of society from the financial markets to politicians and individual citizens are failing to act in any meaningful sense.
Rather worryingly, a new report from Forum for the Future and ENDS concludes that UK plc's sustainability performance in the past year has worsened in many areas including industrial carbon emissions, energy efficiency, decarbonising electricity generation, pay inequality and companies' social performance on human rights and labour, and supply chain standards.
Beyond that, many corporates are actively sabotaging attempts at change. Christiana Figueres, executive secretary of the United Nations Framework Convention on Climate Changesaid last week that the only corporate group that is showing any real co-ordination and initiative in the area of climate change is the global energy sector and that is seeking to push us in the wrong direction.
There are also the numerous trade associations that are seeking to prevent progressive regulation in other sustainability-related areas, from banking to fishing.
Given this rather depressing backdrop, what are progressive businesses doing and what more can be done?

And some are even more skeptical:

Is sustainable growth possible?
In my view ‘green growth’ is really an oxymoron. In a deregulated market economy global corporations are accountable to only one master, a rogue financial system with one incessant demand – keep your stock price as high as possible by maximizing short-term returns. One way to do that is to shift as much of the cost of the corporation’s operations as possible onto the community. The goal is to externalize costs and privatize gain.
A green corporation simply can’t last in our unregulated market where competing companies are not internalizing their costs. If you do attempt to ‘green’ your business you’ll soon be bought out by some corporate raiders who see an opportunity to externalize the costs and make a short-term killing.


Steve Berke said...
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