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Sustainable and Profitable

Management expert Andrew Savitz asserts that every company can find a `sweet spot,' where its interests and those of society overlap.

July 30, 2006|Alison Maitland | Financial Times

Andrew Savitz recalls a conversation he had with a purchasing manager at a large telecommunications company. The man was adamant that social responsibility had nothing to do with his job, which was to buy products at the lowest price.

"Would you buy from a foreign supplier that you knew was employing 10-year-old girls and paying them 60 cents a day for their labor?" Savitz asked. "Of course I wouldn't do that," came the reply.

Not even if the supplier offered the lowest price, if child labor was legal in that country and if no one could possibly find out? No, the manager replied. It would not be right.

"Do you think your company would support your decision to sacrifice profit in this case?" Savitz persisted. "Absolutely, I'm certain of it," the manager said.

Do not be deterred by the unfortunate title of this forthcoming book. Savitz makes a lively and cogent case, rich in anecdotes, that companies can no longer afford to ignore the world around them.

Many of the reasons that companies face "the age of accountability" are familiar, but it is useful to see them pulled together:

* Our shared sense of vulnerability, fostered by climate change and natural disasters, coupled with the awesome power that global corporations have accumulated;

* The goldfish bowl in which companies operate;

* Their increased exposure through networks of business partners and global supply chains;

* The campaigns mounted by lawyers, nongovernmental organizations and shareholder activists.

But this book is not a tract admonishing business to take its responsibilities seriously. Its central argument is an upbeat one that is gaining currency: It makes financial sense for companies to anticipate and respond to society's emerging demands.

In the long run, Savitz says, the sustainable company is likely to be highly profitable. There is a flip side: Companies that fail to respond, or thumb their noses at society, are likely to pay the price.

What is a sustainable company? Savitz and Karl Weber, his co-author, spend time on their definitions -- a sensible move given the confusion and spin that often surround this debate.

Sustainability is not about philanthropy, which has nothing to do with the company's main purpose. Nor is it merely about ethics.

The authors even prefer "sustainability" to "responsibility," contending that the latter emphasizes benefits to society rather than benefits to the company.

For Savitz, who created the environmental practice at PricewaterhouseCoopers and has worked with some of America's biggest companies, it is about conducting business in a way that benefits employees, customers, business partners, communities and shareholders at the same time. It is "the art of doing business in an interdependent world."

The best-run companies find "sustainability sweet spots" -- areas where shareholders' long-term interests overlap with those of society. Implausible?

Look at General Electric Co.'s revenue-boosting Ecomagination green technology, Savitz says. Or Toyota Motor Corp.'s fuel-efficient Prius.

Or Unilever's Project Shakti in India, training 13,000 women to distribute its products to rural customers and thereby greatly increasing families' income while expanding its market penetration.

Every company can find a sweet spot, he suggests, even if it is the minimal one of cutting costs by reducing energy use, employee accidents or the chances of a lawsuit -- though some of this could just as well be called smart risk management.

In the second half of the book, Savitz explains how to translate all this into "business as usual": how to decide what it means for the company; how to work with stakeholders, not against them; how to set enforceable goals in difficult areas such as child labor.

Throughout, the arguments are driven by pragmatism, not dewy-eyed altruism. The narrative occasionally suffers from its American slant. The English Quakers, after all, pioneered decent working and community practices long before Henry Ford.

Even if you do not agree with it all, this is a thoughtful guide for managers who still harbor doubts about the point of sustainability, who are taking tentative steps toward it or who are seeking a clearer path through the maze.

*

Alison Maitland is a staff writer for the Financial Times, where this review first appeared.

*

Changing climate

* The Triple Bottom Line: How Today's Best-Run Companies Are Achieving Economic, Social and Environmental Success -- and How You Can Too

* by Andrew W. Savitz, with Karl Weber

* Jossey-Bass, $24.95, 320 pages

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Source: Publisher

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