Natura Corporation CEO Alessandro Carlucci is a leader among CEOs. He and his Brazilian cosmetics company believe that alleviating poverty and inequality and protecting the environment are intimately tied to their business agendas.
In Carlucci's case, he has confronted the key social/environmental issue in his industry - deforestation and poverty - and redirected his company's strategy to tackle it.
While sceptics still deny ethical investment's ROI competitiveness, more and more companies are adopting ethical approaches. And the results are egg on the face of the naysayers.
In 2007, Goldman Sachs released a landmark report showing that companies that were considered leaders in environmental, social and governance policies tended to outperform the general stock market and their peers. This and many other similar reports are helping align the interest of business with those of broader society.
Traditionally, economic growth models of the last two centuries have relied on the undervaluation of natural assets by economists, accountants, engineers and politicians. This current paradigm of capitalism is founded on the idea that a strong global economy is the rising tide that lifts all boats.
After the September 2008 financial crisis, however, this confidence was shattered. Looking back, it seems as though the benefits of growth were hugely exaggerated by the ready availability of debt. For the majority, a feeling of deep economic insecurity and limited upward progression (in wealth and quality of life) are the fruits of this economic model and ideology. On both natural resource management and improving upward social mobility, some corporations see these issues as public goods that fall in the realm of government regulation, however the magnitude of business risks (and opportunities) is inspiring new opportunities for leadership.
In Natura's case, it sought to establish processes and systems in its strategic planning and daily business routines that marry the need for driving financial results in lockstep with making positive social and environmental impacts. These include: promoting an ethical and transparent relationship with its stakeholders, defining targets that are compatible with sustainable development, and ensuring sustainable sourcing of products throughout all layers and tiers of its supply chain. So far it has transformed the business to provide an option for the sustainable use of raw materials from Brazilian biodiversity into product manufacturing, the adoption of a strong social and environmental supplier evaluation process (to train and upskill suppliers within its value chain), and the development of packages that have less of an environmental impact, reducing costs for all stakeholders.
A more enlightened approach
Given the scale of challenges ahead of us, collective global prosperity depends very much on corporations and business adopting a more direct, proactive and enlightened approach to eliminating the negative externalities they contribute to.
More enlightened corporations will opt to do this through the creation of business opportunities that realign their organisational strategies, instead of engaging in tangential corporate social responsibility (CSR) activities - however well meaning - that, at best, merely offset negative liabilities. CSR, including setting up and supporting payroll giving schemes, encouraging volunteering and modelling philanthropic behaviour, is well-intentioned but produces limited benefits for the corporation and for wider stakeholders in society alike.
The examples provided overleaf show that corporations that go the extra mile and push past a limited vision of their purpose and obsolete appreciation of their responsibilities to wider society can create new market-based opportunities that offer a combination of profit and positive social impact. We need corporations to realise not only their responsibility to contribute to creating a better world, but also their ability to do so. This is 21st-century thinking for 21st-century business.
The Natura Corporation [Brazilian Cosmetics company] and its CEO Alessandro Carlucci, a leader among CEOs. believe that alleviating poverty and inequality and protecting the environment are intimately tied to their business agendas. In Carlucci's case, he has confronted the key social or environmental issue in his industry (being deforestation and poverty) and redirected his company's strategy to tackle it. In particular, Natura has sought to establish processes and systems in its strategic planning and daily business routines that marry the need for driving financial results in lockstep with making positive social and environmental impacts. These include: 1) promoting an ethical and transparent relationship with its stakeholders, 2) defining targets that are compatible with sustainable development, and 3) ensuring sustainable sourcing of products throughout all layers and tiers of their supply chain. So far they have transformed the business to provide an option for the sustainable use of raw materials from Brazilian biodiversity into product manufacturing, the adoption of a strong social and environmental supplier evaluation process (to train and upskill suppliers within their value chain), and the development of packages that have less of an environmental impact, reducing costs for all stakeholders.
Pearson is a leading learning company worldwide that operates in more than 70 countries. In 2012, they launched the USD 15 million Pearson Affordable Learning Fund, which focuses on providing K-12 education at the Base of the Pyramid (BOP). The Fund's goal is contributing to 'Education For All' via for-profit investments that drive both impact and profits. As a company, Pearson achieved USD 1 billion of revenue from developing markets for the first time in 2011; the Fund sees great prospects helping Pearson access the next key innovations in education at the BOP. Engaging this market with business solutions is essential for a company with global aspirations.
This well-known clothing and footwear company with USD 20 billion in annual turnover is another example. In 2011 it created a corporate venturing arm, Hydra Ventures, in order to access new business opportunities. This new division makes seed investments in apparel brands and sports-related areas such as sports technology. Its investment criteria are mainly financial, but also give significant consideration to the environmental sustainability and social performance record of investees. Last year, Hydra Ventures invested nearly USD 1.8 million in CRAiLAR Technologies Inc., a company that provides sustainable, environmentally friendly fibres and fabrics for use in textiles, cellulose pulp, paper and composites such as sustainable hemp, bamboo, organic cotton and soy for use in fabrics.
The global furniture retailer IKEA has also made similar strategic investments to marry its financial targets with aspirations to have a meaningful and positive social and environmental impact. By 2020, IKEA is planning to almost double revenues from €29 billion (USD 38 billion) in fiscal year 2012-2013 to €45-50 billion (USD 63-$70 billion) in turnover. To support its strategy, IKEA also invested more than USD 2.8 million in sustainable fibre and fabrics producer CRAiLAR Technologies Inc. for the installation of equipment to support and expand CRAiLAR's European production facility and to provide working capital for IKEA orders. Insiders believe the IKEA did this believing in CRAiLAR's potential to contribute to achieving the stretch goals that IKEA has set for itself and communicated broadly as part of its 2020 strategy, which includes all home furnishing materials, including packaging, will be made from renewable, recyclable or recycled material, and all cotton will be compliant with the Better Cotton Standard.
Patagonia is a certified B-Corporation and outdoor apparel company based in Ventura, California, whose mission is to build the best product, cause
no unnecessary harm and use business to inspire and implement solutions to the environmental crisis. Most recently it announced a strategic investment in CO2Nexus, Inc., a company that has developed a sustainable method of processing (cleaning, disinfecting and coating) textiles and garments using liquid carbon dioxide - using zero water, consuming less energy and generating very little waste. Traditional textile processing methods are extremely water-
and energy-intensive, consuming up to 100 gallons of water for every pound of textile processed, according to industry analysis. That translates to hundreds of billions of gallons of water in the US alone, and trillions worldwide. Most textile processing today is concentrated today in regions globally where water quality is low, which puts even greater strain on already scarce drinking water supplies. Finally, consider GE and its work around disrupting the affordability of healthcare globally. Its` approach to disruption also entails investing in startups with innovative solutions capable of greatly reducing financial waste from the healthcare system.
Acutus Medical, a medical devices startup, is one of Patagonia's investees and is currently developing electrophysiology solutions for diagnosing and treating atrial fibrillation (AF) that drastically upend the economics of the status quo. At present, procedures in AF are often lengthy, lasting six to eight hours, and can cost $27,000 or more. Acutus' solution pinpoints the cause of AF in a 60-to-90-minute procedure costing about $5,000.
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