When someone talks of “sustainability”, do you know what they mean? Do they? Chances are that the term has a slightly different connotation for nearly every person who uses it. Some think of it in purely an environmental context. Others (including myself) see sustainability as encompassing our society as a whole, mandating attention to and prioritization of social, governance, financial, economic, and environmental issues to ensure long-term success.
As a financial services firm, Cornerstone Capital Group has defined sustainability through an economic lens, as “the relentless pursuit of material progress towards a more regenerative and inclusive economy.” Regenerative in the sense that we find ways to meet the needs of humanity without depleting the resources necessary for our survival; inclusive in that all share in the benefits of our ingenuity.
In pursuing a more regenerative and inclusive economy, it is necessary to understand how people, our inventions, our economies, and the earth and its resources are interconnected and interdependent. And whether as a government entity, NGO, business, or individual, it’s equally important to understand how the interests of one’s various stakeholders can be aligned rather than merely balanced.
The notion of interdependence certainly isn’t new. Prior to publishing Conscious Capitalism with Raj Sisodia last year, John Mackey noted in a 2007 essay of the same title the importance of recognizing and capitalizing on the interdependence of stakeholders:
Surrounding the central purpose [of the company] are the various constituencies: customers, team members, suppliers, investors, and the community and environment. All are linked interdependently. Retail business provides a simple model to illustrate that management’s role is to hire good people, train them well, and do whatever it takes to have those team members flourish and be happy while they are at work. The team member’s job . . . is to satisfy and delight the customers. If we have happy customers, we will have a successful business and happy investors. . . . Management helps the team members experience happiness, team members help the customers achieve happiness, the customers help the investors achieve happiness, and when some of the profits from the investors are reinvested in business you end up with a virtuous circle. I find myself continually astounded about how few business people understand these linkages. But market analysis increasingly illustrates that the businesses with a sole purpose of maximizing profits, in other words, those that do not understand that their profits are produced by an interdependent system of constituencies, are less successful over the long-term.1
In “Firms of Endearment: How World-Class Companies Profit from Passion and Purpose”, Sisodia and his fellow researchers identified 28 companies as “firms of endearment” (FoE) based on their “humanistic profiles”: These include “active alignment of the interests of all stakeholders”, generosity of compensation, attention to quality customer experience, environmental performance, and community investment. The only financial criterion was that they be going concerns). The authors found that the 18 publicly traded FoE delivered returns of 1,646.1 percent from 1996 to 2011, outperforming the S&P 500 Index returns of 157.0 percent by 10.5 times. 2
What seems to be at work in these companies are cultures that understand and value interconnectedness and systemic thinking. That involves various kinds of mapping, whether formal or not, to understand stakeholders, their needs, concerns, influences, and impacts on each other and the organization; the organization’s impact on them; and the impact of the organization on the environment and vice versa.
Organizations seeking a deeper understanding of the Interconnectedness of Things, as reflected by the FoE, have many tools available to them. They might undertake a materiality analysis, a kind of 360-degree risk mapping that considers a broad cross-section of stakeholder views. They could engage in value-chain mapping to determine where in the value chain their key impacts occur and which stakeholders are affected. Companies needing to understand business risks that are geographically influenced might consult tools such as the World Resources Institute’s AqueductTM water-risk map, or Transparency International’s Corruption Perceptions Index. Similarly, that investment data services increasingly offer environmental, social, and governance data and analysis alongside financial information facilitates a deeper understanding of these relationships and enable more holistic valuation of our investments and activities.
Leading companies have unique ways of thinking about and communicating the value of these connections. In this interactive online map, for example, SAP depicts the relationship of various indicators to each other and to financial impact. Some linkages are made explicit and quantifiable, such as the savings or cost effected by higher or lower employee retention, respectively.
Common to these and many other sustainability mapping efforts is the expression of relationship between activities and “externalities.” A common example is the relationship between industrial activities, climate change, and world food supplies. But what of the relationship between food prices and political unrest? Between digital connectivity and entrepreneurship? Between girls’ education, birth rates, and economic growth?
Connections exist among all of these things and often have a multiplier effect, for better or worse. As business owners and investors, our charge is to understand them and to direct our thinking, managing, and investing to connections that multiply for the better.
Kathee Rebernak is the founder and CEO of Framework LLC and a member of the Cornerstone Capital Board of Directors.
1 John Mackey. “Conscious Capitalism: Creating a New Paradigm for Business.” 2007.
2 Raj Sisodia, Jag Sheth, David Wolfe. “Firms of Endearment: How World-Class Companies Profit from Passion and Purpose.” Wharton School Publishing, February 2007.